Donald Trump’s decision to pause steep tariffs against most nations has ignited a share market rally set to erase most of the losses suffered over the past week, even as Australia grapples with how to navigate an escalating trade war between the world’s two biggest economies.
Wall Street soared overnight after Trump unveiled a 90-day pause on tariffs above 10% on dozens of countries, with the notable exception of China.
Australia’s position, along with those of the UK and New Zealand, are unchanged given they remain subject to the US’ “baseline” 10% tariff.
The S&P/ASX 200 spiked 6.3% in the opening minutes of trading on Thursday, taking the index above 7,840 points.
The lift added well over $150bn in value to Australian shares in the opening minutes of trading, and has taken the ASX back towards levels recorded one week ago, shortly after the new tariff regime was unveiled.
If the ASX holds the gains for the session, it could rival the strong single-session gains recorded in the early pandemic.
NAB described the overnight market moves as some of the most dramatic “since the onset of the pandemic and, before then, the [global financial crisis].”
ANZ said it had been a “wild night in global markets” and that the tariff situation had developed at “breakneck pace”.
When asked whether the government had requested a call with Trump to discuss tariffs, Australia’s deputy prime minister, Richard Marles, said on Thursday that Labor was focused on the Australian people before the election.
“We continuously advocate to the United States through the representatives of the government,” Marles told ABC radio. “It’s fair to say right now Anthony Albanese is focused on his conversation with the Australian people as we move towards the federal election on 3 May.”
Trump’s stunning tariff reversal came shortly after clear signs of market ruptures appeared, with investors selling off US government bonds, which have historically been one of the world’s safest financial assets.
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Asked why he had ordered the pause, the US president told reporters: “People were jumping a little bit out of line. They were getting yippy.”
While traders cheered the tariff reversal, the affect on some market sectors was unchanged. The 25% levy on steel and aluminium imports to the US is still in place, and Trump has said he will introduce a “major” tariff on all pharmaceutical imports.
Australia’s close trade ties to China also make it susceptible to any economic slowdown sparked by the escalating tariff wars between Washington and Beijing.
The Australian dollar recovered significant ground early on Thursday, rising to US61.5c, after threatening to plunge below the US59c barrier earlier this week.
