US Commerce Secretary Lutnick announced a 90-day extension for the China deadline, shifting it from the original date of August 12. President Trump will not impose tariffs on semiconductors made in the US. The US government expects to collect $50 billion in monthly tariff revenue, lowering previous projections from $700 billion to $600 billion. Lutnick is pushing for the return of manufacturing to the US.

China Deadline Extension

He emphasized the leverage gained through tariffs, which led to commitments like Apple’s additional $100 billion investment in US manufacturing. Lutnick acknowledged that negotiations with China are complicated and take time. With the China deadline likely being extended by 90 days, we expect less market volatility. This mirrors what occurred during the trade disputes of 2018 and 2019 when extensions eased investor worries. Strategies such as selling VIX call options or buying puts may become popular as “fear” levels decrease. This reduced near-term risk should help boost the broader market. We may want to cut back on hedges by selling some S&P 500 and Nasdaq 100 put options. The market now has a clearer path until the new mid-November deadline.

Impact on US Semiconductors and Market Strategy

Protecting US-made semiconductors is a big win for that sector. It lifts a heavy burden that has kept valuations low, making call options on key companies in the PHLX Semiconductor Index (SOX) appealing. These firms will now have more certainty regarding their domestic operations. This strategy seems well-timed, considering the fragile economic data we’ve seen. The manufacturing PMI from July showed a reading of 49.1, indicating the administration likely wants to prevent another supply chain shock. This backdrop supports a more optimistic sentiment in the short term. The downgrade of annual tariff revenue expectations to $600 billion indicates careful economic management. This suggests a shift from direct confrontation to securing long-term investment commitments from companies like Apple, focusing more on re-shoring jobs rather than just tariff income. However, we must keep in mind that core issues with China remain unresolved and complicated. While short-term options strategies may benefit, traders should be cautious with longer-term derivatives. The new November deadline is likely to bring back volatility as it approaches. Create your live VT Markets account and start trading now.

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