The Australian stock market experienced a significant rebound on Tuesday despite looming tariff threats from the US and China. The benchmark S&P/ASX 200 closed more than 2% higher, marking its biggest one-day gain over two years. This recovery came after a steep decline on Monday, where the share market dropped by more than 4%.
Investors appeared to dismiss fears of an escalating trade war between the US and China, buoyed by a strong lead from the US futures market. US President Donald Trump has threatened to increase tariffs on Chinese goods by an additional 50% from 9 April if Beijing does not retract its own tariffs. China’s commerce ministry has vowed to retaliate against US tariffs resolutely.
Market rebounds amid tariff threats
Chris Weston, research head at Pepperstone, remarked that Trump’s tariff threats pose a significant risk, though traders remain hopeful for a possible deal. There are concerns that failure to reach an agreement could lead to a full-scale trade war, a potential recession, and liquidity issues reminiscent of the early pandemic era.
The Australian dollar rebounded robustly, trading at US60.5c by late Tuesday. However, the currency, closely tied to commodity prices like iron ore, could face challenges if global economic activity slows, especially in China. Long-term institutional investors had already started reducing their exposure to shares last month, moving towards safer assets like bonds and cash.
This shift indicates a defensive strategy ahead of the potential tariff imposed, dubbed “liberation day.” Overall, while the Australian market’s rise on Tuesday offers a reprieve, the overshadowing threat of further tariffs between the US and China continues to be a critical concern for global and local economies.
Image Credits: Photo by Amber Weir on Unsplash
