US President Donald Trump recently mentioned that he hopes China will start buying soybeans again at levels seen before the trade war. He believes a deal can be made, which might lead to lower tariffs if China meets certain conditions. There are also updates about possible beef purchases from Argentina and tariffs on Colombia. Trump noted that Russia controls about 78% of the Donbas region, while India will face high tariffs if it buys Russian oil.

Trade War Impact

In market news, the AUD/USD has seen a small increase, trading 0.09% higher at 1.1664. A trade war creates barriers like tariffs, which raise import costs and can lead to a higher cost of living. The US-China trade war began in 2018 when Trump placed tariffs on Chinese goods, prompting China to respond with its own tariffs. In 2020, a Phase One trade deal aimed to ease tensions. With Trump back in office, trade war tensions are flaring up again as he plans to impose 60% tariffs on China. This could create further global economic disruptions and affect inflation levels in the Consumer Price Index. As the focus on US-China trade grows, we anticipate significant price fluctuations in agricultural commodities. The uncertainty surrounding a soybean deal means traders should brace for big price moves in either direction. Options strategies, like straddles on November soybean futures (ZS), may help capitalize on these swings, regardless of whether a deal happens or negotiations fall apart.

Market Strategy

The VIX index, often referred to as the market’s “fear gauge,” is likely to rise from its current low. The VIX spiked above 30 several times during the trade tensions of 2018-2019, and the threat of 60% tariffs could lead to a repeat of that trend. Buying VIX call options or futures can protect against a possible downturn in our equity positions in the weeks ahead. The Australian dollar’s small increase may be misleading and create an opportunity for bearish positions. Since the AUD is closely tied to the Chinese economy and Australia’s iron ore exports to China are slowing, its value appears vulnerable. We should consider buying puts on the AUD/USD, betting that rising trade tensions will weaken the currency. Discussions about tariffs on India’s oil imports add new risks to the energy markets. Recently, India became a major buyer of Russian crude after the 2022 sanctions, importing over 1.5 million barrels per day. Any disruption in this supply could tighten global markets, making long call options on Brent crude a smart bet on higher prices. When it comes to rare earths, this poses a threat to technology and electric vehicle sectors. China holds nearly 90% of the world’s processing capacity in this area. To mitigate this risk, we should consider purchasing puts on semiconductor ETFs, as they are especially vulnerable to these supply chain issues. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now