China’s President Xi Jinping emphasised the need for maintaining openness and cooperation for mutual benefit in global economic interactions. He stated the importance of sustaining the international economic and trade order.
The president pointed out that some nations are adversely impacting the global economy with trade conflicts. Tensions between the U.S. and China are still present, with Chinese exports declining to their weakest level in six months.
Impact Of Tariffs
Shipments from China to the U.S. have dropped by over 30%, illustrating the impact of tariffs imposed by both nations. The Trump administration recently extended its tariff truce with Beijing until November 10, maintaining average tariffs at around 30% while avoiding new increases for the time being.
We are seeing familiar talk about openness, but the hard data tells a different story. China’s latest manufacturing PMI, released for August 2025, dipped to 49.8, marking a second straight month of contraction and confirming the slowdown mentioned. This economic weakness makes the ongoing trade dispute a critical pressure point.
The key date for us is the tariff truce deadline on November 10, which is now just over two months away. Looking back at the patterns from the 2018-2020 period, we remember that market volatility and uncertainty consistently spiked in the one to two weeks before such deadlines. This creates a clear, calendar-based opportunity to position for a potential repricing of risk.
Given this predictable event, we believe implied volatility is too low. For example, options on the FXI China Large-Cap ETF are pricing in a level of calm inconsistent with the approaching deadline. Purchasing long-dated puts or put spreads on indices like the Hang Seng or ETFs exposed to Chinese equities appears to be a cost-effective way to hedge or speculate on renewed tensions.
Global Ripple Effects
The currency markets are signaling caution, and we should pay close attention. The offshore yuan (USD/CNH) has been testing the 7.35 level, a psychological barrier that has attracted central bank attention in the past. Using options to position for a break above this level could be a direct play on trade talks souring before the November deadline.
This is not just a China-centric trade, as renewed tariffs would have global ripple effects. We saw during past escalations how US technology and industrial sectors reacted negatively. Therefore, buying protective puts on the S&P 500 or Nasdaq 100 with expirations in late November could serve as a valuable hedge against a breakdown in negotiations.
