Insights 
VT 
China’s Foreign Ministry spokesperson Lin Jian has urged the United States to engage with China based on equality, respect, and mutual benefit. Lin emphasised that China will take necessary actions to protect its rights and interests if the US continues with its current approach.
The statement was made in response to US President Donald Trump’s recent threat to impose 100% tariffs on Chinese goods starting November 1. This move has drawn attention and concern over the future direction of US-China trade relations.
Market Reaction Stabilises
In terms of market reaction, there has been a stabilisation of sentiment due to reduced fears of a further trade conflict between the two largest global economies. The US Dollar has shown a reversal from its previous decline, and the Dow Jones futures have maintained intraday gains exceeding 1%.
With a potential November 1st tariff deadline approaching, the market’s calm reaction today suggests traders see this as political posturing rather than a definite policy move. We see the CBOE Volatility Index (VIX), a key measure of market fear, has actually fallen by 8% to settle around 17.5 after spiking above 20 on Friday. This implies that options traders are not buying protection for a significant market downturn, betting instead that the threats will soften.
We have seen this pattern before, particularly during the trade disputes of 2018-2020, where harsh rhetoric often led to short-term volatility before a deal or delay was announced. The current market is pricing in a similar outcome, viewing the threat as a negotiation tactic ahead of potential talks. Therefore, selling out-of-the-money puts on major indices like the S&P 500 could be a viable strategy to collect premium from the perceived low risk.
Sector Performance Insights
Key sectors to watch are semiconductors and automotive manufacturers, which have highly integrated supply chains with China. The PHLX Semiconductor Index fell 3% last Friday but has already recovered over half of that loss in today’s trading, showing resilience. For traders anticipating a de-escalation, call options on bellwether tech companies that sold off could offer leveraged upside.
The currency market is telling a similar story of disbelief, as the offshore yuan (CNH) has strengthened against the dollar today, moving from 7.34 to 7.30. Typically, in a true trade crisis, we would expect the yuan to weaken significantly as capital moves out of China. This strength suggests that currency traders do not believe these 100% tariffs will actually be implemented.
In the coming weeks, the primary strategy should be centered on volatility and event-driven plays tied to the November 1st date. Look for opportunities in options spreads that profit if the market stays within a range or rallies modestly on news of diplomatic talks. For example, a call spread on the Dow Jones Industrial Average could capture upside from a relief rally while defining risk if negotiations break down.
