The fallout of Trump’s tariffs hits financial markets as ASX dives. Here’s what it means for AustraliaBy business reporter David TaylorTopic:Stock Market1h ago1 hours agoMon 3 Feb 2025 at 2:14amFinancial markets have been rocked by Donald Trump’s tariff announcements, with US futures and the ASX declining sharply. (f-l-e-x: www.flickr.com)In short:US President Donald Trump’s tariffs on Mexico, Canada and China have hit financial markets, with Australian shares falling sharply at the open.Analysts say correction (a decline of of at least 10 per cent from the previous peak) on equity markets is now looking more likely.What’s next?US stock market futures are pointing to a fall when Wall Street resumes trade on Monday US time.Tariffs imposed by US President Donald Trump may not be a surprise, but they’ve certainly caused a shock on financial markets.Australian share market dived at the open of trade on Monday and the fall looks set to continue on Wall Street, with US stock market futures off more than 2 per cent.”It could be an overreaction, given that China only got hit with a 10 per cent tariff but given the record highs, it was due a pullback and now it has an excuse,” market analyst Henry Jennings said.”Expect more volatility as the tariffs unfold.”There’s a lot at stake — the US does $US1.6 trillion in business with China, Canada and Mexico.Canada responded with tariffs on US$170 billion in US goods.Mexico is still working through how it will respond, while China is preparing to take the US to the World Trade Organization to reverse the tariffs.”Investors have started what will probably be a de-risking phase — taking money out of stocks and crypto and shifting to the safety of the US dollar and gold,” MooMoo Australia’s market strategist Jessica Amir wrote in a note.What are the implications for Australia?Those in or approaching retirement will be worried about their superannuation balances.Market analysts and economist are describing this as a “risk-off” event.This means global share markets, many of which were at or near all-time highs and were already vulnerable to declining, are now at great risk of big falls.However, big superannuation firms including AMP are forecasting overall equity market returns to be positive over calendar year 2025, as the market recovers in the second half.”After the double digit returns of 2023 and 2024, global and Australian shares are expected to return a far more constrained 7 per cent in the year ahead,” AMP’s head of investment strategy Shane Oliver said in his outlook for 2025.”Stretched valuations, the ongoing risk of recession, the risk of a global trade war and ongoing geopolitical issues will likely make for a volatile ride, with a 15 per cent plus correction somewhere along the way highly likely.”But central banks still cutting rates with the RBA joining in, prospects for stronger growth later in the year supporting profits, and Trump’s policies ultimately supporting US shares, should still mean ok
Lun. Feb 3rd, 2025
