The Australian share market experienced its biggest one-day fall in almost five years on Monday. The benchmark S&P/ASX 200 plummeted over 4%, closing at 7,343 points. This represents the steepest drop since the COVID-19 pandemic roiled financial markets.
The massive selloff wiped $100bn from local stocks. The declines build on the market falter that began last week following US President Donald Trump’s announcement of tariff measures. “It’s a bloodbath on the share market today in Australia,” said Luke McMillan, head of research at Sydney-based Ophir Asset Management.
The pivotal difference from previous market crashes is that this is driven essentially by one individual — the US president.
Monday’s tariff-induced drop joined a rare list of significant market falls exceeding 4%. The ASX 200 has fallen more than 14% from its February highs. While Trump’s new tariff regime initially sparked a selloff across global markets last week, plans from major economies to hit the US with retaliatory tariffs have heightened fears of a global recession.
The ASX managed to trim some of its losses after an initial drop of more than 6%.
Stock market plunge amid tariff fears
Omkar Joshi, chief investment officer at Sydney-based Opal Capital Management, remarked on the escalating trade tensions weighing down markets.
“If neither side backs down, and we see increased retaliation, there’s a significant possibility that we could go lower from here,” Joshi said. US futures markets are also signaling a brutal trading session for the American market when it opens for the week. Investors now view Australia’s economy as heavily intertwined with China’s due to their significant trading relationship.
Tony Sycamore, market analyst at IG Australia, noted that China’s impending 34% retaliatory tariffs on all US imports have sparked fears of “a full-blown trade war, imminent recession, and a liquidity crunch last seen during the early pandemic.
Despite the market turmoil, a handful of resource companies involved in critical minerals saw gains. Investors bet that China’s export controls on these minerals would boost demand. The Australian dollar fell to its lowest level against the US dollar since COVID-19, reacting to global market selloffs.
One Australian dollar bought just over 60 US cents late on Monday after dipping to a low of 59.64 cents, its lowest point since April 2020. When there is concern about a global slowdown, mainly from tariffs and trade wars, there is less demand for our commodities,” AMP economist My Bui noted, referencing Australia’s substantial iron ore exports. As the global economic landscape remains uncertain due to the burgeoning trade war, the Australian share market’s significant fall underscores the fragility and interconnectedness of global markets.
Investors and policymakers must navigate carefully to manage the potential economic fallout.
