U.S. White House trade adviser Peter Navarro stated that the U.S. is not rushing to impose additional tariffs on China for buying Russian oil. This is in contrast to the recent rise in tariffs on Indian imports for similar actions. Navarro explained that many Chinese products already have a 50% tariff, so it’s important to avoid causing more harm to the U.S. economy. He advised a careful approach, saying, “Let’s wait and see,” indicating no immediate actions are planned against China.

U.S. Trade Sanctions Increase

These remarks come as the U.S. tightens trade sanctions on countries purchasing Russian energy while being mindful of the potential downsides of escalating tariff conflicts. President Trump has also cautioned that China holds some control in these negotiations and pointed out the chance of a 25% extra tariff on China due to its Russian oil purchases. The reluctance to impose new tariffs on China suggests that the risk of escalation is lessening. For derivative traders, this could mean that implied volatility, which recently pushed the VIX above 19, may start to calm down. We view this as a chance for markets to stabilize in the coming weeks. This cautious approach is particularly relevant after China’s latest Caixin Manufacturing PMI for July recorded 49.8, indicating a slight contraction. Adding new tariffs now could worsen global demand and support the idea that the administration is tough in its talk but sensible in its actions. This strategy may favor selling volatility. We recall the significant market drops during the 2018-2019 tariff escalations, which often happened unexpectedly. The current “wait and see” position is a marked shift from those times. This suggests that while there are still risks, the likelihood of an immediate tariff increase has decreased for now.

Effects on Currency and Commodity Markets

In currency markets, this could help strengthen the Chinese yuan, which has been weak. The offshore yuan (CNH) has been trading around 7.35 against the dollar due to tariff concerns. A de-escalation might allow it to strengthen back to about 7.30 as this tariff risk fades. This careful approach may also help keep oil prices steady, with WTI currently around $85 a barrel. By not sanctioning China’s energy purchases from Russia, it ensures that this supply remains in the global market. Traders may also begin to lower the risk premium in agricultural futures like soybeans, which are sensitive to trade tensions. Create your live VT Markets account and start trading now.

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