Insights 
VT 
Tariff negotiations between the U.S. and Japan are encountering challenges due to conflicting perspectives among three senior U.S. officials. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamiesol Greer each have differing trade views, complicating the discussions.
This internal discord has led to confusion for Japanese negotiators who are trying to understand the U.S. administration’s stance. During a recent meeting, tensions among the U.S. team became evident when the cabinet members paused talks to engage in a discussion among themselves.
Breakdown In Cohesion
What we’re seeing here is a tangible breakdown in cohesion within a key pillar of the negotiations — the American delegation. Typically, international trade talks benefit from a clear, unified line of communication. That isn’t what’s happening here. Each of the high-level officials from the United States government is coming to the table with their own ideas about how this should progress, and they aren’t doing much to hide those differences.
From the Japanese viewpoint, the picture is blurry. They’re attempting to interpret not just the words being said, but also the tone, the hesitations, and the changing emphasis that each shift in official brings. Rather than receiving a straight, reliable message, they are faced with a dynamic where policy direction appears unsettled. In last week’s meeting, this internal disagreement went as far as halting the talks altogether, at least temporarily, while the Americans deliberated among themselves. For negotiators observing from across the table, it turned into a waiting game of trying to guess where the final decisions would even come from.
Now, what does all this mean for those of us involved in forward pricing and hedging strategies? It means we’re not reacting to formal policy – at least, not yet. Instead, we’re looking at bottlenecks, delays, and maybe even reversals. Trade-related announcements are prone to carry extra noise right now, and markets may misprice early signals due to the apparent lack of central direction. It’s less about reading the official statements and more about spotting which voice gains the upper hand behind closed doors.
We’re anticipating more hesitation from market participants in related sectors – auto manufacturing, agri-business, and even shipping – since they often gear their forecasts, purchases, and even staffing around milestones in trade talks. If those milestones now carry more uncertainty, then timing decisions around them becomes trickier. Some options that looked attractive weeks ago may now appear overpriced, while others – particularly short- to medium-dated positions – might need a shift in attitude. Gaps between implied and realised volatility could present opportunities, although the structure of the curve currently makes it difficult to isolate whether that’s a product of political volatility or standard quarter-end activity.
Reevaluating Strategies
We’d also suggest reviewing hedging thresholds that may have been calibrated with too much reliance on linear progression in these talks. There’s every reason to expect more stops and starts, especially if one camp becomes dominant and then recedes in the same week. That’s especially relevant in directional exposure linked to agricultural or tech-linked basket commodities, both of which remain sensitive here.
Posturing matters. When cabinet-level figures present conflicting goals, it often disorients counterparties — and eventually, markets, particularly when liquidity is narrow. We’ve already seen increased bid-ask spreads in instruments tied to future import/export volume between the two nations. Those aren’t likely to compress until we start to see consistency from the policy direction behind them.
Expect price action to remain jumpy around scheduled remarks, and if past experience is any guide, even off-the-cuff media comments can move futures and swap spreads beyond their typical ranges. This creates both opportunity and exposure — the kind that shouldn’t be underestimated when recalculating VaR limits or assessing forward contracts that depend on clearance timeframes or customs rules that might shift.
What we’re dealing with is not just miscommunication; it’s indecision. We should plan for it to last.
