Trump is contemplating a broader tariff strategy, possibly introducing an across-the-board increase of up to 20%. While he previously downplayed expectations for his reciprocal tariff plan, recent encouragement to his team indicates a shift towards a more aggressive approach.
Plans are being developed to apply higher tariffs to a wide array of countries, particularly those with which the U.S. has a trade deficit. Furthermore, industry-specific tariffs may be introduced, targeting essential minerals and products that contain them.
Widening tariff exposure and market implications
We are now facing a set of trade policy signals that may widen in scope and gain momentum in a matter of weeks. When a figure like Trump begins to lean more heavily into tariff escalation—despite earlier hesitation—it puts pressure on markets that depend on regular, cross-border commodity flows. His team’s renewed focus on shifting tariffs higher, both generally and in a targeted fashion, reveals more than a change of tone. It may add layers of pressure across industry chains already watching for bottlenecks in everything from raw materials to final assembly.
For us, the emphasis is now squarely placed on recalibrating expectations, particularly in terms of how directional risk could feed into price discovery. Traders focused on implied volatility should be keeping a close eye on the commodities and sectors that lean heavily on imported critical inputs—especially those with a history of being external supply dependent. For example, anything with exposure to refined lithium, rare-earth magnets, or processed nickel may begin to display sharper fluctuations if tariffs are applied selectively to countries that dominate these markets. That vulnerability to price disruptions, especially in short-dated contracts, could be brought forward much sooner than anticipated.
The broader market may not fully price in the likelihood of these measures until formal announcements are made. However, waiting for final clarity often places participants at a disadvantage if protective positioning is left too late. We’ve found that three-month volatility skews in commodity-linked equities and currency crosses often react ahead of the event. That kind of movement in the derivatives space can catch even prepared desks short if their Greeks are not correctly balanced by asset class. We are seeing early signs of that in some parts of metals and energy names, where options are moving slightly ahead of the underlying curve.
Secondary impacts and hedging considerations
From a strategic angle, attention should now shift to the potential ripple effects across secondary suppliers. Countries with indirect ties to the U.S. via larger exporting economies may begin to see speculative flow increase as investors hedge supply chain risks and seek pricing inefficiencies in cross-listed stocks and foreign FX pairings. We’ve witnessed this before in trade-adjacent shocks, where secondary actors experience volatility not because they are prime targets, but because they sit too close in the value chain.
The reminder here is that when tariffs expand broadly, they do not just lift costs at the import node—they strain the entire chain, and pricing models based only on primary exposure tend to underperform. That’s where short-dated options, tail-risk protection and structured notes can be tools of flexibility rather than reaction. Moving now could preserve optionality in case sentiment shifts fast.
