US Treasury Secretary Bessent told CNN that if trade agreements aren’t reached, tariffs will increase to a “reciprocal” level. He said that Trump warned foreign countries that if they don’t negotiate honestly, tariffs could return to their April 2 levels. Bessent pointed out that deals with 18 trading partners are in progress, but he didn’t specify when these agreements will happen. Initially, Trump’s tariffs were set to take effect on April 9, raising concerns with rates as high as 30%, 40%, and 50%. After a market drop, Trump paused the tariffs for 90 days to allow time for negotiations. This pause created an opportunity to explore discussions and possibly avoid the planned tariff increases. For those in the derivatives market, Bessent’s statements are more than just words; they set a timeline, whether explicitly or not. The mention of returning to April 2 tariffs, with rates from 30% to 50%, highlights potential cost impacts on international goods. According to Bessent, these tariffs will activate if negotiations collapse, hinting at possible future market volatility for import-heavy sectors. Even though discussions are ongoing with 18 partners and no specific dates have been provided, it suggests that timelines are still flexible. This uncertainty doesn’t indicate inactivity; instead, traders should prepare for gradual developments, likely influenced by political events rather than economic ones. Without fixed deadlines, synchronized announcements can’t be assumed. Trump’s earlier choice to halt tariffs after market reactions illustrates a tendency for responsive policies rather than preventative ones. We saw a 90-day pause after sharp market reactions, which now serves as a reference point. Moving forward, it would be unwise to expect the same level of leniency without similar backlash. This indicates a need to closely monitor shifts in momentum, especially in sectors with hedges related to industrial inputs, consumer electronics, and high-volume retail goods. We should not only anticipate policy changes but also recognize that fiscal adjustments will likely align with media coverage, not precede it. The markets revealed the story last time, and they will have to do so again. Derivatives tied to international shipping indexes, freight forwarders, and Asia-Pacific exporters face heightened risk. Some may advocate for low-delta positioning, but this approach overlooks the directional signals present in this new wave of warnings. There is a history of partially following through when diplomatic delays are made public. What Bessent didn’t say might be more significant. By avoiding a specific date or season, he creates room for unpredictability. This uncertainty pushes those with daily or weekly pricing exposure to prepare for wider fluctuations. Position management must adapt, as events are unfolding clearly enough that ignoring them could be costly, even if actual rate changes end up being more moderate. Finally, even paused measures can have lasting effects. Ongoing negotiations suggest movement, but not guarantees. History shows that tariffs can serve both as punishment and as bargaining tools. We see this as a time for multi-layered risk models. This approach should not only consider different sectors but also various jurisdictions. Static hedging is insufficient—understanding momentum correlation is now more crucial than relying on basic assumptions.

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