ASX slumps as Trump’s ‘Liberation Day’ rattles global markets

Global markets have taken a battering and investors are bracing for more volatility in weeks ahead, after US President Donald Trump announced sweeping tariffs on all US trade partners, sparking fears of a radical upheaval of global trade and a major hit the world economy.

Australia’s sharemarket dropped 1 per cent, erasing $21 billion off its books, on Thursday as markets also sank across Asia, and in the late afternoon futures were pointing to further weakness on Wall Street on Thursday night.

In what Trump dubbed “Liberation Day,” the US president unveiled tariffs that were higher than markets had expected, with all countries including Australia to face a 10 per cent minimum tariff on their exports to the world’s largest economy.

Australia’s crucial trading partner China was hit especially hard – it will face a total tariff of 54 per cent on its exports to the US under Trump’s plan.

All 11 ASX industry sectors are in the red on Thursday. Credit: Peter Braig

The energy and mining sectors plunged amid fears over the global growth outlook, with mining giant BHP dropping 3.4 per cent, Rio Tinto falling 2.7 per cent and Woodside losing 2.9 per cent. Tariff-exposed stocks that suffered deep falls included luxury fashion retailer Cettire and medical glove maker Ansell, both of which lost more than 14 per cent, while appliance maker Breville shed 5 per cent.

Head of research at fund manager Ophir, Luke McMillan said markets were still grappling with whether the announced tariffs were a negotiating tactic from Trump that could be wound back. But if the radical plan went ahead as announced, McMillan said it would be a major shift for the world’s largest economy and the global trade system.

“Investors have been dealing with a lot of uncertainty on tariffs for the past four to six weeks. I think a lot of investors were thinking that we were going to get a lot more certainty today. What we got was something that was worse than markets expected for how high these US tariffs would be,” he said.

“If it is all actually implemented, and none of it is rolled back, this is a complete upending of the liberalisation of global trade over the last 100 years.”

As equity markets reeled, bond yields also dropped in the US, and banks including UBS reiterated they expected the US Federal Reserve would cut interest rates this year. UBS wealth management chief investment officer Mark Haefele said uncertainty would remain high for weeks, predicting “an extended period of volatility for US equities.”

AustralianSuper’s head of asset allocation, investments, Alistair Barker, said the moves on equity and fixed income markets suggested the key question was how the tariff moves affected US growth.

“The growth outlook has certainly softened, but it’s softening from quite a strong period coming out of the back half of 2024,” Barker said.

Most Australian super funds are heavily invested in US shares, meaning fund returns will be affected by recent volatility. But Barker said that despite the recent volatility, the bulk of AustralianSuper’s accounts had made returns of about 2 to 4 per cent since the start of July.

Banks were mixed with Commonwealth Bank closing 1 per cent higher, Westpac losing 0.5 per cent, National Australia Bank falling 1.2 per cent and ANZ falling 1.4 per cent following a penalty from the banking regulator over its cultural problems.

Ansell, which plunged over concerns about its tariff exposure, said in February that it would look to offset the US tariffs imposed on China by raising prices of its goods. The company, headquartered in Australia, has manufacturing facilities across a number of countries affected by the US tariff regime, including China, Sri Lanka, Vietnam, Thailand and Malaysia.

Wall Street has been on a rollercoaster this week.Credit: Bloomberg

Australian hearing implants maker Cochlear told investors it was waiting on more information from the US government on how the tariffs will hurt its business. The stock rose 0.3 per cent.

Luxury fashion retailer Cettire, which plunged 14.5 per cent, said it would likely take a hit from the tariffs imposed on imports from European Union (EU) countries into the US.

The retailer said almost 41 per cent of Cettire’s total gross sales in the first half of fiscal 2025 related to goods manufactured in the EU and sold to customers located in the US. It also warned that changes to US tariffs on overseas imports would hurt luxury retailers, given that a large proportion of luxury items are manufactured in the EU.

BHP boss Mike Henry has said the impact of tariffs on Australia’s biggest resource company would be “relatively limited”, telling investors earlier this week only 2 to 3 per cent of BHP’s revenue comes from the US. But he warned the uncertainty and the potential for retaliatory tariffs from countries such as those in the European Union that have been hit by Trump’s imposts may reduce free trade and slow global growth.

“BHP is well set for pretty much any scenario. In that, we’ve got commodities that have the most resilient demand, we sit at the very bottom end of our respective cost curves,” he said.

“Even in the face of price volatility or a bit of a turn down in global growth, we’re better positioned than most to weather that because we’ve got the strongest margins.”

Trump announced the tariffs after Wall Street’s closing bell, with its share futures initially rising before plunging after he went into detail on exactly on what tariffs would be imposed.

“When the press conference first started the President said tariffs would start with a 10 per cent baseline across the board. That was better than expected, which was why we saw futures rallying. But once he got to specifics and started giving examples which were significantly higher than 10 per cent, that’s when futures turned around and went negative because it was worse than expected,” said Chris Zaccarelli, chief investment officer at Northlight asset management.

The moves came after another volatile session on Wall Street on Wednesday before the tariffs were unveiled. The S&P 500 rose 0.7 per cent, but only after careening between an earlier loss of 1.1 per cent and a later gain of 1.1 per cent. It’s had a pattern this week of opening with sharp drops only to finish the day higher.

With Simon Johanson, AP, Reuters

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