A senior US official states there is no finalised decision regarding trade with China, as a China trade agreement continues to be elusive. Recent news includes Trump signing executive orders related to tariffs affecting numerous countries. <\/p>\n
The order includes raising the tariff rate on Canada to 35%, up from 25%, and imposing a 39% tariff rate on Switzerland. The White House is working on clarifications, especially concerning the situation with China, suggesting potential temporary extensions. <\/p>\n
Additionally, Taiwan has been subjected to a 20% tariff. The developments are part of a broader range of trade policy actions by the US administration.<\/p>\n
Given the unpredictable nature of these trade announcements, we should expect market volatility to increase significantly in the coming weeks. We believe the CBOE Volatility Index, or VIX, is poised to climb from its current calm levels. Looking back at the 2018-2019 trade disputes, we saw the VIX spike over 60% on similar news, so levels pushing towards the high 20s should be anticipated.<\/p>\n
We think purchasing put options on broad market indices like the SPX is a wise defensive move to hedge against potential downturns. Sectors with heavy international exposure, such as technology and industrials, are especially vulnerable to these sudden tariff announcements. The new 20% tariff on Taiwan, a critical hub for semiconductors, puts chipmakers at direct risk.<\/p>\n
There are clear opportunities in currency markets, particularly with the US dollar strengthening against the Canadian dollar and the Swiss franc. Given that total US trade with Canada was over $900 billion in 2023, the new 35% tariff will create significant pressure on the USD\/CAD pair. We see a similar, though smaller, effect on the Swiss franc following its 39% tariff imposition.<\/p>\n
For traders who are unsure of the market’s ultimate direction, a long straddle or strangle on key exchange-traded funds could be an effective strategy. This approach profits from a large price swing in either direction, which seems likely given the conflicting signals from the White House. The official clarification that no final decision has been made on China only adds to this uncertainty.<\/p>\n
The suggestion of a “can-kick extension” for China tells us that this specific issue may not be resolved immediately. We should therefore consider longer-dated options, perhaps with expirations in the next fiscal quarter, to outlast the expected short-term noise. This allows time for a more definitive policy to emerge, avoiding the rapid time decay of short-term contracts.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US trade policy shifts with raised tariffs; no final China deal yet amid ongoing global trade tensions.<\/p>\n","protected":false},"author":62,"featured_media":17027,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27875","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27875","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=27875"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27875\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17027"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=27875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=27875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=27875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}