The ongoing conflict between President Trump and Fed Chair Powell is clear. Trump believes Powell will not lower interest rates, which he thinks harms the public. He also discusses negotiations with India, claiming progress and hoping for more clarity by the end of the week. Trump brings up talks with Harvard, aiming for a settlement. He mentions progress with China and anticipates a clear agreement soon. Additionally, he signed a 50% copper tariff and raised tariffs on Brazil to 50%.

Economic Emergency And Interest Rates

Trump has suspended the de minimis exemption for low-cost goods imported to the U.S., starting on August 29, highlighting an economic emergency. NEC Director Hassett noted that data supports a rate cut, reflecting what many economists believe: the Fed has been slow to act. Despite Trump’s pressure on Powell, current economic data shows 3% GDP growth and a 4.1% unemployment rate, with potential inflation from tariffs. This suggests that markets should stay alert, as the Fed’s future decisions remain uncertain. Looking back at 2019 provides a useful guide for today’s market. The clear conflict between the government and the Federal Reserve led to major market ups and downs. We see similar tensions today as the Fed keeps rates steady to control inflation, which opens opportunities for traders seeking volatility.

Market Volatility And Trade Negotiations

The Volatility Index (VIX) is currently around a low 16, making options premiums not too expensive. Given the ongoing uncertainty in global trade and domestic growth, this is a good time to buy protection or bet on a big market move. In 2019, we saw how quickly market sentiment could change after one announcement, a lesson that is still relevant today. The Fed funds rate has remained steady at 5.25% for the past four months, while the latest core PCE inflation data from June 2025 showed a stubborn 3.5%. However, last week’s jobless claims rose to 255,000, the highest in six months, indicating a potential weakness in the labor market. This disconnect between stubborn inflation and weak employment puts the Fed in a tricky spot, making interest rate derivatives, like options on SOFR futures, especially important. The 2019 scenario showed how tariffs could disrupt specific sectors and currencies. Today, we are closely monitoring trade talks with India over digital services, expected to wrap up in a few weeks. The sharp movements in the Brazilian Real after tariff announcements in 2019 serves as a cautionary tale and may guide trading strategies with the Indian Rupee. Back then, the surprise suspension of the de minimis exemption negatively affected retailers who depended on affordable international shipments. Today, with consumer credit card debt at a record $1.15 trillion last quarter, the retail sector is still at risk. Any new policies that raise costs for consumers could have a significant negative effect, making puts on retail sector ETFs a smart hedge. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now