Jamieson Greer said the US aim is to manage and control economic ties with China to meet domestic objectives. He said keeping the Strait of Hormuz open is vital for China, and said China’s involvement with Iran was viewed by the US as pragmatic.
He said China is meeting commitments on soybean purchases. He said the US wants to address disputes over rare earths, and said shipments of Chinese yttrium have arrived in the US in recent weeks.
Trade Talks Signal Management Not Escalation
Greer said China accepts there will be some US tariffs on Chinese products, but he could not state a specific tariff rate. He said the US wants to set priorities for buying from and selling to China, and said acquisitions are a sovereign choice for China.
He said China could see the US lead in AI chips as a risk to local manufacturing. He said chip export controls were not discussed, and chip export restrictions were not a key focus of talks.
He said Chinese rules that restrict supply chains moving out of China are a worry. He said the Taiwan issue is unlikely to affect trade talks.
The AUD/USD was down 0.12% at 0.7212. A trade war is a rise in trade barriers such as tariffs that can trigger retaliation and raise import costs and the cost of living.
Market Implications Across FX Rates Commodities And Volatility
The US-China trade conflict began in 2018 and led to a Phase One deal in January 2020. Trump imposed 60% tariffs on China on 20 January 2025 after pledging them in the 2024 campaign.
The latest comments suggest a gap between the harsh tariff policy and the more pragmatic reality of ongoing talks. We should focus on the underlying tone, which seems to be aimed at management rather than escalation. This implies that selling volatility could be a viable strategy, as the market may be pricing in more conflict than what is actually happening in negotiations.
In foreign exchange, the Australian dollar’s weakness reflects the headline risk, but the offshore yuan (CNH) is the real barometer for trade tensions. While the CNH has been weaker since the 60% tariffs were introduced in 2025, these talks could create a ceiling for the USD/CNH pair, unlike the sharp breakout we saw when it first crossed the 7.00 level back in 2019. We should watch for signs of stability in the yuan as an indicator of a temporary truce.
For commodities, the confirmation that China is meeting soybean commitments provides a firm floor for agricultural futures. Short positions on soybeans are now riskier. Similarly, the desire to handle rare earth disputes calmly suggests that the extreme price volatility seen in materials like yttrium in past flare-ups is less likely in the immediate term.
The broader market’s fear gauge, the VIX, has likely priced in the high tariff environment, recently hovering around 18 after spiking in early 2025. These more moderate discussions suggest implied volatility in equity indices like the S&P 500 may be too high. This presents opportunities for traders to sell options premium, betting that a major escalation is not imminent.
The news that chip export controls are not a key focus is a major development, contrasting sharply with the policies we saw from 2022 to 2024. This removes a significant threat for the semiconductor sector. We should consider that this could trigger a relief rally in tech stocks, particularly those in the SOX index that have high exposure to the Chinese market.
Finally, the mention of the Strait of Hormuz is a reminder that energy is tied to these trade dynamics. China’s reliance on oil imports through this chokepoint gives the U.S. leverage. We should therefore monitor for any unusual activity in oil options, as sudden spikes in WTI or Brent crude prices could signal a new pressure point is being applied.
