China’s commerce ministry said it is willing to work with the US through the China–US economic and trade consultation mechanism. The ministry said China has met its obligations under the Phase One agreement. It said it wants the US to assess the agreement’s implementation objectively. It also said China will defend its rights and interests, and urged the US not to shift blame or create new obstacles.

Market Reaction So Far

There was no immediate reaction in offshore trading. USD/CNH was down 0.16%, near 6.8666. A trade war is an economic conflict caused by protectionist steps such as tariffs. These measures can lead to retaliation, raise import costs, and increase the cost of living. The US–China trade dispute began in early 2018 after the US imposed trade barriers over claims of unfair practices and intellectual property theft. China responded with tariffs on US goods, including cars and soya beans. A Phase One deal was signed in January 2020. The pandemic reduced focus on the dispute. Later US policy kept tariffs in place and added more levies. The text says Trump imposed 60% tariffs on China on 20 January 2025, which increased tensions and pressured supply chains and inflation.

Trading Implications And Positioning

So far, the market is largely ignoring China’s verbal reassurances. The small move higher in the yuan is minor. This suggests traders are paying more attention to the hard impact of tariffs reinstated in 2025 than to diplomatic statements. As a result, markets are stuck in a tense wait-and-see period, with a high risk of sudden policy changes from either side. The impact of the renewed trade war is already showing up in recent data. US Customs figures cited for January 2026 show container volume from major Chinese ports fell 45% versus January 2025, just before the new tariffs fully took effect. This suggests the disruption is not just a risk—it is already affecting supply chains. Because uncertainty is high, it may make more sense to focus on strategies that benefit from volatility rather than taking a strong one-way view. The VIX, often called the market’s “fear gauge,” has averaged above 22 over the past month, well above the calmer levels seen in 2024. Buying options on major indices or currency pairs such as the Australian dollar may be a practical way to position for potential turbulence. In 2018–2019, Beijing often used the currency to help offset tariff costs. Any sign that the People’s Bank of China is guiding the yuan weaker would be a key signal. For that reason, it may be useful to watch options markets for positioning that expects a higher USD/CNH exchange rate. Some sectors are also emerging as clearer bearish targets, especially technology. The semiconductor ETF has already underperformed the broader market by more than 8% since the start of the year. With Beijing signaling potential retaliation against US agriculture, we may also see ongoing volatility in soybean and corn futures, which could create opportunities for active traders. Create your live VT Markets account and start trading now.

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