Insights 
VT 
The arrangement between the US and China appears to be a temporary easing of export controls. China will relax controls on rare earths and magnets, while the US plans similar moves for key technology, but AI chip restrictions remain.
On tariffs, the US maintains 55% tariffs on China, broken down as 10% reciprocal tariffs, 20% on fentanyl, and 25% pre-existing tariffs. In response, China is expected to impose 10% tariffs on the US.
The Benefactor And The Agreement
The US portrays itself as the benefactor in this agreement, though actual benefits are uncertain. China’s dominance in the rare earth market suggests it has leverage, should future issues arise.
The dynamics mirror past events, such as the soybean negotiations in 2019. China prioritises its interests, often showing resistance if pressured. There is anticipation that China’s response will reflect this, potentially avoiding any perception of conceding.
This preliminary arrangement aims to prevent escalating tariffs, offering temporary relief for both nations. However, calling it a “deal” that marks progress might be overstated. The agreement still requires approval from China’s President Xi, which will dictate its final outcome.
For those of us assessing how to approach the market after this update, it’s helpful to strip the situation down to what’s actually been set in motion. Behind the official statements, this is little more than a pause—an attempt to buy time while conditions remain uncertain. There’s no permanent solution on the table, just a reshuffling of priorities to give both sides room to manoeuvre.
On the surface, the move to pull back on certain export controls implies cooperation. But the preservation of AI chip restrictions by one side is a pointed reminder: neither country is ready to fully back down where it matters most. That’s especially telling. It keeps the most valuable technology away from negotiation, leaving markets exposed to sudden shifts should tensions return.
Managing Market Responses
If we revisit the structure of the tariffs, the 55% figure still holds. There’s been no easing in that front, and retrieval of trade friction remains intact. That level of pressure on goods crossing borders won’t be overlooked by firms pricing risk, and by extension, pricing futures. When the other side introduces a parallel 10% tariff in response, the intention is not simply retaliation—it’s designed to maintain dignity without escalating. This seems more about posture than effect, but markets tend to respond more to tone than to fact in such cases.
Looking at this ratio of give-and-take, there does seem to be a pattern, one that reminds us of late-stage 2019, when export-driven commodities like soybeans became pawns in a wider political exchange. We remember the outcome: tactical backpedalling rather than complete solutions. At that time, there was also confidence by one side that they were driving the conversation, yet the market learned to hedge differently once real power dynamics became visible.
This situation could unfold similarly. Decisions still rest with the higher offices, and until someone formally signs off, what’s occurred so far remains a proposal—albeit one supported informally and relayed to the public. That distinction matters. Nothing is legally binding, and potential for reversal lingers.
From where we stand, these conditions breed temporary opening in volatility spreads. It invites selective entries, but only with the understanding that this quiet isn’t built on anything lasting. Spreads that widened based on speculation could narrow soon, while others, particularly in sectors tied to extractive materials or advanced semiconductors, could tighten more gradually if clarity fails to emerge on tech.
There’s a tactical lesson here: avoid reacting as though this is resolution. Pricing models should still reflect ratios of escalation risk. Instead of allocating heavily, a more restrained, line-by-line analysis appears warranted—especially across contracts concerned with supply-chain sensitivity.
By keeping exposure flexible and staying watchful of policy announcements—not moods or talk—positioning can remain resilient. That makes more sense than leaning into an uncertain claim of progress.
Every time something similar happens, we see that what’s unsaid reveals far more than what’s officially stated. The silence around final approvals and the enduring control on high-grade chips tells us exactly where fault lines remain. It’s unwise to model any long-term change until the official channels confirm otherwise—and that hasn’t happened yet.
