Insights 
VT 
US Commerce Secretary Lutnick announced an understanding with China reached in Geneva in May. Both Trump and Lutnick have repeatedly mentioned this agreement.
Trump referred to a deal signed with China on Wednesday. Lutnick stated that a US-China trade deal was signed two days ago. However, this information is misleading.
The Geneva Understanding
The reference is to the understanding concluded last month in Geneva, not a new trade deal. No concrete trade agreement with China currently exists.
The situation resembles a scene where expectations are met with vague promises and uncertainty continues.
Taken at face value, the remarks from Trump and Lutnick might lead some to believe that a formal, binding trade agreement has been finalised between the United States and China. In reality, what took place in Geneva in May was merely a general understanding—a diplomatic gesture more than a legal commitment. There is no official documentation confirming any contractual obligations or enforcement mechanisms between the two nations as of now. This means that much of the posturing may be political rather than economic in substance.
From our standpoint, and particularly for those tracking derivative movements linked to international policy events, the distinction is not a small one. The absence of binding detail means pricing models based on assumptions of tariff rollbacks, increased imports, or relaxed export controls may be built on unstable ground. Markets dislike ambiguity, but will often trade on it regardless, especially when headlines appear promising.
Lutnick’s choice of wording—referring to this as a “deal”—adds to the noise rather than offering clarity. Traders parsing these statements should not treat them as signals for immediate directional shifts. Instead, it’s worth focusing attention on more observable inputs. Cross-border shipping data, customs filings, industrial production numbers out of Guangdong, or soybean futures can tell a clearer story than diplomatic phrasing.
Understanding Market Movements
The recent buoyancy in asset prices tied to international commerce might reflect hope more than fact. It’s plausible we’ll see short bursts of optimism across Asia-Pacific indices or delta-hedged option positions widening around companies with exposure to Chinese manufacturing. But without substantiated policy changes, these movements are often short-lived. When sentiment corrects back to more realistic expectations, volatility can return suddenly and without much notice.
We also need to keep an eye on Federal Reserve speeches and their tone concerning inflation and global risk. Although these don’t directly reference China, they often act as guiding points for where large macro positions are being adjusted. Should the Fed interpret these recent developments as easing some global strain—even prematurely—we may observe shifts in futures curve steepness or re-weighting within US dollar-based carry trades.
In coming days, it will benefit us to look not just at what officials say, but also at what concrete follow-through occurs. Customs actions, actual trade flows measured on a monthly basis, and policy enforcement changes—these will tell us more than press releases. This calls for setting tighter risk parameters around exposure that hinges on geopolitical resolution. Short gamma strategies or leveraged positions built on hopes of clarity may end up misjudging how fragile this détente really is.
So in short, rather than reacting to announcements, we ought to treat the current environment with skepticism, adjusting our models accordingly. Avoid assuming resolution. Assume noise. Let price confirm before portfolios follow.
