Australian shares took a sharp dive at the opening of trade today, mirroring a rough day on Wall Street after U.S. President Donald Trump confirmed new tariffs on major economies like Canada, Mexico, and China.
At the time of publishing, the ASX 200 had dropped 1.10% (or 91 points) and was still trending lower as traders looked to cut their losses. All 11 sectors opened in the red, and if things continue this way, the local market could erase all its gains from earlier this year.
Overnight, U.S. stocks took a hit, with the Dow Jones tumbling 650 points (1.48%) to close at 43,191. At one point, it was down nearly 900 points. The S&P 500 slid 1.76%, and the Nasdaq dropped a hefty 2.64%. The Nasdaq is now down about 6.5% since Trump took office in January 2021.
During a White House press conference, Trump said that the tariffs—25% on Canada and 25% on Mexico—would take effect the next day. He made it clear there was "no room" left for negotiation, saying the tariffs were intended to "punish" countries he believes have been taking advantage of the U.S. economy. "What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs," he said.
The market reacted swiftly, with the VIX—often called Wall Street’s "fear gauge"—spiking to its highest point this year. Gustavo Flores-Macias, a professor at Cornell University, explained that the uncertainty surrounding these tariffs had wiped out the gains from the "Trump bump" after his election.
Commerce Secretary Howard Lutnick added that global companies could avoid tariffs by investing in U.S. production. He pointed to Taiwanese chipmaker TSMC, which announced a massive $100 billion investment in the U.S. while standing alongside Trump at the White House.
Analysts at Goldman Sachs said the tariffs might boost demand for U.S.-made goods by raising the price of imports. But they also warned that higher production costs and potential retaliation against U.S. exports could hurt American businesses.
Jason Draho, from UBS Global Wealth Management, predicted market volatility until Trump's policies become more growth-focused, although he still has a "positive medium-term outlook."
Some of the stocks that dragged the market down included Nvidia, which dropped 8.7%. The yield on the 10-year Treasury bond also slid to 4.16%, reflecting concerns about economic uncertainty.
Bitcoin wasn’t immune to the turmoil either, trading around $85,600 after falling 8.6% over the past day. This came just after Trump announced a new strategic crypto reserve that would include Bitcoin, which initially sent prices soaring.
Interestingly, while U.S. and Australian markets struggled, European defence stocks hit record highs. It seems European leaders are considering beefing up their defences amid what they see as waning U.S. support for Ukraine.
Overall, it’s a wild ride in the markets, and with Trump’s tariffs just hours away from kicking in, traders everywhere are bracing for more turbulence.
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