The US and China have made a temporary deal to ease some export controls. China will loosen restrictions on rare earths and magnets, while the US will do the same for certain tech items. However, restrictions on AI chips won’t change. As for tariffs, the US keeps a 55% tariff on Chinese goods. This includes 10% reciprocal tariffs, 20% on fentanyl, and 25% on existing tariffs. In response, China is likely to impose a 10% tariff on the US.

The Benefactor And The Agreement

The US sees itself as the benefactor in this agreement, but the actual benefits are unclear. China’s strong position in the rare earth market gives it an advantage if problems arise later. This situation resembles earlier events, like the soybean talks in 2019. China tends to prioritize its interests and resist pressure. Expectations are that China’s response will mirror this attitude, avoiding any appearance of giving in. This preliminary agreement aims to stop rising tariffs and offers short-term relief for both countries. However, calling it a significant “deal” might be a stretch. It still needs approval from China’s President Xi, which will determine its final status. For those considering market strategies after this update, it’s crucial to focus on what’s actually happening. Despite official claims, this is more of a pause—an effort to buy time amidst uncertainty. There’s no permanent solution, only a reordering of priorities to provide both sides with some leeway. Superficially, the easing of certain export controls suggests cooperation. However, retaining AI chip restrictions is a clear signal that neither country is ready to back down where it counts the most. This is important because it keeps valuable technology off the negotiation table, leaving markets vulnerable to sudden changes if tensions flare again.

Managing Market Responses

Returning to the tariffs, the 55% figure remains unchanged. The trade friction is still in place. This level of pressure on goods crossing borders won’t be ignored by companies assessing risk and pricing futures. When the other side implements a 10% tariff in retaliation, it’s not just about getting back at the US; it’s about upholding dignity without escalating matters. This approach is more about maintaining posture than having real impact, but markets often respond more to tone than to the facts. Looking at this back-and-forth, there’s a familiar pattern, reminiscent of late 2019 when export-driven goods like soybeans became part of a larger political game. The outcome back then involved tactical retreats rather than genuine solutions. One side believed they were steering the conversation, but the market adjusted its strategies once the actual power dynamics became clear. This current situation could develop similarly. The decisions still rest with high-level officials, and until there’s formal approval, what has happened so far is just a proposal—informally supported but not legally binding. This distinction is important. There’s still potential for reversal. From our perspective, these conditions may create temporary fluctuations in volatility spreads, allowing for selective investments. However, this calm isn’t built on solid ground. Spreads that widened due to speculation could narrow soon, while those in sectors related to extractive materials or advanced semiconductors may tighten more gradually if clarity doesn’t emerge on technology. Here’s a strategic point: don’t treat this as a resolution. Pricing models should reflect the risk of escalation. Instead of heavily investing, a more careful, line-by-line assessment is needed—especially for contracts connected to supply chain sensitivities. By keeping exposure flexible and watching for policy announcements—not just moods or talk—your positioning can remain strong. This approach makes more sense than relying on an uncertain claim of progress. Each time a situation like this arises, it becomes clear that what’s not said is often more revealing than official statements. The silence surrounding final approvals and ongoing high-grade chip controls shows where the real issues lie. It’s unwise to expect any long-term change until official channels confirm it—and that still hasn’t happened. Create your live VT Markets account and start trading now.

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