The recent meetings in Stockholm aimed to extend the US-China trade truce. Both countries want to prevent a trade war and have agreed to keep things the same while they rethink their strategies. China announced the extension, but US officials said President Trump will make the final call. This shows the ongoing frustrations and different interpretations of the agreements made during talks between the US and China.

Possible Outcomes

For now, both countries are working together, but the outcome of their next steps is still unclear. An extension seems likely, which may lead to a meeting between Trump and Xi Jinping either in October or before Thanksgiving. This potential summit could set the stage for future trade talks. However, recalling events like the 2019 Phase One trade deal, it could end up being just a show without any real concessions from either side. As time passes, both nations’ strong positions might result in more deadlock. With the final decision on the trade truce extension still undecided, market nervousness is increasing. The CBOE Volatility Index (VIX) climbed to just over 18 this past week, indicating uncertainty among traders. This situation reminds us of 2019 when each news update about negotiations caused sharp, short-term market movements.

Market Implications

The most likely outcome is that Trump will approve the 90-day extension, merely postponing any serious confrontation. If this happens, traders can expect a brief rally in equity indices like the S&P 500 and a drop in the VIX. This creates a short window for profit through selling expensive options, as implied volatility is likely to decrease dramatically with the news. However, it’s important to remember that this is just delaying the issue. The underlying tensions remain, as shown by the latest Commerce Department data from June 2025, which indicated that the U.S. trade deficit with China grew slightly. Past experience with the Phase One deal teaches us that these agreements can be fragile and often focus more on political appearances than on real solutions. Thus, any market strength in August should be seen as a chance to prepare for future volatility. Looking ahead to the possible Trump-Xi meeting in October, it would be wise to start building protective positions. Buying put options on key indices or exchange-traded funds that expire later in the fourth quarter could be a smart way to guard against potential setbacks. Create your live VT Markets account and start trading now.

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