Australian shares plunged more than 4% on Monday, marking the biggest one-day fall since the COVID-19 pandemic. The sell-off was triggered by fears of a full-blown trade war and global recession after US President Donald Trump announced new tariffs. The benchmark S&P/ASX 200 index closed at 7,343 points, shedding nearly $110 billion in value.
The steep drop diminished the value of almost all investment and superannuation portfolios. Luke McMillan, head of research at Ophir Asset Management, described the market action as a “bloodbath” resembling falls seen during the pandemic and the 2008 global financial crisis. He noted that the key difference is that this sell-off was essentially caused by one person, the US president.
Few sectors were spared from the sell-down, with banking, mining, and energy stocks among the hardest hit. The ASX 200 is now down more than 14% from its February highs.
Shares tumble amid trade war fears
While Trump’s tariffs initially sparked a global sell-off last week, plans from major economies like China and the EU to retaliate with their own tariffs have heightened the risk of a global recession. Omkar Joshi, chief investment officer at Opal Capital Management, said that if no one backs down and more retaliation is seen, markets could continue to fall. He believes the Trump administration is unlikely to back down quickly or meaningfully.
US futures markets are also pointing to a tough trading session when the American market opens. Australia’s economy is closely tied to China due to their significant trading relationship, and China’s 34% retaliatory tariffs on all US imports have sparked fears of a “full-blown trade war, imminent recession, and a liquidity crunch,” according to Tony Sycamore, a market analyst at IG Australia. The Australian dollar fell to its lowest level against the US dollar since the pandemic, trading just over 60 US cents late on Monday.
The local currency has close links to commodity prices, particularly iron ore, which could suffer if global economic activity slows. AMP economist My Bui explained that when there are concerns about a global slowdown, especially related to tariffs and a global trade war, there is less demand for Australia’s commodities.
