Time for defensive ETFs on renewed Trump tariff threats?

U.S. stocks ended sharply lower on Oct. 10, 2025, after President Donald Trump threatened higher tariffs on Chinese goods, accusing Beijing of becoming “very hostile” with new restrictions on rare earth metals – a vital resource for technology and defense industries, as quoted on CNBC.

Major indexes posted steep losses on Oct. 10, 2025. The Dow Jones Industrial Average plunged 1.9%, the S&P 500 dropped 2.71%, while the Nasdaq Composite sank 3.56% -- marking its biggest one-day decline since April 10. Prior to this announcement, U.S. markets were steady.

Trump pulls back from planned Xi meeting

“I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so,” Trump said on Truth Social. He added that the U.S. is “calculating a massive increase of tariffs on Chinese products coming into the United States,” as mentioned on CNBC.

Rare earth restrictions raise alarm

Earlier last week, Beijing imposed new export restrictions, requiring foreign companies to obtain a Chinese government license to ship products containing more than 0.1% rare earth content.To obtain the license, foreign companies must disclose the intended use of the products. Most of these restrictions will take effect from December 1 (quoted on Aljazeera).

Market reaction: Uncertainty is back

“Expectations for a China trade deal just got swept off the table,” said Jeff Kilburg, founder of KKM Financial. “Profit takers are out in full force,” he added, as traders rushed to lock in gains following the recent market rally, as quoted on the same CNBC article. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) – which measures volatility in the market – surged as much as 12.8% on Oct. 10, 2025.

Why to pick defensive ETFs

Against this backdrop, to bypass the equity market weakness, investors may rev up their exposure to long/short or other kinds of defensive ETFs. Investing in long-short ETFs seems prudent now, as it offers ways to seek profits and protection simultaneously.

Long-short investing strategy takes long positions in securities that are expected to gain and short positions in securities that are expected to decline. Below, we highlight a few long/short ETFs that have beaten the S&P 500 (down 2.8%) last week.  

Winning long/short ETFs in focus

AGF U.S. Market Neutral Anti-Beta Fund (BTAL - Free Report) – Up 2.6% Last week; up 3.2% on Oct. 10, 2025

The AGF U.S. Market Neutral Anti-Beta Fund seeks to provide a consistent negative beta exposure to the U.S. equity market. The fund’s expense ratio is 1.58% and yield is 4.17% annually.

AdvisorShares Ranger Equity Bear ETF (HDGE - Free Report) – Up 6.4% Last week; up 3.1% on Oct 10, 2025

The AdvisorShares Ranger Equity Bear ETF seeks capital appreciation through short sales of domestically traded equity securities. The fund charges 380 bps in fees and yields 7.71% annually.

Simplify Managed Futures Strategy ETF (CTA - Free Report) – Up 1.2% Last week; down 0.6% on Oct 10, 2025

The ETF looks to offer long-term capital appreciation by systematically investing in futures contracts. The fund seeks to deliver absolute returns with low correlation to equities, offering potential diversification benefits and downside support during risk-off market environments.

To achieve this, CTA employs a suite of systematic trading models developed by Altis Partners, a seasoned commodity trading advisor with over two decades of experience in managed futures strategies. The fund yields 4.25% annually and charges 76 bps in fees.

KFA Mount Lucas Managed Futures Index Strategy ETF (KMLM - Free Report) – Up 0.8% Last week; up 0.4% on Oct 10, 2025

The underlying KFA MLM Index consists of a portfolio of twenty-two liquid futures contracts traded on U.S. and foreign exchanges. The fund yields 0.86% annually and charges 90 bps in fees.

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