US President Donald Trump said the US has asked to delay his planned meeting with Chinese President Xi Jinping in Beijing by “a month or so”, according to CNBC. He linked the change to the ongoing war with Iran. Trump said he did not know if he would still travel to China at the end of March as previously scheduled. He said he wanted to remain in the US because of the war, and that the delay would be limited.

Trade War Definition

A trade war is an economic conflict driven by protectionist measures such as tariffs. These barriers can trigger counter-measures, pushing up import costs and the cost of living. The US-China trade dispute began in early 2018 after the US imposed trade barriers on China over claims of unfair practices and intellectual property theft. China responded with tariffs on US goods, including automobiles and soybeans. The two countries signed the US-China Phase One trade deal in January 2020. The deal required structural reforms and other changes to China’s economic and trade system, while the Coronavirus pandemic shifted attention away from the dispute. After taking office, President Joe Biden kept tariffs in place and added further levies. During the 2024 campaign, Trump pledged 60% tariffs on China and imposed them on 20 January 2025, renewing tensions.

Market Volatility Outlook

Looking back, we can see how the events of early 2025 created significant market instability for traders. The combination of 60% tariffs on China and a new war in Iran caused the CBOE Volatility Index (VIX) to surge, as it briefly spiked above 28 in March 2025. This prolonged period of uncertainty has established a new, higher baseline for implied volatility in equity index options. The currency market reacted exactly as we anticipated, with a flight to safety benefiting the US dollar. The offshore yuan weakened sharply against the dollar last year, with USD/CNH breaking past 7.9 for the first time as capital flowed out of China. Traders should be positioned for further yuan depreciation if trade relations do not improve, using options to hedge exposure. Commodities saw a split reaction, creating distinct opportunities. As we saw during the conflict last year, Brent crude futures briefly topped $115 per barrel on fears of supply disruptions through the Strait of Hormuz. In contrast, agricultural futures, particularly soybeans, remain under pressure, echoing the price patterns we observed during the 2018 trade dispute. The impact of those tariffs is now evident in our inflation data, complicating Federal Reserve policy. The latest CPI reading for February 2026 came in at a stubborn 3.4%, well above the 2% target, limiting the Fed’s ability to lower interest rates. This environment suggests selling call options on rate-sensitive sectors that are unlikely to rally until inflation is controlled. Given the lingering geopolitical tensions, traders should continue to buy protection against sudden market swings. We have seen how quickly headlines can move the market, so holding long-dated puts on multinational industrial companies exposed to tariffs is a prudent strategy. VIX call options also remain a relatively inexpensive way to hedge an entire portfolio against another flare-up. Create your live VT Markets account and start trading now.

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