Insights 
VT 
China has announced adjustments to tariff rates on US goods, effective 14 May. A 24% tariff will be paused for 90 days, with a new rate set at 10%.
China will also cancel additional tariffs imposed under two later rounds of measures. This change is aimed at benefiting producers and consumers in both countries.
Impact On Us Stocks
US stocks have increased since the announcement, reversing previous declines in the futures market. The impact of these changes on future economic relations remains to be seen.
This announcement signals a temporary reprieve in what had, until recently, felt like a deepening of cross-border economic strain. Beijing’s suspension of the higher 24% rate, trimming it sharply to 10% for a 90-day window, suggests an intention to dial down friction without making long-term concessions. Paired with the removal of additional duties introduced in a later phase, this might serve as an effort to contain costs for domestic manufacturing while also responding to sectoral pressures abroad.
Markets have moved accordingly. The immediate bump in equity indices indicates that some had already priced in a more negative scenario, and sentiment has turned broadly more accommodative ahead of key data points. Futures had previously pointed downward, tracking late-week volatility and wider concerns around policy uncertainty. Since the tariff news, however, we’ve seen a pivot back towards risk assets, albeit cautiously.
For those of us watching options flows and implied volatility metrics, especially in sectors tied to industrial goods and semiconductors, there’s been a subtle but measurable recalibration in the week-on-week pricing of downside protection. Short-dated skew has narrowed in several large caps—something that does not occur without material shifts in positioning. That being said, traders appeared to retain a degree of hesitation, particularly in names with prolonged China exposure.
Outlook For The 90 Day Period
The key, for now, lies in the 90-day period itself. Pricing models should account for the fact that these lowered rates could revert if follow-through measures aren’t reciprocated or if broader tensions resurface. Therefore, rolling hedges through that mid-summer checkpoint will likely prove prudent. Adjusting delta exposure accordingly, rather than relying on static directional bets, would help maintain flexibility. Calendar spreads may offer good scope in balancing near-term calm with medium-term uncertainty.
What we are observing isn’t so much resolution as it is a pocket of relief. The reduced tariff pressure could act as a dampener on input cost volatility, at least temporarily, making implied moves across consumer durables more predictable. Spot rates across commodities tied to the trade channel should be watched for any immediate reaction—they tend to reflect sentiment faster than lagging indices.
We should continue monitoring how institutional order flow behaves among those with reputational exposure to this type of policy event. Hedging behaviour from larger players often precedes announcements, but the follow-through tells us where conviction lies. Volume in weekly expiries has risen, hinting at the use of short-term options more for reaction than anticipation.
As we move into the next few weeks, portfolio insurance activity will be key to identifying how committed market participants are to this apparent thaw. Sharper eyes should be turned to open interest shifts and whether spreads are being widened or compressed. Adjustments in carry trades may hint at macro desks repositioning—nothing sharp yet, but worth watching.
All things considered, the response from risk markets has been more than just a bounce on sentiment. There’s been methodical rebalancing, and how this develops across sectors will offer further clues. A conservative approach towards exposure maintenance seems warranted, especially for those of us with strategies hinging on volatility structures and cross-border momentum.
