The Australian stock market closed lower on Friday, ending a volatile week on a sour note as concerns about worsening trade relations between the US and China took hold. The benchmark S&P/ASX 200 dropped 0.8% to 7,646.5 points after a sell-off on Wall Street overnight. Investors grappled with wild swings triggered by changes to the US tariff regime, with share prices reacting to extreme bouts of relief and fear.
Following Donald Trump’s “liberation day” tariffs announcement, the Australian share market lost about 3.6% of its value. Despite some nations benefiting from reduced tariffs, Australia, along with the UK and New Zealand, remained subject to the US “baseline” 10% charge. The White House revealed that total tariffs on China had risen to 145% under Trump’s administration.
Health technology company CSL saw a significant decline on Friday, ending the week down 6% in response to Trump’s threat to remove tariff exemptions for Australian pharmaceutical products. Energy and mining companies also experienced losses amid concerns that a tariff-impacted global economy might lead to reduced resource demand. On the other hand, goldminers rebounded, with Australia’s gold exports being exempt from US tariffs, making the precious metal a safe haven during volatile times.
Analysts expressed concerns about the escalating trade war between the US and China, highlighting the impact on the global economy. Westpac analyst Mantas Vanagas noted that the US trade policy, with a 145% tariff on China, could significantly weaken the US economy. Reserve Bank of Australia governor, Michele Bullock, warned of an uncertain and rocky path ahead and anticipated financial market and economic volatility as the situation unfolds.
Despite market expectations of rate cuts at the next four meetings, Bullock did not indicate an immediate need for the Reserve Bank of Australia to ease rates. The Australian dollar showed signs of recovery, stabilizing around the US62c mark by the end of the week after flirting with dropping below the US59c threshold earlier.
The recent market slump underscored the challenges faced by traders as they navigated the evolving trade dynamics between two major economies. With ongoing uncertainties surrounding trade policies and tariffs, market participants are bracing for continued volatility and potential economic repercussions in the near term.
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