Trump stated that clarity on tariffs is expected within 90 days and expressed a desire for a deal with China. He indicated that a first deal on tariffs is close and stated that if negotiations fail, tariffs would revert to previous levels.
He mentioned plans to use funds from tariffs to reduce national debt and currently is not considering exemptions for companies, though this could change. The discussion surrounding the first deal will centre on whether the 10% tariff floor will be removed, as retaining it could pose challenges.
Focus On The 90 Day Timeline
Expectations around upcoming tariff decisions remain pinpointed on this suggested 90-day timeline, with early comments hinting that progress toward an initial agreement is underway. Trump’s remarks suggest a deal is within reach, yet there’s an unmistakable fallback position: if talks collapse, we would return to earlier higher tariff rates. That creates a clear binary outcome trading model for us to map — either conditions ease or they abruptly tighten.
Tariff income earmarked for national debt reduction is a fiscal statement that, while ambitious, alters little in the near term for pricing dynamics. What holds more immediate relevance is the posture on exemptions. With current policy leaning against leniency for individual firms, this implies limited relief in selective areas – unless there is an abrupt pivot. The door is left ajar, but it’s not wide open.
The market narrative will therefore revolve around the trade-off: reduction of the base 10% rate versus the threat of it staying as a permanent fixture. If the floor remains, costs are sticky, pressuring input-dependent sectors and pushing volatility in associated contracts. If it’s taken down, corporate margins firm up, possibly dampening need for further hedges.
Options Lens Weigh In
We now need to weigh these outcomes through an options lens. For the next few weeks, pricing on short-dated contracts will likely respond sharply to any language shift. A steady stream of official releases pointing in either direction would offer traders entry cues. In that context, we’ll want to track the tone and frequency of announcements, rather than relying just on the timeline itself.
Tariff clarity arriving within a defined 90-day period reduces uncertainty, but doesn’t eliminate it. Expect implied volatilities near key expiry points to build, as participants look to cover directional gaps. Long gamma positions may become more attractive, particularly around expected announcement windows, where reaction flows could overpower positioning signals.
Keeping eyes on whether the baseline tariffs are sustained is not optional. That’s the fulcrum upon which near-term pricing turns. If they stay in place, it’s likely we’ll see carry costs push higher, particularly in sectors reliant on cross-border input. Forward curves in those names may steepen unexpectedly.
What’s at stake over these coming weeks is not just binary headlines or the broader policy drift – it’s how quickly participants adjust to credible shifts in position. With fixed strike skew widening in related underlyings, we’re already seeing preparation for surprises. Structured trades may feel more appealing than directional bets if headline risk stays this elevated.
