‘Liberation Day’ tariffs create mayhem on global | Australian Markets

The ASX200 slumped on Monday to the tune of $38bn, as traders concern the worst from the US President Donald Trump’s tariff coverage.

The native benchmark was down 1.6 per cent by lunchtime, following falls of 2 per cent on Wall Street’s S and P 500 index on Friday evening.

But Australia’s falls weren’t alone, with a lot of the world’s markets slumping as a report from Goldman Sachs says Mr Trump’s tariff coverage is rising the risk of a recession within the US.

According to the report, a recession is now a 35 per cent chance, up from 20 per cent simply a few weeks earlier.

IG market analyst Tony Sycamore stated global markets take heed to Goldman Sachs, with the report sending shares closely within the purple.

“When they put something out like that the markets sit up and take notice,” he stated.

“At the very top line the idea of the US heading into a recession ends up creating mayhem. We have ‘liberation day’ coming out on Thursday.

US President Donald Trump has promised his reciprocal tariff plan on April 2 will include all nations, not just a smaller group of 10 to 15 that has the biggest trade imbalance with the United States.

While the full details of the tariff plans are unknown, so far he has imposed tariffs on aluminium, steel and the automotive industry, as well as increased tariffs on all goods coming in from China.

There are tariffs on Canada and Mexico that are due to start early next week.

AMP chief economist Shane Oliver said while a US recession was not their base case, a tariff war added to uncertainty.

“It’s ambiguous or unknown as to what Trump ultimately wants here,” Dr Oliver stated.

“Is it all bringing production back to the US or is it about negotiating better exports for the US in global markets.

“So [April 2] is not necessarily the end of the matter, which could still escalate from here.”

Dr Oliver stated in whole there have been up to $23.9bn value of exports from Australia to the US throughout, aluminium, metal, prescription drugs, agriculture and copper that might be impacted by Trump’s tariffs.

“If lots of countries are hit and a trade war sees an escalation which leads to a slump in global trade, with the US, Europe, Japan and China heading towards a recession, then that would adversely affect us more than the direct impact of the tariffs,” he stated.

Mr Sycamore stated the mayhem might final for years to return.

“There’s this real concern that Trump is going to carry on and do what he is going to do, but the rest of the world is getting on with it,” he stated.

“The risk is the US is backing itself into the corner. The world is becoming a more uncertain place and that is why the ASX 200 is slumping today.”

Mr Sycamore stated global markets had been at the moment in a correction, which means they’re down 10 per cent or more, but it surely might worsen.

“If we go into a recession, the decline will be closer to between 25 and 35 per cent. That is the fear now, especially as Trump and [US secretary of the treasury] Scott Bessent say a recession is a possibility,” he stated.

“The downside is that if we go into recession, share costs haven’t fallen enough.