Donald Trump said he made “fantastic trade deals” with Xi Jinping as he ended a visit to Beijing on Friday, Reuters reported. He also said “we’ve settled a lot of different problems” in talks on Iran.
Trump said both sides do not want Iran to have a nuclear weapon. He added they want the Strait to remain open.
At the time of reporting, AUD/USD was down 0.41% to 0.7190. The report linked the comments to market attention on trade policy.
A trade war is an economic conflict driven by protectionist measures such as tariffs. These barriers can trigger retaliation, raise import costs, and increase the cost of living.
The US-China trade dispute began in early 2018 after the US imposed trade barriers on China over alleged unfair practices and intellectual property theft. China retaliated with tariffs on US goods including automobiles and soybeans.
The two countries signed the Phase One trade deal in January 2020. The Coronavirus pandemic reduced attention on the dispute, while later US policy kept tariffs in place and added further levies.
Trump returned as the 47th US President and imposed 60% tariffs on China on 20 January 2025, after pledging this during the 2024 campaign. The report said renewed tit-for-tat measures could affect supply chains and inflation.
We remember the talk of “fantastic trade deals” with China early last year, but the reality on the ground today is much different. Since those statements in 2025, Washington has actually implemented a new wave of targeted tariffs, with levies on Chinese electric vehicles and medical supplies taking effect this quarter. This has shifted market sentiment from hopeful to cautious, as actions are proving more important than words.
This renewed tension is a clear signal to prepare for higher volatility across asset classes. We have seen the VIX, the market’s “fear gauge,” climb back into a range between 17 and 20 over the past month, a significant jump from the calmer periods of late 2025. Buying options, like VIX calls or puts on vulnerable indices such as the Nasdaq 100, can be a prudent way to hedge against sharp, headline-driven market swings.
The Australian dollar, which we saw dip during the initial announcements last year, remains a key barometer for US-China relations. It is now struggling to hold above the 0.6500 level, and with China being Australia’s largest trading partner, any further escalation will likely push it lower. We see puts on the AUD/USD as an attractive strategy for traders anticipating more friction in the coming weeks.
We should also watch agricultural commodities, particularly soybeans, given their central role in the previous trade conflict that began back in 2018. China has already reduced its purchases of US soybeans by nearly 15% year-over-year according to the latest export data, shifting some orders to Brazil. This trend suggests futures prices could weaken, making strategies that benefit from falling prices or increased volatility, like buying puts or straddles on CBOT soybean futures, worth considering.
The technology sector, especially semiconductors, is on the front line of these renewed tensions. We anticipate unpredictable price action in major chipmakers, as any new export controls could disrupt their significant revenue streams from China, which for some firms exceeds 25% of total sales. Using derivatives on a sector-wide basket, like options on the VanEck Semiconductor ETF (SMH), offers a way to play this volatility without exposure to single-company risk.
