Australian shares have opened sharply lower, mirroring a tumultuous day on Wall Street. This downturn follows US President Donald Trump’s announcement of impending tariffs on key international partners, including Canada and Mexico.
As of the latest update, the ASX 200 index is down by 1.10%, equating to a loss of 91 points, as domestic traders react by offloading stocks to minimise potential losses. Every sector on the local market has opened in the negative, and if this trend continues, the ASX could erase all gains accumulated so far this year.
Overnight, US markets faced significant declines with the Dow Jones Industrial Average sinking 650 points (1.48%) to settle at 43,191. The S&P 500 and the Nasdaq Composite also experienced declines, falling 1.76% and 2.64%, respectively. Notably, the Nasdaq has dropped by around 6.5% since Trump’s inauguration on January 20.
In a press conference, Trump stated, “Tomorrow, tariffs — 25 per cent on Canada and 25 per cent on Mexico,” emphasizing that negotiations had reached an impasse. His strategy involves levying tariffs as a punitive measure against nations he accuses of unfairly benefitting from the US economy without reciprocal trade.
The market volatility was evidenced by the VIX, Wall Street’s volatility index, which surged to its highest level year-to-date amid growing anxiety surrounding these tariffs. Analysts have warned that the uncertainty stemming from the tariff announcements could lead to heightened market instability, erasing gains attributed to the “Trump bump” post-election.
Commerce Secretary Howard Lutnick added that global companies could circumvent these tariffs by investing in US production facilities, citing a significant investment announcement from TSMC, a major Taiwanese chipmaker. While the raised tariffs intend to increase demand for US-produced goods, experts at Goldman Sachs indicated that they may also inflate production costs for domestic businesses and provoke retaliatory tariffs against US exports.
Volatility appears likely to persist in US stock markets until Trump’s trade policy shifts towards growth-oriented strategies, as suggested by Jason Draho of UBS Global Wealth Management, who remains optimistic about medium-term growth.
Tech stocks, particularly Nvidia, were among those dragging the market down, suffering an 8.7% decline. Concerns over economic stability also pushed the yield on the 10-year Treasury bond down to 4.16%, signalling investor apprehension.
In cryptocurrency, Bitcoin saw a drop of 8.6%, trading at around $85,600, reversing gains from Trump’s recent announcement about a strategic crypto reserve. Meanwhile, European defence company stocks surged to record highs as the continent evaluates its military strategies in light of diminished US support for Ukraine.