**China-US Trade Dynamics** China’s commerce minister recently met with a group from the US-China Business Council, led by Rajesh Subramaniam, in Beijing. They discussed economic and trade relations, especially how US companies are performing in China. The Chinese officials encouraged more US investments and stated that “decoupling” wouldn’t work. They highlighted the need for open dialogue to resolve differences and expressed hope for mutual cooperation. While these discussions are important, the bigger issue remains trade and tariffs. The meeting’s comments are mostly seen as symbolic against the backdrop of ongoing economic challenges. **Market Strategies** We view these diplomatic statements as mostly noise, with the key issue of trade tariffs still unresolved. This ongoing uncertainty creates opportunities for trading volatility, as reflected by the VIX index staying around 17 this past month. Buying straddles on broad market ETFs might be a good way to profit from any sudden price movements. We are closely monitoring sectors like semiconductors and electric vehicles, which are central to the tensions. Recent data shows that US exports of high-end chips to China dropped by 12% in the first half of 2025 compared to last year. This suggests that traders might consider buying put options on key tech ETFs to protect against potential new export restrictions. The currency market adds another layer to this situation, with the yuan recently weakening to an exchange rate of 7.32 against the dollar. This decline is mainly due to China’s slower-than-expected GDP growth of 4.9% in Q2 and the interest rate gap with the US. Options on currency futures could be used to bet on further yuan declines if negotiations go nowhere. Looking back at 2018-2019, we remember how quickly market sentiment can shift due to a single policy announcement. Back then, sudden tariff hikes led to sharp drops in the S&P 500. This serves as a reminder to stay cautious and prepared for headlines that may steer the market in the short term. Commodity traders should remain vigilant, especially in the soybean and copper markets. The volume of bilateral agricultural trade is down 8% this year, which is impacting soybean futures. Any sign of a larger purchase agreement could trigger a price rally, while a lack of news may lead to continued price drops. Create your live VT Markets account and start trading now.

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