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Managing Tariff-Induced Uncertainty With Cboe's Volatility Products

Market uncertainty results in investors and market participants having difficulty assessing current and future market conditions, resulting in heightened market volatility. At present, the trade policy actions being taken by the Trump administration are causing reverberations across the market, with many believing that they will have a negative economic impact. While market volatility is inevitable, investors and traders do not need to succumb to it, as there are investment offerings that provide a means of mitigating loss and/or capitalizing on momentary market downturns. Thus, instead of being a challenge, market uncertainty can potentially become a gateway to maximizing returns.

The Current Market Backdrop

President Trump's ‘Tariff On, Tariff Off" actions, as they pertain to Canada and Mexico, the U.S.'s largest trading partners, have left the market unsettled. In February 2025, President Trump announced 25% tariffs on the neighboring countries, only to delay them for a month. At the beginning of March 2025, tariffs were instituted; however, days later, it was announced that tariffs on automakers would be paused for another month. Subsequent to the previously stated announcement, President Trump again changed course, pausing tariffs on Mexican and Canadian goods covered by the United States–Mexico–Canada Agreement (USMCA) free trade treaty until April 2025.

In contrast to the ‘on again, off again' situation between the U.S., Canada and Mexico, Trump's trade actions with China have been resolute, with the President instituting a 20% tariff on all goods. In response, Beijing announced retaliatory tariffs on imports of some agricultural goods from the U.S.

The flurry of announcements and trade actions has elevated market uncertainty, as evidenced by ...