Trump has fired successive shots in the global tariff war, slapping hefty duties on China (34 per cent), the EU (20 per cent), Japan (24 per cent), Taiwan (32 per cent), Vietnam (46 per cent), India (26 per cent), Korea (25 per cent), and even Australia (10 per cent).
The US Treasury Secretary is preaching patience, warning nations not to retaliate – but let’s be real, who’s just going to sit back and take it (aside from Albo)?
“Sit back, take it in, let’s see how it goes,” said Scott Bessent on Thursday. Sure, that leaves room for negotiations, but in a world where trade is a high-stakes chess match, no one wants to play the pawn.
Trump’s latest and most aggressive tariff barrage has blindsided global markets, wiping out billions and jolting economies into a scramble for answers. Despite his long-standing threats, few truly believed he’d pull the trigger – until now.
With US average tariff rates soaring to levels not seen since the 1930s, the world is stuck in a game of “might”.
Trump might negotiate. Europe might retaliate. US consumers might tighten their wallets. Businesses might slam the brakes on spending. And the biggest “might” of all – does this nudge the US closer to recession?
Not only is the world stuck on a merry-go-round of “mights”, it still lacks clarity on whether these tariffs are additive – is the tariff on China now at 54 per cent? And are exempt sectors like copper, semiconductors and pharmaceuticals merely enjoying a temporary reprieve before their turn comes?
Before clarity emerges, the message from market experts mirrors the “wise” words shared by Bessent: sit tight and stay calm.
“Investors now have to wait to see how policymakers respond,” said Chris Kushlis, chief emerging markets macro strategist at T. Rowe Price. But while they have to, global markets are making it clear they won’t.
In the immediate aftermath, S&P 500 futures dropped by 1.5 per cent, the Nasdaq fell by 2 per cent, and in Australia, the ASX opened down nearly 2 per cent.
Market swings are nothing new – they’re an inherent part of the investment landscape. What’s different this time is that instead of stepping in to calm rattled investors, the leader of the world’s largest economy is the one turning up the heat.
‘It’s not liberation, it’s retro’
AMP’s Shane Oliver thinks “America has a hankering for the 1950s” – the fabled golden era of Cadillacs, Chevrolets and diner milk shakes.
But, he warns, Trump’s tariffs won’t bring back the Happy Days or the American Graffiti dream, and so instead of Liberation Day, Oliver is dubbing 2 April (3 April in Australia) Retro Day.
“It’s not liberation. It’s retro, trying to go back to the past. It’s just imaginary,” he told InvestorDaily.
Trump’s undoing of “decades upon decades” of tariff reductions is going to cost the US economy, Oliver warned, putting the chance of a US recession at above 40 per cent.
And as the saying goes, “When the US sneezes, the world catches a cold.”
In fact, the Organisation for Economic Co-Operation and Development recently warned that if the US and its trading partners raise tariffs by 10 percentage points, global gross domestic product could fall by 0.3 per cent within three years, while inflation could rise by an average of 0.4 percentage points each year over the same period.
So, while Trump is presenting his move as a patriotic correction to trade imbalances, the actual result could be long-lasting damage to America’s economic leadership.
“This is how you sabotage the world’s economic engine while claiming to supercharge it,” said deVere Group’s Nigel Green.
Ultimately, Oliver and Green agree, American consumers will bear the brunt.
Australia dodges the worst
Prime Minister Anthony Albanese might be heartbroken, calling out the US, Australia’s so-called “best friend”, for its betrayal, but he’s promised not to hit back – a move applauded by all economists.
Meanwhile, Opposition Leader Peter Dutton reckons he would’ve wrangled a better deal for the country, though in the end, Australia’s feeling the sting only a little.
While America clearly has beef with Australia’s beef, bottom line is, Australia’s exposure to Liberation Day is small relative to other countries, and small relative to the value of total exports.
“Australia has gotten off relatively lightly,” said Betashares’ chief economist, David Bassanese.
And while that is something all economists agree on, consensus view is that for Australia, the main impact of Trump’s new set of tariffs will be indirect.
“The direct impact on Australia is likely going to be limited, but indirect effects from any slowdown in the global economy and, in particular, China could be more significant,” said the CBA’s economist, Harry Ottley.
Oliver agreed, noting that this indirect impact will most likely manifest via weaker global demand for local exports.
“The real threat comes from slower growth in China, slower growth in Europe, slower growth in Canada and Mexico, and slower global growth generally, leading to less demand for our exports. That is the risk for us, and that’s why our share market is obviously jittery,” he said.
Bassanese also warned that if some of Australia’s trading partners start cozying up to the US with exclusive trade deals, Aussie exports could get shoved to the sidelines.
But hey, that’s just another “might” in the ever-growing pile.
Who will save the US from Trump?
Oliver remains convinced, a 15+ per cent correction in shares from this year’s highs is on the cards.
So far, a 10 per cent dip in US stocks hasn’t been enough to shake former market cheerleader Donald Trump into action. But Oliver argues that if losses deepen past 15 per cent, it’s only a matter of time before the President starts tweaking his economic playbook – potentially softening tariffs and doubling down on market-friendly moves like tax cuts and deregulation.
“There will be a trigger point,” he said.
If markets edge towards bear territory, expect a flurry of panicked headlines – Trump Dump? Trump Slump? – that could push the headline-conscious President to reconsider his stance.
“That’s the kind of pressure he’ll be under,” Oliver warned. “Especially with Republicans already getting nervous.”
Then again, nothing in Trump’s playbook is ever predictable.
Click here to hear more from Shane Oliver.
