US President Trump announced on Truth Social that the August 1st deadline is final and will not be extended. He called it an important day for America. Agreements have been made with bigger partners, providing some relief, but it’s unclear how satisfied the EU and Japan are with these deals.

Nature Of The Deals

The type of these agreements, whether temporary or more structured, raises doubts about their reliability. The trade truce with China appears to be more of a short-term fix rather than a long-lasting solution. This situation is unlikely to resolve all trade tensions, and there’s still a chance for future trade-related problems. With the August 1st deadline just two days away, market anxiety is rising. The CBOE Volatility Index, or VIX, has jumped over 20% in the last week, reaching just above 24. This indicates that traders expect significant market movement. Caution is advised, as events like this can cause big price swings. Even if a last-minute deal is reached, we believe the agreements with the EU and Japan are mostly temporary. From 2018 to 2020, we observed that initial rallies after trade truces were often short-lived, providing chances to bet against the market. Any rise in stock prices might offer a chance to buy protective puts on sensitive sectors like German autos or industrial metals.

Truce With China

The ongoing truce with China is more about postponing conflict than solving key issues. We’re monitoring the offshore Yuan, which has weakened against the dollar this month, indicating that international investors are doubtful about long-term stability. This unresolved tension continues to cast a shadow over global supply chains, particularly for tech components. In the days around the deadline, strategies that profit from volatility, regardless of direction, are wise. Long straddles or strangles on major indices allow traders to take advantage of large moves, whether upward or downward. These strategies benefit from the uncertainty currently reflected in the options market. In the coming weeks, we’ll keep an eye out for any signs that these agreements are starting to weaken. In the late 2010s, we saw how quickly sentiment could change based on a single statement or policy shift. Keeping a core hedge against renewed trade disputes seems like the most sensible approach. Create your live VT Markets account and start trading now.

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