The U.S. Supreme Court is set to hear arguments on November 5 regarding former President Trump’s “reciprocal” tariffs. This case is prioritized for quick review and could lead to some of these tariffs being removed. The tariffs include a 10% duty on almost all U.S. imports, with some reaching as high as 50% for countries like Brazil. Additionally, there are tariffs on Canada, China, and Mexico due to concerns about their efforts to stop fentanyl trafficking. The justices will consider two challenges to these tariffs during the first week of November.

Volatility and Market Impact

The uncertainty surrounding these tariffs is causing fluctuations in the value of the U.S. dollar, Canadian dollar, Mexican peso, and Chinese yuan early this month. Industries affected by trade—such as automotive, steel, and agriculture—may see significant changes. If the tariffs are reduced, countries that export commodities, like Brazil, could benefit. With the Supreme Court hearing approaching on November 5, we expect an increase in implied volatility across various asset classes. We recall the VIX index soared over 40% during tariff tensions in 2018, and this upcoming court case is expected to create similar volatility. Traders might want to buy volatility using options like straddles on trade-sensitive ETFs in the weeks ahead. The Mexican Peso and Canadian Dollar are particularly important to watch due to closely connected North American supply chains. For instance, Mexico’s manufacturing output report for August 2025 showed a 1.2% decrease, largely attributed to the uncertainty surrounding tariffs. Buying call options on the U.S. dollar against these currencies could serve as a cost-effective way to hedge against a ruling that keeps the tariffs in place. This scenario poses a significant risk for U.S. industrial sectors, such as automotive and steel, which have seen stock prices decline this quarter. U.S. Steel, for example, has underperformed the S&P 500 by more than 8% since the court decided to expedite the case in August 2025. A smart move would be to buy protective put options on these industry-specific stocks to reduce the risk ahead of the court arguments.

Potential Impact of Tariff Removal

If tariffs are removed, it could lead to a strong rise in the offshore yuan (CNH) and related stocks. This month, the CNH has strengthened past 7.15 against the dollar due to speculation about a possible tariff rollback. Investors might consider long-term call options on China-focused equity ETFs to take advantage of potential gains if the court shows interest in lifting these trade restrictions. On the other hand, a ruling favoring free trade would likely benefit commodity-exporting countries like Brazil, which currently faces a 50% tariff on certain goods. The Brazilian Real has been struggling, falling over 15% against the dollar this year. We see a chance to buy call options on the BRL or Brazil-linked ETFs as a speculative bet on a possible tariff reversal. Create your live VT Markets account and start trading now.

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