Scott Bessent, US Treasury Secretary, addressed trade deals, disputing that this is the biggest trade reset since 1935. He referenced the China trade shock as the largest reset.
Bessent noted the impact of regulation pushing US manufacturing offshore. He estimated annual tariff revenue could start at $300 billion, with potential to exceed this amount by 2026.
Trade Policy Uncertainty
The primary signal for us is that the era of trade policy uncertainty is largely over for now. With major trade agreements considered complete, we should anticipate lower market volatility driven by surprise announcements. The CBOE Volatility Index (VIX) has reflected this, settling into a 14-16 range over the past month, a significant drop from the spikes we saw during past negotiations.
This environment suggests that selling options premium may be a more favorable strategy than buying it in the weeks ahead. As implied volatility is likely to remain subdued without new shocks, strategies like writing covered calls or selling cash-secured puts could offer consistent returns. Looking back at the 2018-2019 trade disputes, we remember that market volatility was a constant threat, which is not the case today.
Impact on Industries
The established figure of $300 billion in annual tariff revenue acts as a known drag on certain industries. Companies in the retail, automotive parts, and electronics sectors that rely heavily on imports have already factored this into their guidance. We have seen this play out in the market, with the SPDR S&P Retail ETF (XRT) lagging the S&P 500 by approximately 8% so far in 2025.
Given this, we see opportunities in buying put options on a few of the most vulnerable import-heavy companies ahead of their next earnings calls. Even though the tariffs are known, any unexpected softening in consumer spending could worsen their outlook significantly. Recent Q2 2025 data from the Commerce Department has already pointed to a slowdown in spending on durable goods, which could be an early warning sign.
This new stability has also calmed the currency markets, with the US Dollar Index (DXY) finding a solid base around the 105 level. This suggests that the impact of tariffs on the dollar has been fully priced in by forex traders. Therefore, we do not expect major currency fluctuations based on this ongoing trade policy.
