The Chinese Finance Ministry has announced that starting November 10th, China will remove certain tariffs on US agricultural products. They will suspend a 24% tariff for a year, but a 10% tariff will still be in place. The US Dollar Index is stable, hovering around 100.20. This announcement comes during ongoing trade tensions between the US and China, which have been fluctuating since 2018. The trade war began when the US imposed tariffs on China under President Trump, leading China to retaliate with their own tariffs. The situation improved somewhat with the US-China Phase One trade deal in January 2020, which aimed to stabilize trade and the economy. Now that Trump is returning as US President in 2025, these tensions have flared up again. He has promised to impose 60% tariffs on China, rekindling trade conflicts that disrupt global supply chains, lower investment, and increase inflation. As of November 5th, 2025, China’s announcement serves as a small yet meaningful sign in this ongoing trade struggle. Although the initial market reaction is slight, this partial tariff relief on agricultural goods effective from November 10th presents short-term opportunities that we need to act on before considering the larger, less clear situation. We view this as an opportunity to examine agricultural futures, especially soybeans, which have suffered since the new tariffs started in January 2025. In the first trade war, US soybean exports to China dropped by over 70% in 2018, so even a partial reopening of the market could boost prices significantly. We expect commodity trading houses to start factoring in renewed demand from China in the coming weeks. This small move may also help ease market fears, which is why we’re considering short volatility strategies. The CBOE Volatility Index (VIX) has been above 22 since the new tariffs were introduced earlier this year, and selling out-of-the-money options could prove profitable. Any signs of further easing could bring the VIX closer to its historical average of under 20. In the currency markets, the Australian dollar could be an interesting choice to trade alongside the easing tensions. The AUD has struggled throughout 2025, affected by the trade war and its link to China’s economic performance. A long position in AUD/USD could thrive if this tariff reduction leads to a more stable trade environment, similar to the relief rallies we saw in late 2019. For stock traders, we are looking at call options on agricultural firms like Deere & Co. and Archer-Daniels-Midland. These stocks have lagged behind the overall market since January, and this news could act as a catalyst for improving their earnings outlook. We plan to make these short-term trades, expecting a positive response in the upcoming weeks leading into year-end.

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