China’s tariff rate has been set at 34%, a lower figure than the anticipated 50%. There is uncertainty about whether this new tariff is additional to existing tariffs, such as the 25% on fentanyl.
If applied to the current tariffs, the total rate could exceed 60%. The 34% rate is notably lower than Vietnam’s tariff of 46%. New baseline tariffs of 10% will start on April 5, with increased rates for about 60 countries commencing on April 9.
Total Tariff Impact On China
It has been confirmed that the 34% tariff will add to the existing 20%, resulting in a total tariff of 54% on China.
This clarification—that the 34% figure stacks atop a pre-existing 20% rate and not beside it—offers much-needed specificity to what was, until recently, a rather opaque policy update. It means the effective rate on goods from China will now sit at 54%, not the over 60% rate some had speculated, but still well above the originally assumed 34%. This total shifts earlier traders’ baseline expectations and notably reduces the margin for error in pricing derived from those assumptions. The previously rumoured 50% figure had been guiding sentiment, yet we’ve now learned both its relationship to existing tariffs and its actual composition were misunderstood.
For those of us trading derivatives, this figure isn’t simply a percentage; it becomes part of a model that shapes contract premiums and implied volatility distributions. The short-lived ambiguity on whether the measure was additive sparked a wave of recalibrations in implied forward rates. As the correction filters through pricing formulas and options chains, timing now becomes delicate.
Volatility In Derivative Pricing
Given the gap between the 34% rate and Vietnam’s 46%, there remains a pricing differential that could influence regional hedges. This is worth watching. However, considering the United States will begin phasing in new baseline tariffs from April 5th—and then raising those shortly after, on April 9th, for 60 countries—near-term volatility may not be fully accounted for just yet. We are moving into a period where short-dated contracts may be particularly susceptible to fast moves triggered by positioning shifts rather than new data.
It’s clear now that the sequencing around dates has a material impact on strategy. Those working with April expiry instruments should already be adjusting exposure. Spreads involving Chinese and regional Asian exports will need immediate review ahead of the April 9 implementation, since correlation matrices are likely to drift, at least until initial trade volumes under the new tariffs settle.
Phillips’ earlier remarks on differential impacts across import categories were proven largely correct, though they had underestimated how soon the confirmatory signals would reach the wider trading public. This misalignment—between when policy is announced and when it is understood—can lead to temporary dislocation. We saw symptoms of that being priced into the curve late last week.
Price action since the announcement has shown that liquidity providers are widening spreads at the open and compressing into the close, a typical sign that order flow is becoming less predictable. This behaviour serves as a reminder to reassess not just positions but the execution methods used to enter and exit them. Manual input systems may be trailing high-frequency reactions, especially in delta-neutral strategies where quote timing must be tight.
Given these widened tariff bands and staggered implementation, our attention should turn to terms longer than one month, as these offer some insulation from rebalancing shocks. However, we’re mindful that short positions may still need quick unwinding depending on how spreads between developed and emerging market trade react.
There isn’t likely to be a single day when markets absorb the full implications. Instead, the impact will unfurl in phases, tracking tax code revisions and jurisdiction-specific commentary. Traders who try to game full repricing too early—particularly through binary-event trades—are more likely to get chopped by short-term sentiment clouds than rewarded for directional conviction.
