Trump announced a 90-day pause on reciprocal tariffs for countries other than China, reducing them to 10%. In contrast, tariffs on China were raised to 125% due to perceived disrespect towards global markets.
More than 75 countries sought to negotiate with the US regarding trade issues; those that did not retaliate will benefit from the lowered tariffs. Shipments en route are not subject to the new tariffs, allowing room for further negotiations.
The White House Strategy
The White House indicated that countries showing no retaliation will be rewarded, and it remains uncertain how the tariff rates apply to the EU, Mexico, and Canada.
This development indicates a distinct pivot in trade strategy by the US administration. By softening the tariff structure for a majority of its trading partners, save for China, the administration seems to be tightening focus on specific geopolitical aims rather than broadly applying pressure. This is unlikely to be a fleeting tactic. Reciprocity now appears to be conditional upon diplomatic cooperation rather than pure economic parity.
The 125% rate imposed on Chinese goods, markedly higher than any others, reflects a targeted penalty rather than an industry-wide safeguard. It is rooted in more than just trade deficits—it speaks to broader criticisms that have been building for some time. With many shipments currently in motion shielded from these changes, we sense a deliberate delay effect being created. The allowance for in-transit goods to arrive under older terms gives room for talks, but traders should not misread that as a sign of stability.
Trump’s mention of “disrespect towards global markets” carries weight. This is not about product quality or competition but centres on political standing. The message to China is unmistakable—not only must compliance increase, but gesture matters. Those watching should be aware that perceptions are now shaping real costs. Market responses to perceived alignment or defiance will not wait for formal policy to be set in stone; reactions move faster than declarations.
Bilateral Trade Discussions
With over 75 nations pursuing discussion, we must assume that bilateral talks are underway behind closed doors. Any hint of hesitation or delay by these countries could now come at a price. For those who acted early, benefits have already begun accruing in the form of a much gentler tariff profile. Not retaliating turned out to be a win, at least temporarily. For derivative traders, this showcases the power of political posture in shaping near-term expectations.
There remains ambiguity around how these revised tariffs will affect trade with Europe, Canada, and Mexico. No clarity has yet emerged, but the wording suggests evaluation is ongoing. Traders should not expect announcements to follow a schedule. Instead, watch for non-tariff signals: official visits, speeches, embassy releases. Often, the once-overlooked detail becomes a price mover before the headline arrives.
In terms of positioning, there’s reason to expect movement in commodities that are heavily reliant on Chinese inputs, especially metals and energy-related instruments. With tariffs at 125%, origin becomes priced in immediately, not gradually. These shifts rarely happen in clean lines—options pricing may experience spikes in implied volatility before delta even catches up.
The narrowing of targets opens tactical opportunities but removes the general hedging logic that prevailed during broader tariff regimes. Long volatility positions linked to Chinese contract counterparts should be reviewed, especially in light of reduced unpredictability elsewhere. Some spreads that once made sense under an-all fronts context no longer do.
Ultimately, the prize this time belongs to those who took positions assuming some would blink first. That blink has happened. Market reactions will now likely hinge on whether negotiations turn terse or cooperative. We will continue watching for who crosses the line from bystander to participant.
