In an interview on Fox News, Kevin Hassett, Director of the US National Economic Council, revealed plans for tariff negotiations with President Donald Trump. Hassett stated that Trump is focused on ensuring fair trade and will consider offers from various countries.
The S&P 500 Index increased by 3.45%, reaching 5,235 points, reflecting the market’s positive response to these discussions. Tariffs, imposed as customs duties on imports, aim to support local industries by giving them a competitive edge.
Economic Impact On The US
In 2024, Mexico, China, and Canada represented 42% of US imports, with Mexico being the top exporter worth $466.6 billion. Trump intends to levy tariffs on these countries and use the revenue to reduce personal income taxes.
The recent remarks made by Hassett offer a clearer lens into the administration’s direction—an approach tightly linked to balancing domestic economic policy with fiscal stimulus. The S&P 500’s 3.45% jump to 5,235 points reflects equity markets digesting the possibility of reshaped trade flows with a degree of optimism, likely due to anticipated tax cuts funded by potential tariff revenue. What we can see here is a shift in investor sentiment, drawing strength from the prospect of personal tax relief and increased government leverage in foreign trade arrangements.
When tariffs are discussed, they’re often misunderstood as a solitary lever. In this case, however, the intended use of tariffs as both a negotiation tool and a tax offset points towards an integrated strategy. If Trump moves forward with increased duties—particularly against high-volume partners like Mexico, which alone sent $466.6 billion worth of goods in 2024—it could temporarily inflate import costs. However, the administration appears less concerned with inflationary pressure than with trade balance and revenue redirection.
From a positioning standpoint, traders operating in futures or options may interpret this momentum as an opportunity to reconsider exposure related to sectors sensitive to trade, such as industrials and materials, or highly globalised consumer goods. Equity derivatives tied to major indices might see implied volatility increase if tariff announcements become more sporadic or unpredictable. We’ve seen in past cycles that clarity in trade policy often suppresses volatility, while ambiguity can cause it to spike.
Potential Market Dynamics
Canadian and Chinese trade relationships, making up the rest of that 42%, carry their own weight. Hassett’s emphasis on ‘offers from various countries’ should be read as a soft signal that some exemptions—or at least, differentiated terms—could emerge, especially for partners willing to reconfigure agreements swiftly. That introduces a binary tension for markets—either partners agree and markets continue trending calmly, or a breakdown invites rapid repricing.
From our angle, if these tariffs are enacted in quick succession, sectors with thin margins reliant on inputs from targeted nations may encounter higher volatility. This includes companies dependent on automotive parts or consumer electronics, which are usually among the first to react in derivatives markets. Option premiums in these areas might widen in anticipation of pricing risk, especially for near-dated contracts.
For spreads and calendar trades, there’s an additional dimension. Any hint of phased implementation rather than abrupt enforcement could reward staggered strategies more. Should revenue from tariffs feed directly into personal tax cuts as proposed, consumer-driven sectors could experience a delayed tailwind—not immediately evident in the short-term charts but visible upon later earnings cycles.
As most tariff decisions come with both market and political latency, we often look for anomalies in positioning data—especially short interest or large open interest changes in OTM contracts. These could indicate internal signals being acted upon faster than headlines suggest. Traders could also examine rate-sensitive instruments as tax adjustments might be aimed at nudging monetary sentiment indirectly, especially where direct rate changes are off the table.
In past policy-currency cycles, similar conditions led to repositioning in dollar-denominated assets. If we see reallocation from trading partners, cross-border capital flows might also accelerate, prompting swaps or forward contract adjustments. These shifts can become more pronounced if paired with a coordinated message across trade and fiscal institutions.
Lastly, awareness of sequencing matters. If a country like Mexico, currently the largest source of US imports, responds with countermeasures or diverging currency policy, it could prompt a wave of hedging activity—not only in exchange rates but in commodities futures tied to North American supply chains.
Hassett’s framing helped anchor this timeline, but it is the path between negotiation and decision that warrants tracking. Tariff-related measures rarely operate in a vacuum, and their second-order effects tend to favour those already watching sector-level correlation shifts. Rate and equity volatilities will eventually adjust, but the lead-up may prove more tradeable than the aftermath.
