The UK is expecting a deal with the US on car tariffs to be in place by the end of the month. This deal will result in tariffs of 10%, lower than the previously suggested 25%. Both sides have agreed to a partial trade deal that will be implemented before the final deadline. However, tariffs on steel and aluminum have not yet been resolved.

President Trump Delays Tariff Increase

Currently, tariffs on these metals are set at 25%, with a chance they could double. President Trump has delayed this increase until July 9. These developments show a temporary easing of trade tensions. While reducing automotive tariffs from 25% to 10% helps, it doesn’t fully eliminate the challenges traders face in setting prices. This outcome avoids the worst-case scenario, but the risk of increased tariffs on metals still lingers, meaning uncertainty remains. Tariffs on steel and aluminum are still at 25% and could rise, which would significantly change hedging costs and lead to more aggressive trading strategies. Although Trump’s delay until July 9 doesn’t take away the risk, it simply shifts it further down the timeline. This situation is a warning, not a certainty. The extra time makes June a crucial period for forward contracts. The partial trade deal is not finalized but offers hope for stability in the automotive sector. We have adjusted our calculations regarding automotive component costs, and the sharp decline noted in mid-May seems exaggerated. Some of that recovery, while modest, could last as volatility decreases in auto-related assets. We don’t expect this trend to last unless the final agreement includes broader measures or extends timelines. There’s also a lack of coordination regarding industrial metals. With steel and aluminum not included in the initial deal, prices for metal-dependent sectors are likely to remain unstable. For perspective, trading on flat-rolled products surged after warnings in April. We believe institutional traders, who have already factored in a potential 50% duty, might begin adjusting their positions for Q3, especially after the narrow window ends next month.

Expected Impact on Market Adjustments

The delay indicates that leaders on both sides want to negotiate further but are still applying pressure. This postponement gives traders clear short-term dates to consider. July 9 is now a key date for planning. This isn’t speculation; it’s a structural change. Options prices are already leaning towards higher implied prices for metals as that date approaches. For us, the focus shifts to the timing in mid-duration exposures related to industrial input costs. The delay in metals creates a pricing gap for the coming weeks. Traders’ early actions might establish prices that move outside typical ranges, particularly if economic indicators change. Also, it’s important to see how these trade negotiations affect consumption-related investments. With no set metals prices yet, we should be cautious about assuming consistent profit margins downstream, suggesting a more selective approach to contracts linked to product demand. Mitigation strategies should now place more emphasis on timing. There’s a cycle between waiting for the automotive deal, preparing for the July 9 deadline, and managing positions in industries still at risk. Trying to play both sides could restrict cash usage and confuse timelines. What has changed is not just the numbers but the pace of decision-making. Release schedules, announcements, and shifts in hedging costs are now closer together. This tightens the decision-making space, especially for teams managing exposure across multiple commodities. We see this delay as a tactical signal—not a resolution but an opportunity to recalibrate. This means adjusting calendar spreads accordingly and focusing on key dates. There’s no time to overlook them. Create your live VT Markets account and start trading now.

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