Recent trade news has significantly impacted the market as the US approaches an important deadline. Tariffs on Malaysia, Thailand, Indonesia, and Cambodia are set at 19%. Taiwan has secured temporary relief with a 20% tariff. Vietnam is also facing a 20% tariff due to the latest US trade measures. In Europe, Switzerland is dealing with 39% tariffs, affecting the Swiss franc, which rose 0.2% against the dollar to 0.8137 during the European session. Canada has seen its tariffs increase from 25% to 35%, while the US has given Mexico an extra 90 days before its trade deadline.

Ongoing China Negotiations

China is a key player in these negotiations, with discussions about a possible extension. Although Beijing has agreed to delay, the US administration indicates that uncertainty remains. President Trump has not yet confirmed an extension, and the current deadline is set for August 12. For an updated list of tariff changes before the August 1 deadline, check the White House announcement. These trade updates are causing significant uncertainty in the markets. We anticipate a notable rise in implied volatility across various asset classes, similar to the 2018-2019 trade disputes. Traders should think about buying protection or using strategies that benefit from sudden price movements, as the VIX could easily exceed 20 in the coming days.

Expected Market Volatility

The 39% tariff on Switzerland is a major setback, likely driving down the Swiss franc against the dollar. With the U.S. being Switzerland’s second-largest goods export market in 2023, totaling over $67 billion, we might see USD/CHF targeting the 0.8500 level. Options traders will focus on put options for the Swiss Market Index (SMI), as companies in the pharmaceutical and luxury watch sectors are likely to face serious challenges. For Canada, the 35% tariff increase is concerning for the Canadian dollar, especially since around 75% of its exports go to the U.S. We expect the loonie to weaken and will monitor bearish positions on the S&P/TSX Composite Index. Mexico’s 90-day extension offers temporary relief for the peso, but lingering uncertainty may prevent any significant rallies. Tariffs on Malaysia, Thailand, and other Southeast Asian nations will likely negatively impact their currencies and stock markets. Attention is now on the August 12 deadline for China, creating a significant risk event. This uncertainty should keep implied volatility high for options on the Chinese yuan and related market ETFs like FXI. Global trade tensions often lead to a flight to safety. We expect gold to gain momentum, possibly reaching highs not seen since the inflation concerns of 2022. Likewise, demand for U.S. Treasuries should rise, driving yields lower as investors seek shelter from volatility. Create your live VT Markets account and start trading now.

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