A senior official has confirmed that the US-EU trade framework has not resolved aircraft tariffs. Because of the ongoing investigation into aircraft tariffs, they will stay at zero until it’s finished. Aircraft may avoid tariffs, but the final decision depends on the investigation’s results. In the meantime, the steel tariff remains high at 50%.

Temporary Relief For Aerospace Sector

We see the delay on aircraft tariffs as temporary relief, not a solution. This lessens the immediate risks for major aerospace companies, but uncertainty will return when the investigation continues. The official suggests a positive outcome is possible, but we will wait to act until the investigation officially ends. The risk of future tariffs limits potential growth for the aerospace sector. In the past, announcements about tariffs in the long-running WTO dispute have caused significant one-day drops of 3-5% for stocks like Boeing and Airbus. We think selling slightly out-of-the-money call options on aerospace ETFs can generate income from this limited potential. The steel tariffs continue to be a challenge for domestic industrial and automotive manufacturers. These sectors are still grappling with high input costs, which hurt their profit margins. Data from the American Iron and Steel Institute shows that imports play a major role, and this policy keeps European steel from easing domestic prices.

Opportunities In Trade Volatility

For traders, this situation suggests that the gap between raw material producers and industrial consumers will likely continue. We see chances for pair trades—going long on steel producers while being cautious about manufacturers that say material costs hurt earnings. This cost issue for consumers is not likely to improve soon. This mixed trade policy suggests that market volatility may be underestimated. Although the CBOE Volatility Index (VIX) has recently been below 15, indicating calmness in the market, these unresolved trade issues could trigger sudden spikes. The absence of a full agreement leaves room for future trade tensions. Given the current low cost of options, it makes sense to create protective positions. Buying medium-term put options on broad market indices like the SPY is an affordable hedge against any negative surprises from the aircraft investigation’s conclusion. This acts as a low-cost insurance policy against renewed trade issues. Create your live VT Markets account and start trading now.

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