Chinese state media has shared insights about ongoing issues in US-China trade talks. A commentary from Xinhua highlights China’s genuine approach in these discussions, noting that these problems won’t be resolved quickly. China is open to addressing differences through dialogue and consultation, with the aim of resolving tariff disputes. Despite the challenges in trade discussions, the overall message reflects a commitment to finding solutions.

Market Volatility

The focus on deep-rooted problems in trade talks suggests that we should expect ongoing market volatility. Since these issues are complex, a prolonged period of uncertainty appears likely. The CBOE Volatility Index (VIX) has been around 19 this past month, significantly above its historical average, indicating this tension. Given this situation, a wise approach would be to protect against potential negative surprises. The mention of “structural problems” indicates that a breakdown in talks remains a real possibility, which could adversely affect equities. Therefore, buying put options on indices like the S&P 500 or a China-focused ETF like the FXI could be a smart way to safeguard portfolios. However, the ongoing willingness to negotiate also leaves room for unexpected positive news. During trade disputes in the late 2010s, markets would quickly rally at the first hint of a breakthrough. Thus, traders might want to consider strategies that can profit from sharp upward movements, or even those that work in a fluctuating market, rather than only preparing for a downturn.

Sector Specific Derivatives

We recommend that traders examine sector-specific derivatives closely. Technology and semiconductor stocks are highly responsive to tariff news, making options on an ETF like the SMH a viable way to bet on the direction of these talks. Conversely, agricultural commodities like soybeans may have significant potential for gains, as November soybean futures have already risen 4% in July 2025 due to speculation about a resolution. The currency market, especially the U.S. dollar against the Chinese yuan, will also be crucial to monitor. The yuan has stayed relatively steady, trading close to 7.30 to the dollar, which signals goodwill. Any shifts from this level could indicate changes in the negotiations, making options on currency futures essential tools for traders in the coming weeks. Create your live VT Markets account and start trading now.

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