Rabobank strategist Michael Every describes China as a key player in today’s geopolitics and global finance. The piece covers Donald Trump’s visit to Beijing, possible results from US–China talks, and debate over whether a “Grand Bargain” is possible.
Trump travelled to meet Xi alongside “a billionaire CEO entourage” and wrote on Air Force One that he would ask Xi “to ‘open up’ China so that these brilliant people can work their magic”. The article also compares US rhetoric to “Nixon–Mao 2.0”, while noting many reactions depend on views of Trump.
Possible outcomes listed include a “Grand Bargain” that reshapes geopolitics and geoeconomics, or a smaller deal on tariffs, technology, and Taiwan. It also cites Dutch objections to a US proposal to further block chip firm ASML from the China market.
On Iran, it reports claims that China may pressure Tehran, while The New York Times says Chinese firms are planning arms sales to Iran. The wider context includes Euroclear weighing China onshore bonds and Beijing efforts to expand international use of the yuan.
Everybody gets how crucial these upcoming US-China talks are, with outcomes ranging from a “Grand Bargain” to a “Great Escalation.” With the CBOE Volatility Index (VIX) currently hovering around an elevated 18, we should be buying options to position for a significant market swing in either direction. The current uncertainty is too high to be simply long or short the market.
The focus on China’s push for the yuan is critical for currency traders. Given the yuan’s share of global SWIFT payments recently surpassed 5.5%, up from just over 4.5% last year, its reaction to any deal will be sharp. We should look at buying straddles on the offshore yuan (USD/CNH) to capitalize on a breakout from its recent tight range.
We remember the market whiplash from tariff announcements throughout 2025, which makes us cautious about equities now. The talks will directly impact indices, so derivatives on the S&P 500 and Hong Kong’s Hang Seng are essential tools for hedging or speculation. Expect implied volatility on these index options to rise as the meeting dates approach.
The tech sector, particularly semiconductors, remains the primary battleground. With the Netherlands still being pressured over ASML sales, we should anticipate sharp moves in tech ETFs. We are using options to position for a binary outcome where tech either rallies on a compromise or sells off on further restrictions.
China’s potential leverage over Iran introduces an energy market angle. Any hint that Beijing is leaning on Tehran could briefly soften oil prices, while reports of continued arms sales could add a risk premium. This makes derivatives on WTI crude a valuable way to trade the geopolitical fallout from the main US-China negotiations.
