Trade Truce or Trap? Seize the Tariff Trade’s Hidden Opportunities Now

The U.S.-China trade talks in Geneva last week delivered a fragile ceasefire—a 90-day tariff truce that slashes U.S. levies on Chinese goods from 145% to 30% and China’s retaliatory tariffs from 125% to 10%. This temporary reprieve has sent U.S. consumer discretionary stocks and Chinese manufacturing equities soaring. But here’s the rub: this is no lasting peace deal. Investors must act now to capitalize on the short-term bounce while hedging against the structural landmines still buried beneath the surface. Let’s dissect the opportunities and risks—and how to profit without getting blown up.

The Immediate Rebound: Tariff-Exposed Sectors Are Back in Play

The tariff rollback is a lifeline for two key sectors: U.S. consumer discretionary giants and Chinese manufacturers.

Consumer Discretionary (U.S.): Lower tariffs mean companies like Home Depot (HD), Amazon (AMZN), and Target (TGT) can finally breathe easier. These retailers had been absorbing 145% tariffs on goods like furniture, appliances, and apparel—a cost that forced price hikes, inventory cuts, and stagnant sales. With tariffs dropping to 30%, they can renegotiate terms with suppliers, rebuild stockpiles, and potentially pass savings to consumers.

HD’s Q1 2025 earnings missed estimates due to tariff-driven costs. A 90-day reprieve could unlock a Q2 bounce.

Manufacturing (China): Chinese exporters like Foxconn (HNHPY) and TCL Technology (TCLGY) are seeing a reprieve from their 125% retaliatory tariffs on U.S. machinery and raw materials. This eases input costs for manufacturers exporting to the U.S., while boosting domestic demand as Beijing tries to stabilize its slowing economy.

The HSCEI has lagged global markets by 20% since 2023—this truce could spark a short-covering rally.

The Structural Risks: Why This Isn’t a Free Pass

But don’t mistake this truce for a victory. The real threats—technology export controls, data sovereignty disputes, and China’s $1.2 trillion U.S. trade surplus—remain unresolved.

1. Tech Sector Blackout: The U.S. continues to block sales of semiconductors, AI tools, and 5G equipment to Chinese firms. Nvidia (NVDA) and Applied Materials (AMAT) may see fleeting gains, but their long-term growth hinges on China’s tech sector—which is being strangled by export bans.
2. Currency Warfare: China’s yuan is weakening to offset tariffs, but this risks inflation and capital flight. A sudden yuan plunge could reignite trade tensions.
3. The 50% Tariff Threshold: Analysts say tariffs above 50% make trade unviable. The current 30% U.S. rate is still punitive for bulk goods like steel (see Caterpillar (CAT)’s China exposure).

The Playbook: Overweight Tariff Winners, Hedge with Treasuries

The tactical move is clear: overweight tariff-exposed ETFs and stocks with valuation support, but pair them with Treasury yield hedges to cushion against the next shockwave.

Buy These Now:
- Consumer Discretionary ETF: The Consumer Discretionary Select Sector SPDR Fund (XLY) trades at a 25% discount to its 2023 high. It holds tariff beneficiaries like Costco (COST) and AutoZone (AZO).
- China Manufacturing ETF: The iShares China Large-Cap ETF (FXI) is down 40% from its 2021 peak. Names like ZTE (ZTCOF) (telecom) and BYD (BYDDF) (batteries) have deep discounts but could rebound on production restarts.

Hedge with Treasuries: Pair these bets with 10-year Treasury notes (TLT). A 5% allocation to TLT will buffer against the 5% correction that could follow if the 90-day truce sputters.

When tariffs rise, Treasury yields fall—TLT moves inversely to trade tensions.

The Bottom Line: Act Fast, but Stay Wary

This is a trade, not an investment. The 90-day tariff rollback is a “buy the dip” opportunity in beaten-down sectors. But unless Washington and Beijing resolve tech bans and currency disputes by summer’s end, this rally will fizzle.

Today’s move: Deploy 10% of your portfolio into XLY and FXI, with a 5% TLT hedge. Set a 30% profit target and an exit if tariffs re-escalate above 50%.

The clock is ticking—act now before the truce expires and the next round of trade war fireworks begin.

Disclosure: The author holds no positions in the stocks mentioned.