Commerce Secretary Howard Lutnick announced that new tariffs will begin on August 1. He mentioned that President Trump is finalizing the rates and agreements. Back in April, Trump introduced a base tariff of 10%, with some rates possibly reaching 50%. Many of these increases were delayed until July 9, and Lutnick’s latest update shows an additional three-week delay. Trump has confirmed that some trade deals are already completed. Additionally, on Monday, 12 to 15 letters will be sent to other countries, informing them about the upcoming higher tariffs.

Concrete Timeline Shift

Lutnick’s announcement represents a concrete timeline shift, moving the tariff start date to the beginning of August. This gives market players a bit more time than expected. The earlier delays, which were supposed to start in early July, made traders rethink their pricing models and hedging strategies. This new extension should be treated the same way. The proposed tariffs, ranging from 10% to as high as 50%, are still being worked out. The extra waiting time serves as a chance to reevaluate positions, especially when it comes to cross-border impacts and medium-term yield curves. While immediate volatility might seem low, it probably won’t stay that way, so stay alert. Trump has mentioned that several agreements have been finalized. For those trading contracts in import-sensitive sectors, this suggests some markets may be less affected, while others will face more challenges. The letters being sent to over a dozen countries will officially notify them and are expected to prompt quick reactions, possibly leading to countermeasures and short-term currency shifts and equity volatility.

Dealing in Derivatives

When managing derivatives, we cannot view announcements like these as background noise. Pricing mechanisms reflect not just the current situation but also forecast future decisions. With this three-week extension in place, implied volatility—especially in energy and industrial sectors—may increase as everyone anticipates potential retaliatory actions. Although the exact tariffs and targeted countries are still under discussion, we now have clearer information: we have a start date, letters being sent out, and guidance from Lutnick. This suggests that forward-looking positioning will likely be beneficial. It’s wise to adjust delta exposures before mid-July, especially if we’re net long in the affected areas. Time-based spreads could also offer opportunities for contracts settling before or after August. We recommend aligning expected tariff levels with the entire delivery calendar for Q3. Execution may need to be more efficient in the coming two weeks, as pricing pressure is likely to rise in correlated instruments. Manage risks carefully with gamma-heavy instruments and consider rolling key positions earlier. Expect policy news to directly influence realized volatility. Create your live VT Markets account and start trading now.

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