Insights 
VT 
Trump announced on Truth Social that a deal with China is complete, awaiting final approval from him and President Xi. The agreement includes China supplying full magnets and necessary rare earth elements, while the US will allow more Chinese students in its colleges and universities.
The deal also stipulates that the US will impose a total of 55% tariffs while China receives 10%. Trump’s statement lacks specific details on other aspects of the agreement, leaving some terms vague.
Market Reaction
Financial markets are experiencing some volatility following the announcement, with an overall steady state compared to pre-announcement levels. The market’s muted reaction may be influenced by the uncertainty surrounding the specifics, especially since the US recently reduced its tariff rate to 30%.
Further details might emerge from Chinese officials or other sources as the situation continues to unfold.
The announcement, made via a social media post, laid out a framework that would, on paper, alter the flow of key materials and students between two of the world’s largest economies. What is particularly striking is the imbalance in the proposed tariff structure—Washington setting duties up to 55%, while Beijing would reciprocate at only 10%. That 45-point spread is large by any standard, especially considering that just a short time ago, the US had lowered its tariff rate to 30%. This reversal not only re-introduces headwinds for importers but also injects uncertainty for those measuring exposure to Sino-American trade.
Markets initially wavered but settled in a range reflective of caution rather than confidence. There was no strong directional bias, which suggests many are still parsing the meaning behind the numbers and waiting for clearer terms from Chinese authorities before adjusting positions. When headlines contain more diplomacy than legislative detail, we often see liquidity tighten in futures—particularly in equities and industrial commodities. That seems to be the case here.
Investment Strategy Considerations
We view these conditions as fertile ground for opportunities in gamma strategies due to expected price swings around an increasingly policy-sensitive market. There’s limited short-term clarity, meaning implied volatility remains generally flat, or underpriced, which is attractive for long-vol exposure if paired with disciplined risk.
Given the nature of this kind of agreement—built around both trade flows and educational exchange—cross-asset impact should not be underestimated. There’s a direct linkage between rare earth imports and names in the electronics and electric vehicle sector. Options volume around semiconductors and battery technology providers climbed after the post, which we interpret as positioning ahead of clearer confirmation.
Tariff spreads matter not only for commodities but equally so for multinational firms with exposure to East Asian supply chains. Preparing for potential adjustments to input costs is urgent. Hedging through macro products with tight deltas—those that respond sensitively to trade remarks—may be more reliable than blunt positioning in indices.
In light of tightening bid-ask spreads and shifting tail risk assumptions, we’ve slowly reduced directional exposure and rotated into strategies that lean on convexity. There’s little benefit in guessing intraday news flow, but derivatives let us express probability-driven outcomes with limited capital at risk. That becomes even more rational when neutral deltas are harder to read due to rapidly fluctuating interpretations.
Amid cross-currents and policy unpredictability, it is prudent to stay nimble. Discretionary signals—particularly from Beijing in response to tariff terms—will likely shape short-term flows. Above all, let realised movement confirm conviction before reloading positions materially. Consistency matters more than speed in reacting to barely-defined deals.
