Expectations for a breakthrough in US-China trade relations are low, even after Trump’s announcement of a potential deal. The agreement focuses on non-tariff issues, like rare earth export controls, but leaves core trade tensions unresolved.

Trade Standoff Status

Current tariffs remain unchanged. Although dialogue resumption may suggest possible future progress, the bilateral relationship is reportedly in worse condition than it was months ago, reducing short-term optimism.

The article outlines that despite public suggestions of progress, little has actually changed between the United States and China in terms of their trade standoff. Trump’s remarks may have hinted toward movement on certain export restrictions—like those affecting rare earth materials—but more substantial issues such as intellectual property rights, technology transfer, and tariffs remain in place and largely unaddressed. Importantly, the reintroduction of dialogue, while seemingly positive at first glance, does not imply that tensions are meaningfully lower. In fact, relations appear to have deteriorated further compared to recent months.

From our point of view, this reflects a wider reluctance by either side to make fresh concessions ahead of major political events that could shift priorities yet again. Any illusion of a reset is likely designed as a public gesture rather than a policy shift. As such, we should interpret the present environment not as one of heightened risk, but rather, one where uncertainty clings stubbornly and limits a return to fully directional moves.

For traders dealing in derivatives, that slowness—combined with unresolved structural disputes—points to a need for tighter control around exposure to event-driven spikes, including those prompted by press briefings or policy rumours. Gut instinct may tempt one to view headlines as momentum drivers, but the instruments we rely on are shaped more by tangible adjustments. Forward volatility in these contexts tends to flatten as time-value expectations are not refreshed by real policy adjustment.

Market Opportunities and Risks

Still, pricing micro-swings in short-dated options may offer opportunities, provided one stays sharply focused on the timing of official statements and scheduled economic releases from both economies. Positioning around these soft triggers demands that we review our implied-volatility estimates more frequently, especially in the one-to-two-week range, where low conviction on either side fosters low consensus.

Avoid leverage against longer themes until more reliable patterns emerge. Thin bids and flow on both sides of the US-Asia corridor suggest a hesitancy to commit, particularly in high-delta contracts. If that persists—even with occasional hawkish or dovish cues thrown into the mix—then implied moves may begin to fall out of sync with realised ones, particularly in macro-tied FX or index-linked credit.

In the meantime, liquidity providers are likely to favour tighter spreads on near-term tenors and recalibrate correlation assumptions cautiously. For those managing larger portfolios, this argues for a bias toward calendar trades with protective overlays, rather than outright directional views based on assumed resolution of trade barriers. The atmosphere remains heavy with potential misreadings, and we expect few shifts in policy direction barring a surprise move from regulators or an unplanned disruption in supply chains.

As Powell and Liu remain mostly committed to domestic narratives, external pressures—no matter how strategically framed—tend to take a back seat. This adds to the persistence of that sideways tone, with realised ranges holding narrower than implied breakevens would normally suggest. If one is seeking gamma exposure here, recalibrating entry points might better serve than relying on macro triggers that continue to disappoint.

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