The Australian share market experienced a significant downturn on Tuesday, shedding more than $20 billion in value. This sell-off was triggered by fears that the ongoing tariff war initiated by the Trump administration could spark a recession in the US and destabilise global markets. The S&P/ASX 200 fell 72.2 points, or 0.9%, to 7890.1, hitting a seven-month low.
The benchmark index clawed back some ground after plunging to an intraday low of 7818.3 points but was hampered by weakness in the IT sector as tech stocks tumbled 4%. The ASX 200 index is now 8.5% lower than its all-time high of 8615 on February 14, with the market trading lower in 13 of the 17 sessions since then. With eight out of the 11 industry sectors in the red, analysts are warning of more choppy times ahead for the Australian share market.
Jessica Amir, market strategist at the trading platform Moomoo, said, “[Tariffs] are repeating like groundhog day. Whenever Trump says he’s going to do something, he does it. That’s why it’s very probable that the Australian share market might retest the pullback that we saw in the 2018 trade war.
I don’t think we’re at the bottom yet; there’s more pain ahead.”
Impacts from the looming trade war will also not be equally felt across sectors, with autos, aerospace, technology, apparel, and agriculture expected to be the hardest hit, according to eToro analyst Josh Gilbert.
Australian market hit by tariff fears
“Tariffs can either raise their costs or make their products less competitive abroad.
By contrast, more insulated sectors [such as] utilities, finance, healthcare, and real estate might see less direct impact,” Gilbert said. The fresh bout of uncertainty in global markets came after a weekend where Trump himself suggested that the American economy is set to slow, sidestepping a recession-related question during an interview on Sunday. The US will impose 25% duties on all steel and aluminium imports, including from allies such as Australia and Japan, starting Wednesday.
This has sparked a frenzied repricing of risk assets and triggered an investor flight to traditionally safe haven assets such as gold. Tech stocks led the market’s losses, with WiseTech Global, Xero, TechnologyOne, and NextDC all recording sharp falls. The tech plunge mirrors the big tech sell-off on Wall Street that sent the S&P 500 down 2.7% and had the tech-heavy Nasdaq 100 plummeting 4%, wiping out more than $US1 trillion ($1.6 trillion) in its worst session in two and a half years.
The Australian dollar traded at US62.66¢ after its fall overnight, and West Texas Intermediate dipped to trade below $US66 a barrel, down more than 15% from its mid-January peak. Chris Larkin of E*Trade (Morgan Stanley) warned, “There are always multiple forces at work in the market, but right now, almost all of them are taking a back seat to tariffs. Until there’s more clarity on trade policy, traders and investors should anticipate continued volatility.”