US Treasury Secretary Scott Bessent, speaking before a summit between US President Donald Trump and Chinese President Xi Jinping, said he had held an engagement with China covering trade and AI, according to Reuters. He added that both sides agreed to convene another meeting under an AI dialogue, while Washington proposed a notification system between the two countries. US Trade Representative Jamieson Greer said the US and Chinese teams were continuing work on a proposed board of trade agreement, with the Chinese side expected to focus on consumer goods and low-tech items, while the US side could include energy, agricultural goods and potentially medical devices.
In markets, AUD/USD was 0.03% higher at 0.7127 at the time of writing. The US–China trade dispute began in early 2018 after the Trump administration introduced trade barriers citing unfair practices and intellectual property theft, prompting Chinese retaliatory tariffs on goods including automobiles and soybeans. The two countries signed the Phase One deal in January 2020, though the pandemic shifted attention, and tariffs largely remained under President Joe Biden, with additional levies added. Trump’s return as the 47th US President has revived tensions; he pledged 60% tariffs during the 2024 campaign and imposed them on 20 January 2025.
—
Derivative Strategies in an Evolving US-China Trade Environment
We suggest derivative traders prepare for a short-term shift toward risk-on assets as US-China trade relations show signs of thawing ahead of the Trump-Xi summit. Historically, the Australian Dollar acts as a liquid proxy for Chinese growth, and its current rise to 0.7127 indicates brewing market optimism. We recommend looking at short-dated call options on the AUD/USD to capture further upside if the summit yields concrete progress.
With USTR Jamieson Greer highlighting potential US exports of energy and agricultural goods, commodity derivatives present a highly lucrative setup in the coming weeks. During the 2020 Phase One agreement, US agricultural exports to China eventually surged to record highs of over $40 billion by 2022 after initial tariffs depressed the market. Derivative traders should consider building long positions in soybean and crude oil futures to front-run the formalization of this proposed bilateral trade agreement.
—
Implications of AI Dialogue for Tech Derivatives
At the same time, the proposed US-China notification system on artificial intelligence introduces unique pricing dynamics for tech-heavy index options. Because AI remains a highly sensitive geopolitical battleground, we expect implied volatility in major semiconductor and tech derivatives to spike as the summit date nears. Trading this volatility through long straddles or strangles could protect portfolios against sudden regulatory announcements or unexpected policy shifts during the bilateral talks.
