China’s President Xi Jinping stressed the importance of openness and cooperation in the global economy. He highlighted the need to uphold the international economic and trade order. The president noted that some countries are hurting the global economy due to trade conflicts. Ongoing tensions between the U.S. and China have led to a decline in Chinese exports, now at their lowest in six months.

Impact Of Tariffs

Shipments from China to the U.S. have fallen by over 30%, showing the effects of tariffs enacted by both countries. The Trump administration has extended its tariff pause with Beijing until November 10, keeping average tariffs around 30% while avoiding new increases for now. While the conversation around openness continues, the actual data tells a different tale. China’s latest manufacturing PMI for August 2025 dropped to 49.8, marking two consecutive months of decline and confirming the slowdown. This economic weakness highlights the ongoing trade dispute as a major concern. The crucial date is the tariff truce deadline on November 10, just over two months away. Reflecting on past patterns from 2018-2020, we can anticipate increased market volatility and uncertainty in the weeks leading up to such deadlines. This presents a clear opportunity to adjust for potential risk changes. Given this predictable scenario, we think implied volatility is too low. For example, options on the FXI China Large-Cap ETF indicate a calm that does not match the impending deadline. Buying long-term puts or put spreads on indices like the Hang Seng or ETFs tied to Chinese stocks seems a cost-effective way to hedge or bet on renewed tensions.

Global Ripple Effects

Currency markets are showing caution and deserve our attention. The offshore yuan (USD/CNH) has been nearing the 7.35 mark, a significant level that has caught the eye of central banks before. Using options to prepare for a break above this level could be a direct response to potential trade talks going south before the November deadline. This isn’t just a trade issue for China; renewed tariffs would impact the global market. In previous escalations, we witnessed negative reactions in the U.S. technology and industrial sectors. Thus, purchasing protective puts on the S&P 500 or Nasdaq 100 with expiration dates in late November could provide effective protection against a breakdown in negotiations. Create your live VT Markets account and start trading now.

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