$41 billion wiped from ASX as Trump’s tariffs kick in

Investors wiped $41 billion off the value of Australian shares on Wednesday and key markets dropped across Asia, as the Trump administration ramped up the pressure on China and imposed its sweeping global tariffs that have sparked fears of a global recession.

The S&P/ASX 200 plunged 135 points, or 1.8 per cent, to 7375 points at the close, erasing most of Tuesday’s rebound gains after another rocky session on Wall Street overnight.

The ASX 200 dropped 1.8 per cent on Wednesday.Credit: Getty Images

The decline was part of a wider sell-off across the region, which is likely to be especially hard hit by US President Donald Trump’s radical plans to shake up global trade by erecting barriers aimed at protecting US firms. Japan’s Nikkei index was down 3.6 per cent in afternoon trade, while Hong Kong’s Hang Seng Index had pared earlier losses and was 0.4 per cent lower.

The Australian dollar, which has been smashed in the market turmoil of the past week, was trading at US59.93¢ shortly after the ASX closed. Futures pointed to more falls on Wall Street on Wednesday night, while US Treasury bonds, traditionally regarded as haven asset on world markets, also fell.

Ten of the 11 sectors on the ASX closed in the red, with mining and energy shares hit hard over concerns about the hit to global economic growth from Trump’s trade war.

Strategist at trading platform Moomoo, Jessica Amir, said global markets were “on eggshells”, adding that a key measure of volatility was at its highest since the COVID-19 pandemic.

Amir predicted more turbulence for markets, saying she believed US companies would respond to the deteriorating economic backdrop by pulling earnings guidance and potentially cutting spending plans and jobs.

“Earnings are probably going to be very grim and the biggest companies in America start to report earnings this week,” she said.

Trump is imposing tariffs on China as high as 104 per cent along with import taxes on about 60 trading partners that run trade surpluses with the US. That comes after a 10 per cent baseline tariff for most US trading partners, including Australia, took effect on Saturday. Asian countries are facing the brunt of the measures, with Cambodia and Vietnam facing 49 per cent and 46 per cent charges, respectively. Imports from the European Union will be taxed at a 20 per cent rate.

Beijing did not immediately return fire, but it has vowed that it will not back down from the trade war, declaring on Tuesday that China would “resolutely take countermeasures” against the US.

‘At the risk of sounding dramatic, we are on the verge of seeing the two largest economic and military superpowers collide at high speed.’

IG Australia analyst Tony Sycamore

“At the risk of sounding dramatic, we are on the verge of seeing the two largest economic and military superpowers collide at high speed,” said Tony Sycamore, an analyst at IG Australia.

As well as assessing the damage likely to be inflicted by Trump’s tariffs, investors are awaiting China’s likely response, which could include further countermeasures on top of already announced tariffs, and domestic economic stimulus.

Head of international economics at Westpac, Elliot Clarke, said China could still achieve its growth targets through accelerating domestic investment and consumption, and the country could also strengthen its standing in the region when compared to the aggressive approach unveiled by Trump.

“Into the medium term, the hit to US relations with the rest of Asia from the reciprocal tariff framework will give China much greater leeway to strengthen their economic and political relationships across the region – and further afield,” Clark said.

Even so, he said China’s strengthening of its position in the world is also likely to raise the ire of the US, which would perpetuate geopolitical uncertainty and market volatility.

On the tariff-shaken ASX, mining companies that rely on China as a crucial customer fell sharply, with mining giant BHP dropping 3.5 per cent, Rio Tinto down 5 per cent and Fortescue losing 4.2 per cent.

Energy companies were also deep in the red, with Woodside slumping 3.7 per cent and Santos down 5.7 per cent after the oil price continued to fall amid worries about how the trade war will hit global economic growth.

Healthcare stocks were sharply lower, with CSL – one of the biggest stocks on the index – losing 5 per cent after Trump said at a dinner in Washington overnight that he would announce “a major tariff on pharmaceuticals” very shortly. ResMed fell 1.6 per cent.

Cyclical industries dependent on economic growth also struggled, with the IT and consumer-related sectors posting heavy losses. The nation’s biggest tech stock, WiseTech Global, fell 1.8 per cent, while on the consumer side, Wesfarmers – which owns Kmart, Officeworks and Bunnings – dropped 0.6 per cent, and travel company Flight Centre shed 4.2 per cent.

Most traded shares on IG Markets.Credit: IG Markets

The banking sector – which accounts for about a third of the local sharemarket – had a mixed day. Commonwealth Bank rose 0.5 per cent, while National Australia Bank fell 0.7 per cent, Westpac dropped 1.7 per cent and ANZ Bank lost 2.1 per cent.

Overnight, US stocks sunk following another stunning reversal, with Wall Street veering from a huge gain at the opening of trading to more losses at the close because investors still have no idea what to make of the trade war.

After blasting to an early gain of 4.1 per cent, which would have marked its best day in years, the S&P 500 quickly lost all of it. It then careened to a loss of 3 per cent before paring its drop to 1.6 per cent. That left the index, which sits at the heart of many investors’ pension savings, nearly 19 per cent below its record set in February. The Dow Jones lost 0.8 per cent, while the Nasdaq composite dropped 2.1 per cent.

With Bloomberg, AP

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