USD/CNH extended losses that started on 30 April, after hitting a 39-month low of 6.7815. It traded near 6.7850 in Asian hours on Thursday as a Trump–Xi summit began in Beijing.
The meeting opened with remarks on maintaining stable relations and global security. Trump said he expected the relationship to improve.
Board Of Trade Framework
Officials are reported to be weighing a “Board of Trade” framework to cut tariffs on about $30 billion of non-sensitive goods. Talks are also expected to cover the Iran war, trade imbalances, artificial intelligence, and Taiwan.
The summit was delayed for weeks amid Middle East tensions. Trump is expected to ask China to press Tehran to help reopen the Strait of Hormuz, while playing down Iran as the main focus.
A trade war is an economic conflict marked by protectionist steps such as tariffs, followed by retaliation. These measures raise import costs and can lift the cost of living.
The US–China trade dispute began in early 2018 and led to the Phase One deal in January 2020. Biden kept tariffs and added some levies; Trump returned as the 47th US President, pledged 60% tariffs, and imposed them on 20 January 2025.
Market Volatility Outlook
Given the current strength in the Chinese Yuan, we should view the ongoing Trump-Xi summit as a major source of market volatility. The USD/CNH pair is at a 39-month low, reflecting optimism, but this could reverse violently if talks falter. Derivative traders should be looking at options to hedge against, or profit from, a sharp move in either direction.
Implied volatility on USD/CNH options is likely elevated, and for good reason, as we have seen this pattern before during the 2018-2019 trade disputes. Buying a straddle or strangle on the currency pair could be a prudent way to position for a significant breakout, regardless of the summit’s outcome. If we believe the market is overstating the potential move, selling volatility through strategies like an iron condor might be considered.
This uncertainty extends directly to equity markets, particularly the VIX, or “fear index.” We can look back to August 2019, when a surprise tariff announcement caused the VIX to surge over 40% in a single day. A negative outcome from this week’s summit could trigger a similar spike, making long call options on the VIX or VIX-related ETFs an attractive hedge for equity portfolios.
We must also watch companies with heavy supply chain exposure to China, such as those in the semiconductor and consumer electronics sectors. The U.S. trade deficit with China stood at $279.4 billion in 2023, and the 60% tariffs imposed when Trump took office again in 2025 have already strained these relationships. Options on specific stocks or sector-specific ETFs will be highly sensitive to any news about the proposed “Board of Trade” framework.
Commodities like soybeans are on a knife’s edge, as they were a primary target for retaliatory tariffs in the past. We remember how soybean futures tumbled in 2018 after China curtailed its purchases from the U.S. A breakthrough deal could send futures soaring, while a failure would likely pressure prices, making agricultural commodity options a key area of focus.
Finally, the discussion around Iran and the Strait of Hormuz introduces significant risk into the energy markets. A diplomatic success could ease tensions and pressure oil prices lower, but any sign of Beijing refusing to cooperate could be seen as a green light for further conflict. With analyses suggesting a closure of the Strait could cause a 20-30% jump in crude prices, options on WTI or Brent crude offer a direct way to position for this geopolitical risk.
