State-owned media believes that 90 days may not be enough time to achieve significant results. They emphasize the need for ongoing collaboration beyond this timeframe and express hope that the outcomes of recent talks will prompt the US to compromise more with China. The proposed 90-day period seems to be more of a guideline than a fixed deadline. It allows for extensions if talks are making headway. Any extension will depend on the patience of the US, especially if President Trump remains understanding towards China.

Beijing’s Negotiation Strategy

Experts think that Beijing may take its time before revealing how it plans to meet its commitments. There might be little clarity regarding non-tariff barriers as both nations continue their discussions. Even if purchase agreements are reached, they might not indicate real progress. There is concern that history may repeat itself with the unmet promises from the previous Phase One trade deal. This article looks at the likelihood of progress in US-China discussions, focusing primarily on trade relations. It suggests that the 90-day talk period should be seen as a flexible checkpoint rather than a strict deadline, providing room for delays if negotiations appear productive. This reflects a sense of realism rather than optimism, as it acknowledges that such discussions don’t adhere to exact timeframes. Commentators from state-linked media believe more time is necessary to achieve useful results, resulting in a more cautious outlook. Implicitly, there’s a recognition that major outcomes may not emerge as grand agreements or immediate actions. Instead, the focus is on small gestures and intentions, which complicates understanding the timeline.

Market Behavior Implications

There’s still uncertainty about how policy pledges will be implemented, especially regarding non-tariff barriers. These barriers often present more challenges than tariffs, as they involve regulations and standards that are difficult to measure. Both sides appear reserved, reluctant to reveal their complete stances early on. Market participants should expect some ambiguity in the near future. Previous unfulfilled promises, especially related to the earlier Phase One deal, are crucial to highlight. There’s a risk that initial signs of agreement, like lowered tariffs or bulk orders, might be misinterpreted as resolutions. Such cues have misled markets before, so a more cautious interpretation of news is reasonable this time. What’s more important for us is not just confirming agreements, but recognizing what remains unspoken. Delays in sharing specifics, particularly regarding non-tariff policies or enforcement, can cause fluctuating prices and changes in implied volatility. We should closely monitor short-term implied volatility in key currency pairs and commodities, especially those dependent on sentiment rather than substance. Situations where sentiment drives market positioning can increase the risk for structured products and calendar spreads. However, we should avoid overreacting based on expected goodwill. The situation indicates that any pause or slowdown in new negotiations could happen quickly, especially if political pressures grow elsewhere. In such cases, short positions might become riskier than they seem. Reviewing correlated positions, particularly those influenced by sentiment, could minimize unforeseen challenges tied to abrupt shifts in narrative. Additionally, no new compliance or verification protocols have been agreed upon. Without these, any future agreements remain mostly verbal. This uncertainty may not show up immediately in macro indicators but is vital when pricing quarterly volatility or structuring options like iron condors or risk reversals. Often, quieter periods with less concrete news but softer postures provide the best opportunities for adjusting risk rebalancing. Revisiting the overall message, a reluctance to commit to a concrete timeline remains evident. If this hesitation continues, it could delay improvements in bilateral trade flows or licensing changes. This affects trade volumes and impacts operational confidence for firms linked to cross-listed stock or sector ETFs. Those invested through American Depository Receipts (ADRs) or related to manufacturing or base materials may want to reevaluate their timing strategies in light of potential regulatory issues. While we keep an eye on public reactions, it’s important to note that lengthy discussions without substance typically cool implied rates rather than directly influence underlying exposure. This could lead to flatter long-term spreads, despite short-term implied volatility remaining constrained. We believe this is a scenario worth preparing for, if not actively positioning against already. Rapid changes in sentiment can be disruptive, while slow progress accompanied by optimistic language requires just as much discipline. Create your live VT Markets account and start trading now.

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