How new US-China trade tensions are affecting global markets
Fresh tariffs between the US and China, combined with potential North American trade disruptions, have introduced new uncertainty into global markets in early 2025.
Latest developments in US-China trade relations
The US has announced a 10% tariff on Chinese imports, citing concerns over China's role in the fentanyl crisis. This marks a significant escalation in trade tensions between the world's two largest economies.
China responded swiftly with retaliatory measures, implementing 15% tariffs on US coal and liquefied natural gas (LNG), alongside 10% tariffs on crude oil and other key exports.
The situation has been further complicated by China's initiation of an antitrust investigation into Google and new export controls on strategic metals, signalling a broader economic confrontation.
These developments have created significant uncertainty for traders, with markets showing immediate reaction to the news.
Impact on global markets and trading
The immediate market response has been notable, with the S&P 500 experiencing a 0.72% decline following the tariff announcements. This highlights the sensitivity of financial trading to trade policy developments.
Energy markets have shown particular vulnerability, with the new tariffs affecting key commodities like LNG and crude oil. Commodity trading volumes have increased amid the uncertainty.
The forex market has also seen increased volatility, particularly in the USD/CNH pair, as traders assess the implications of these trade measures on currency valuations.
These market movements have created both challenges and opportunities for traders using various instruments, like CFD trading.
North American trade considerations
While initial plans for 25% tariffs on Canadian and Mexican imports created market concern, the subsequent 30-day suspension has provided temporary relief to North American markets.
The agreement focusing on border security represents a shift from pure trade policy to a broader diplomatic approach, potentially affecting various sectors differently.
Market analysts suggest this temporary resolution could provide trading opportunities in certain sectors, particularly those heavily dependent on North American trade.
However, the possibility of future tariffs remains a source of market uncertainty that traders need to monitor closely.
Trading considerations in volatile markets
During periods of heightened trade tension, it's crucial for traders to maintain robust risk management strategies and stay informed about policy developments.
Diversification across different markets and instruments can help manage exposure to sector-specific impacts of trade policies.
Technical analysis combined with fundamental awareness of trade policy developments can help identify potential trading opportunities while managing risks.
Traders should consider using tools like stop losses and position sizing to manage increased market volatility.
How to trade during periods of trade tension
Research how trade policies affect different markets and sectors
- Open a CFD account with us
- Search for markets that align with your trading strategy
- Place your trade using appropriate risk management tools
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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