The US-China trade war has entered a dangerous new phase. According to Trading Economics, in 2024, the US imports from China were US$462,62 billion, but the trade deficit ballooned to US$295 billion, prompting President Donald Trump to impose 145% tariffs on Chinese imports.
China retaliated with 125% tariffs on American goods, effectively freezing bilateral trade. While Trump temporarily paused tariffs for other nations, China remains squarely in the crosshairs.
This isn’t just about tariffs anymore. China is flexing its economic muscles in ways that could reshape global supply chains and financial markets.
From rare earth minerals to Boeing jets, Beijing is retaliating strategically — and the ripple effects are hitting US stocks, bonds, and the dollar. Let’s break down what’s happening, why it matters, and how I’m adapting my portfolio.
Market impacts: Stocks, bonds, and the dollar
- Stock market roller coaster
U.S. stocks have been on a wild ride. When Trump paused tariffs for 90 days (excluding China) on April 9, 2025, the S&P 500 surged 8.2%, and the Nasdaq jumped 10.4%—its best day since 2008 according to CNN. Airlines like United and Delta soared over 20%, while tech giants like Apple and Nvidia rebounded sharply.
But don’t mistake this for stability. The S&P 500 is still down 8.92% Year-to-Date at the time of writing this article, even dropping sharply into bear territory after Trump announced reciprocal tariffs before recovering from that low. China’s retaliatory measures—like halting Boeing deliveries—are hammering specific sectors. Boeing shares dropped 3% premarket after Beijing blocked jet orders, threatening a US$650 billion trade relationship according to Reuters.
My take: In this volatility, I’m focusing on businesses with strong balance sheets and services resilient to tariffs—think tech companies with global supply chain flexibility or domestic-focused industries.
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- Bond market jitters
The bond market is signaling panic. The 10-year Treasury yield spiked by 0.25% in six days, while the 30-year yield jumped 0.33% according to Market Insider. Why? Traders fear China might dump its US$760 billion in US debt to devalue the dollar as per Aljazeera. If Beijing sells Treasuries en masse, yields could skyrocket further, raising borrowing costs for consumers and businesses.
While the Fed could counter with quantitative easing (QE), as it did during Covid-19 epidemic, policymakers are hesitant to cut rates amid inflation risks. This uncertainty is keeping bond traders on edge.
- Dollar volatility
The dollar’s status as the global reserve currency is under pressure. China’s potential Treasury sales could weaken the dollar, but paradoxically, tariffs might strengthen it short-term by making imports expensive, a report by JP Morgan states. According to the same report, during the 2018 trade war the dollar index (DXY) rose 10% on trade uncertainty. Now, with China restricting rare earth exports and Boeing deals, the dollar’s swings are becoming unpredictable.
Supply chain time bomb
China isn’t just fighting with tariffs. It’s targeting America’s Achilles’ heel: rare earth minerals.
China produces 70% of the world’s rare earths and 90% of processed minerals as per Chartman report. These elements are critical for EVs, batteries, and defense tech like F-35 jets.
By restricting exports of dysprosium and yttrium, Beijing could cripple U.S. manufacturing and military projects.
Meanwhile, a Reuters report states that Boeing’s $20 billion backlog in China is at risk, and airlines face higher maintenance costs without U.S. parts. For investors, this means sectors like defense, tech, and green energy could face prolonged supply chain disruptions.
How I’m trading through the chaos
In this environment, cash flow is king. Here’s my strategy:
Cash-secured puts: I’m selling puts on stocks I’d happily own at lower prices (e.g., SOFI at $9.50 strike price). If assigned, my cost basis drops thanks to the premium. If not, I keep the income.Covered calls: For stocks I already hold, writing calls generates extra income while I wait for long-term growth. I recently did a video explaining how i made a 7% return in a month on Walmart Stock selling covered calls.Watch full video here: https://tinyurl.com/p9azeaz3
Focusing on quality: I’m investing in companies with low debt, strong cash flows, and pricing power—businesses that can weather a protracted trade war.
For a deeper dive, I recently broke down these strategies on my YouTube channel, Streetwise Economics. Watch the full analysis here.
What traders and investors can do
Traders: Hedge with options (e.g., buying puts on vulnerable sectors) or capitalise on volatility with short-term swings.
Long-term investors: Diversify into sectors less exposed to China, like healthcare or utilities. Consider commodities as a hedge against inflation.
Everyone: Stay nimble. Monitor treasury yields and rare earth supply chain news—they’re early indicators of market shifts.
Final thoughts
The US-China trade war is more than a headline—it’s reshaping global economics. While risks abound, opportunities exist for those prepared to adapt. Whether you’re trading options or building a long-term portfolio, staying informed is critical.
If you’re feeling overwhelmed, I offer 1:1 coaching sessions on trading and investing through www.streetwiseeconomics.com. Let’s navigate this together.
Until next time, trade and invest wisely—and may the markets be on your side.
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