US President Donald Trump recently warned that he might raise tariffs on Chinese goods if a trade agreement is not reached soon. He indicated that these tariffs could increase by 155% starting November 1 unless a deal is made. Trump noted that China has been paying significant tariffs to the US and has shown respect towards the country. He is hopeful about reaching a fair agreement with China’s leader, Xi Jinping, and believes China will return to the negotiation table.

US Advancements in Artificial Intelligence

Trump also talked about the US leading in artificial intelligence, claiming an edge over China. He mentioned an invitation to visit China in early 2026 and emphasized partnerships with other nations for rare earth materials, expecting a substantial stock in the coming year. This article is written by Joshua Gibson, part of the FXStreet team, with expertise in economics and finance. Please remember that investing in markets carries risks, and this information is for general purposes only. Readers should do their own research before making investment choices. FXStreet and the author do not give personalized recommendations, and the accuracy of this information is not ensured. With the potential 155% tariff deadline on November 1, we expect to see a sharp increase in market volatility. The mixed messages of a severe threat alongside hopes for a fair deal create a classic situation for the markets. This uncertainty will be a crucial factor in trading in the coming days. We should consider buying protection and positioning for sudden moves. Reflecting on the trade disputes of 2019, we saw the VIX, the market’s fear gauge, jump over 40% in one month due to similar tariff increases. Implied volatility on S&P 500 options set to expire in early November is already up 15% this past week, indicating that the market anticipates a significant shift.

Impact of the US Government Shutdown

The ongoing US government shutdown adds more pressure domestically, possibly pushing for a quicker resolution to prevent further economic slowdown. Moreover, the latest jobs report from October 3 revealed only 110,000 new jobs added, which was less than expected. An escalation of the trade war on top of this could be very harmful. On the flip side, China’s economy is also vulnerable to this shock. Their GDP growth for Q3 2025 was just reported at 3.9%, below expectations and marking the second straight quarter of slowing growth. This economic weakness could encourage them to negotiate and avoid tariffs. We see opportunities in derivatives linked to sectors most affected by Chinese trade. Buying puts on semiconductor ETFs like SOXX serves as a direct hedge since this sector earns over 30% of its revenue from China. We are also monitoring potential weakness in industrial and agricultural commodity futures that would be hit hard by new tariffs. This trade uncertainty is prompting investors to seek safe assets, driving the price of gold close to its record high of $4,350 per ounce. We should think about call options on gold miners or futures to take advantage if a deal isn’t reached by the deadline. The Japanese Yen might also gain strength, offering chances in USD/JPY put options. While the comments about developing rare earth material sources point to a long-term strategy, they don’t change the immediate risk surrounding November 1. The market’s focus remains on the short-term deadline. Our main strategy revolves around the volatility this situation is likely to create across equities, commodities, and currencies. Create your live VT Markets account and start trading now.

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