Why Trump’s trade war is shaking global markets and when the turmoil might end

Global markets are melting down and trade is in turmoil. Why is it happening, when will it end, and what does it mean for you? Here is what you need to know.

US President Donald Trump has forged ahead with his tariffs on foreign imports and world markets have been hit hard.

WHAT’S HAPPENING?

Global stock markets suffered dramatic losses across rollercoaster trading sessions after the US President announced harsher-than-expected reciprocal tariffs last week.

Mr Trump made the announcement of his “liberation day” tariffs on Wednesday afternoon (US time) just as Wall Street closed.

In the days since, global stock markets have tanked, including in Australia which on Monday suffered its worst loss in five years, haemorrhaging about $100bn.

Australia’s stock market figures at the close of trading in Sydney on Monday. Picture: David Gray / AFP

Global markets have also tumbled, including six per cent losses in London and Paris and eight per cent in Tokyo.

For the first time since the coronavirus pandemic, the Australian dollar plummeted below 60 cents to buy just 59.92 US cents on Monday.

IS THE US MARKET IN TROUBLE?

Experts had feared the US was headed for a Black Monday stockmarket crash similar to the 1987 tumble that wiped $1.7 trillion in one day.

The market plummeted on Monday as trade began on Wall Street, sending the S&P 500 into bear territory for the first time since 2022.

The tech-heavy NASDAQ Composite also suffered its largest three-day decline since the dotcom crash of 2000 before rebounding.

Traders work on the floor of the New York Stock Exchange on Tuesday (AEST). Picture: Spencer Platt / Getty via AFP

But the markets rallied on the back of false reports the Trump administration was considering a 90-day pause on tariffs.

The White House issued an official statement, labelling the rumour “fake news”, sending the market crashing again before a rollercoaster afternoon that saw the Nasdaq closed slightly higher, the Dow finishing 1 per cent lower and the S&P 500 down 0.23 per cent.

WHAT DOES DONALD TRUMP THINK?

Despite previously linking the success of Presidents to the performance of the stock market, Donald Trump has been undeterred by the economic fallout of his tariff policy.

As the markets tumbled on Monday morning, he took to his Truth Social account to share messages and comments from aides and politicians supportive of his agenda.

This included a video of one Republican Senator who took aim at Australian trade barriers on beef.

US President Donald Trump took to his social media to urge people not to panic. Picture: Saul Loeb / AFP

As all eyes were on Wall Street, Mr Trump also welcomed the LA Dodgers baseball team to the White House in recognition of their 2024 World Series win, cracking jokes and shaking hands in a pointed display.

Mr Trump urged people not to panic in a post to his social media account, coining a new word in the process.

“The United States has a chance to do something that should have been done decades ago,” he wrote on Truth Social.

“Don’t be weak! Don’t be stupid! Don’t be a PANICAN (a new party based on weak and stupid people!).

“Be strong, courageous, and patient, and greatness will be the result!”

WHEN WILL THIS END?

The global uncertainty over trade is likely to last for months.

The White House has said more than 50 countries have already expressed an interest in negotiating Mr Trump’s tariffs.

It appears each one of those deals will have to be individually negotiated with Mr Trump and his advisers.

Israeli Prime Minister Benjamin Netanyahu on Monday became the first world leader to meet with Mr Trump after the tariffs were imposed.

President Donald Trump meets with Israel’s Prime Minister Benjamin Netanyahu in the Oval Office. Picture: AP

He appeared to have been swayed by the US President’s argument, committing to eliminating Israel’s trade deficit.

“We think it’s the right thing to do and we’re going to also going to eliminate trade barriers, a variety of trade barriers that have been put up unnecessarily,” he said.

WHAT ARE OUR TRADE BARRIERS?

Mr Trump doesn’t just want tariffs to be reciprocal, he will be using “trade barriers” as a bargaining tool with other nations.

In a report released last week by the US Trade Representative, Australia was mentioned for imposing a number of perceived barriers to trade.

This included health restrictions on US beef, pork and poultry imports and constraints on apples and pears.

Mr Trump has taken specific issue with Australia’s “ban” on US beef imports given Australia exports thousands of tonnes of the product to the US each year.

Australian beef exports to the US are now subject to a 10 per cent tariff under President Trump’s ‘Liberation Day’ trade measures. Picture: Asanka Ratnayake / Getty

But Australia’s restriction is not a ban. It requires countries to prove a record of the animal from birth to slaughter to ensure strict biosecurity regulations are met – something the US has not done.

The barriers report also identified the news media bargaining code which requires social media giants to fairly remunerate news businesses for its content.

HOW IS THIS AFFECTING AUSTRALIANS?

Australians are likely to see a blow to their superannuation accounts – at least in the short term.

The drop in the already weak Australian dollar could also cause some pain, particularly to those who do business with or travel to the US.

One silver lining is the likelihood of a rate cut increasing, with Treasurer Jim Chalmers saying there could be up to four cuts by the end of the year.

Treasurer Jim Chalmers addresses the media in a press conference in Sydney on Monday. Picture: Gaye Gerard / NewsWire

Even if Australia is able to reach an agreement with the US, it will see still feel the more widespread fallout of the global trade war with fears of an economic slowdown from major trade partners.

Originally published as Why Trump’s trade war is shaking global markets and when the turmoil might end