Soybeans, Steel, Semiconductors: Are You Ready to Trade the U.S.-China Wildcard?

Globe and Mail

4 hours ago

The U.S. and China are entangled in a trade war that's rocking commodity markets. A 90-day tariff truce, struck in May, slashed tariffs from 145% to 30% for the U.S. and 125% to 10% for China. Non-tariff barriers, which have been strangling supply chains since April 2020, are being dismantled. Both nations have pledged to maintain ongoing talks, but the truce remains fragile, with accusations of violations mounting. For traders and investors, this is a landscape of peril and profit. Can you seize the moment?
Source: ESignal
The Bloomberg Commodity Index monthly chart has returned to its midpoint after reaching its lows during the COVID-19 pandemic and the Russian-Ukrainian conflict. Regardless of the outcome of the trade talks, the results could be the next catalyst to project commodity prices higher or lower significantly.
Rare Earths and Magnets: The Tech Lifeline at Risk
China's dominance over rare earth minerals and magnets—critical for tech, manufacturing, and defense—remains a flashpoint. These materials fuel everything from electric vehicle (EV) motors to missile systems. Beijing's export restrictions have driven dysprosium prices up 29% and neodymium prices down 1% year-to-date (YTD), respectively. If talks collapse, supply disruptions could lead to further price spikes. What if you could lock in rare earth products now, such as those on specialized markets? Trading of dysprosium and neodymium may occur in specialized or over-the-counter markets related to industrial supply chains, allowing you to capitalize on a potential supply crunch.
Ethane: The Plastic Power Play
Ethane, a cornerstone of plastics production, is a geopolitical weapon. The U.S., a leading producer, now mandates export licenses for shipments to China, which depends on American ethane for its petrochemical plants. The Energy Information Administration (EIA) forecasts that the United States will produce 2.9 million barrels per day (b/d) of ethane this year and 3.1 million b/d next year, up from 2.8 million b/d in 2024. A breakdown in talks could hinder China's plastics industry, potentially disrupting global supply chains. What if you could trade ethane-linked ETFs, like those tied to petrochemical stocks, to profit from supply constraints?
ETFs with potential ethane exposure:
Energy Infrastructure ETFs: These ETFs invest in companies that own and operate infrastructure, such as pipelines, processing plants, and export terminals, related to natural gas liquids (NGL), which include ethane. Examples include the Alerian Energy Infrastructure ETF (ENFR).
Oil & Gas ETFs: Some oil and gas ETFs may hold companies involved in ethane extraction or processing as part of their broader energy portfolio.
Leveraged/Inverse Energy ETNs: Certain exchange-traded notes (ETNs) tracking energy sectors, like the MicroSectors U.S. Big Oil 3X Leveraged ETN (NRGU), may have exposure to companies that handle ethane.
Agriculture: Soybeans, Corn, and Beef on the Brink
U.S. farmers are battered by past tariffs that crushed soybean, corn, and beef exports to China. The truce offers a lifeline, but export costs persist, and Brazil's surge in soybean production threatens to erode U.S. market share. Soybean futures on the Chicago Board of Trade are about unchanged year-to-date, signaling cautious optimism. A successful deal could revive demand, but failure could reignite tariffs. What if you could go long on soybean futures (ZS) or ETF (SOYB) now, anticipating a demand rebound if the truce holds?
Oil: The Global Wildcard
A trade deal could spark global growth, driving oil demand. Resulting in Brent crude (QA), at $65 per barrel in June 2025, could hit $85 if economic confidence surges. However, if talks falter, recession fears could drive prices down. This aligns with recent EIA projections, which indicate that Brent crude oil prices are expected to average around $66 per barrel in 2025. This is a decrease from their previous forecast of $68/bbl in April and significantly lower than the average of $81/bbl in 2024.
Brent prices are expected to decline further, averaging $59 per barrel in 2026. Oil's trajectory hinges on this deal. What if you could position in oil ETFs, like USO, or futures like (CL), to ride a potential price surge fueled by renewed global demand?
Clothing, Textiles, and Food: The Consumer Squeeze
Clothing, textiles, and food declined, as reported by the U.S. Bureau of Labor Statistics (BLS), which measures inflation using the Consumer Price Index (CPI) in the CPI data for April 2025. Apparel prices declined by 0.7%, while fruit and vegetable prices declined by 0.9%.
A trade truce will ease some of the strain, but retailers will still face ongoing cost pressures. Cotton and wheat futures remain volatile as supply chains recalibrate. What if you could trade cotton futures (CT) on the Intercontinental Exchange (ICE) to capture price swings driven by tariff relief?
Steel and Aluminum: Tariffs Bite Deeper
The U.S. raised Section 232 tariffs on steel and aluminum to 50% in June 2025, doubling the previous rate of 25%. China's potential retaliation could disrupt global metal flows. What if you could invest in U.S. steel producers, like Nucor (NUE), to benefit from higher domestic prices amid tariff protections?
Semiconductors and Electronics: A Fragile Exemption
Computers and semiconductors sidestepped some tariffs, but exemptions are shaky. With duties still in play, chip prices are volatile—Intel and NVIDIA stocks dropped 5% in Q2 2025. A trade war escalation could disrupt tech supply chains. What if you could short vulnerable semiconductor stocks or go long on resilient players, such as Taiwan Semiconductor (TSM), to navigate tariff-driven volatility?
The Fragile Truce: What's Next?
This truce is a house of cards. Both sides wield strategic resources, such as rare earths and ethane, as bargaining chips. The commitment to ongoing talks is hopeful, but trust is scarce. Commodity markets will stay turbulent as long as uncertainty reigns. What if you could diversify across commodity ETFs (DBA) to hedge against the volatility of a potential trade war relapse?
Your Move, Trader,
The U.S.-China trade saga is a chessboard of risk and reward. Rare earths, ethane, agriculture, oil, textiles, food, steel, and semiconductors are all in play. Prices are shifting, and opportunities abound. Will you act decisively to capture the movements or let the chaos outmaneuver you? Study the markets, track the news, and move strategically. The clock is ticking—what's your next trade?