Insights 
VT 
Chinese Vice Premier He Lifeng is leading trade talks with the US, adopting a hardball style compared to his predecessor, Liu He. This approach could complicate efforts to reduce trade tensions, with hopes for less conflict while Trump remains in office.
China is more prepared for negotiations than during the previous trade war in 2018 and 2019, according to Xi Jinping’s view. He has put together a team ready for a tougher negotiation stance, reflecting a shift from historically unequal agreements described as the ‘century of humiliation.’
Potential New Agreement
There is a potential path towards a new agreement akin to the Phase One deal. In this, China would agree to purchase US products in exchange for concessions, but it is clear that China seeks reciprocity for these commitments.
What the existing portion essentially details is a harder stance from Beijing in discussions with Washington, guided by Lifeng, who has taken over from his more moderate forerunner. Unlike before, the tone is sharper, a reminder that earlier decades of perceived imbalance will no longer be tolerated. Xi’s camp seems more organised, perhaps more methodical, and less likely to settle quickly.
There’s also a hint that whilst a structure similar to the Phase One agreement might emerge again, it won’t be on identical terms. China is no longer approaching these talks as the junior partner. They’re seeking more than gestures or broad promises—they’re after enforceable reciprocity, not unilateral commitments.
Given this observed firmness, it’s fair to rethink what we’ve come to expect from cross-border economic negotiations. We should no longer assume that diplomatic gestures will quickly translate into predictability or clarity. That’s not where things are heading.
Over the coming weeks, sharp movements in headlines may no longer be tightly mirrored in price levels, but that doesn’t mean they’re irrelevant. On the contrary, it suggests a dislocation that can be used to manage positions differently—less reactive, more selective.
Implications Of China’s Firmness
If China’s approach in talks continues down its current path, and more fiscal or policy angles are brought in, we might see volatility bunching in clusters rather than distributed throughout sessions. This puts the onus squarely on timing—more than usual—when establishing new trades or adjusting current ones.
The broader narrative is still trade. But for us, what matters is how expectations re-anchor themselves given these shifts. Changes in tone from leaders may not affect macro indicators straight away, but they pull at the sentiment that shapes liquidity, particularly around listed exposures and index-tied vehicles.
We’ve already seen some compression in implieds across a few key contracts, which feels out of place given where headlines are steering. That tends to unravel sharply when sentiment catches up with fundamentals. It usually does.
Trades that had once worked as reliable barometers of policy direction are starting to behave less cleanly. Watching long-dated exposure shed volume quickly is telling—flows are not committing deep.
Now attention is shifting, methodically, toward whether a return to structured purchases will be framed as a starting point or an ultimatum. If it falls into the former, the usual proxies around agriculture and tech hardware should start flashing again. If the latter, positioning will be more cautious—ridden shorter, hedged stiffer.
This creates an asymmetry in reactions—where measured expectations in official statements drag on forward pricing, while surprise softening draws sharper recoveries. That sort of structure isn’t unusual, but it’s more actionable now than in prior rounds.
We keep seeing a level of preparedness from Beijing that implies less room for misinterpreting posturing as concessions. That limits the scope of reactive pricing to announcements unless tied to actual order data or customs reports.
Despite elevated attention, many exposures continue to lean towards lower realised vol outside of catalysts. This is where patience plays out. There’s a window here. Spread risk is there for those looking to harvest during expectation gaps—just mind when the floodgates re-open.
Volumes along the curve have given us clues. Shorter-dated positioning carries more conviction, while longer maturity plays are hesitant. That likely reflects how little trust there is that these positions are durable under policy pressure.
This changes the way we view ramps. Moves tend to start soft, then extend quickly when they confirm. We’ve got to build around that. The first trade rarely gets the full follow-through—it’s usually the second leg that allows cleaner exposure. That structure is evidence of a market still dancing around uncertainty but ready to switch.
As we examine flow direction and net positioning, we’re tracking the delta between headline interpretation and instrument response. That gap will shrink once traders recalibrate for this newer rhythm of negotiation—one that speaks less, but means more when it does.
