Key events
Billions wiped off Australian stocks
Jonathan Barrett
In Australia, shares swung wildly early on Wednesday, wiping tens of billions of dollars of value from the market over concerns the world’s two largest economies are headed for a full-blown trade war.
The S&P/ASX 200 opened slightly lower, before plunging more than 2% a few minutes into the session, erasing the rebound of the previous day. By midday, the benchmark had recovered to the 7,435 point mark, representing a 1% fall for the session.
Mining companies were early casualties of the drop, with BHP shares falling more than 4% in early trading. Australia’s largest biotech company, CSL, was also down more than 4% after Donald Trump announced that a “major” pharmaceutical tariff was coming soon.
Resources companies, especially those involved in iron ore extraction, are particularly sensitive to any slowdown in global economic growth and a trade war between the US and China.
The full story is here:
The New Zealand Reserve Bank cut interest rates on Wednesday citing US trade tariffs, one of the first central banks to respond to the economic turmoil sweeping markets worldwide.
“Recent increases in tariffs and uncertainty about global trade policy have weakened the outlook for global economic activity,” the central bank said, announcing it would lower the country’s key interest rate.
It’s one hour until Donald Trump’s slew of new tariffs on the US’s largest trading partners are due to come into effect, despite fears of widespread global economic damage and calls to reconsider.
The US will also go ahead with imposing a 104% tariff on China from 12.01am ET (12.01pm China Standard Time) on Wednesday, the White House confirmed after Beijing did not lift its retaliatory tariffs on US goods by Trump’s Tuesday noon deadline.
The so-called reciprocal tariffs are also due to hit about 60 other countries.
The latest tariffs are higher than the 10% flat rate imposed on all global imports to the US last week and are tailored to specific nations based on a formula that has been criticised by economists.
Will Trump’s tariffs tip the world into recession? That’s one of the big questions as the wall of levies he announced last week comes into effect today, upending decades of precedent from the world’s strongest economy – as this podcast explains.
The Guardian’s senior economics correspondent, Richard Partington, talks to Michael Safi about the dynamics of a market crash and a trade war and how together they may contribute to the onset of a global recession.
However, as he makes clear, the world is not yet in that worst-case scenario and steps can still be taken to minimise the risk.
Partington explains that even if the tariffs were reversed, decisions being made by governments and businesses have already moved the world into a new economic era – one in which China may make gains and where many workers at the bottom of shifting supply chains are likely to lose out.
You can listen here:
South Korea has announced emergency support measures for its auto sector, seeking to reduce the blow of the Trump tariffs on a sector that has seen years of sharply rising exports to the US.
The measures include financial support for the auto industry as well as tax cuts and subsidies to boost domestic demand, while the government also vowed efforts to negotiate with the US and help expand markets, Reuters reports.
Trump has announced a 25% tariff on imported cars and light trucks starting on Thursday. Manufacturers are expected to bear some of the tariff costs in the first year but will eventually alter production and possibly cease importing certain low-volume models into the US market.
The South Korean government said in a statement:
Given the (lower) proportion of South Korean automakers’ local production in the United States, our industry is comparably at a disadvantage.
The tariff was expected to cause “significant” damage to South Korean automakers and auto parts manufacturers, though it was difficult to estimate by how much, the government said.
To help prevent any liquidity issues, the government will raise policy financing support for the auto industry to 15tn won ($10.18bn) in 2025 from the 13tn won previously planned, according to the statement.
Speaking at a dinner for House Republicans, Donald Trump has been seeking to soothe fears about the economic impacts of his tariffs.
“Companies are pouring back into our country,” Trump said at the National Republican congressional committee dinner. “I know what the hell I’m doing. I know what I’m doing, and you know what I’m doing, too. That’s why you vote for me.”
He added that after years of countries ripping off the United States, “now it’s our turn to do the ripping”.
Vietnam’s government said it would buy more US goods including security and defence products as it seeks a last-minute delay to the huge tariffs imposed by Washington.
The south-east Asian manufacturing powerhouse counted the US as its biggest export market in the first three months of the year but its key customer has now hit it with 46% duties, Agence France-Presse reports.
Vietnam has asked Donald Trump to delay the implementation by at least 45 days to give time for talks.
The prime minister, Pham Minh Chinh, said Vietnam would “approach and negotiate with the US side to reach a bilateral agreement, moving towards a sustainable trade balance”, according to a statement published on the government’s news portal late on Monday.
It would also “continue to buy more US products that are strong and Vietnam has demand for, including products related to security and defence; promote early delivery of aircraft trade contracts”, the statement added.
Donald Trump says his administration is planning to announce a “major” tariff on pharmaceuticals “very shortly”. The president discussed the tariff at an event with the National Republican congressional committee, Reuters reports, saying such a duty would incentivize drug companies to relocate to the United States.
“We’re going to tariff our pharmaceuticals and once we do that they’re going to come rushing back into our country because we’re the big market,” he said.
“So we’re going to be announcing very shortly a major tariff on pharmaceuticals and when they hear that, they will leave China, they will leave other places because they have to – most of their product is sold here and they’re going to be opening up their plants all over our country.”
China, Hong Kong and Taiwan stocks fall
Shares in Shanghai, Taiwan and Hong Kong fell at the open today as the US-China trade war escalated.
China’s blue-chip CSI300 Index opened down 1.2%, while the Shanghai Composite Index lost 1.1%. China’s SmallCap 1000 Index was down more than 4%, Reuters reports, following the US decision to impose 104% tariffs on Chinese goods starting later on Wednesday.
Hong Kong’s benchmark Hang Seng dropped 3.1%.
Taiwan’s share market fell 1.8% in early trade.
Chinese state holding companies continued to support the stock market by increasing share investment, while a slew of listed firms announced share buybacks.
Shanghai’s composite index is set to open down 1.1% today, while China’s Beijing stock exchange 50 index is set to open more than 2% down, Reuters is reporting
Here’s a broad wrap of the buffeting across markets as Asian share losses deepened after another Wall Street retreat in the face of the latest set of US tariffs.
Japan’s Nikkei 225 index initially lost nearly 4% and markets in South Korea, New Zealand and Australia also declined.
On Tuesday, the S&P 500 dropped 1.6% after wiping out an early gain of 4.1%. That took it nearly 19% below its record set in February. The Dow Jones Industrial Average dropped 0.8%, while the Nasdaq composite lost 2.1%.
The sharply higher tariffs were scheduled to kick in after midnight Eastern time in the US.
The retreat overnight and into early Wednesday in Asia followed rallies for stocks globally earlier in the day, with indexes up 6% in Tokyo, 2.5% in Paris and 1.6% in Shanghai.
The Nikkei 225 in Tokyo fell more than 3.9% before levelling off. About an hour after the market opened it was down 3.5% at 31,847.40.
South Korea’s Kospi lost 1% to 2,315.27, while the S&P/ASX 200 in Australia declined 2% to 7,359.30. Shares in New Zealand also fell.
The Bank of Japan’s governor has said the central bank will carefully analyse how US tariffs could affect the economy in making monetary policy decisions.
“Domestic and overseas economic uncertainties have heightened due to US auto and reciprocal tariffs,” Kazuo Ueda told parliament on Wednesday.
We will continue to carefully analyse how the tariffs could affect Japan’s economy and prices through various channels.
The Bank of Japan (BOJ) exited a radical stimulus program last year and raised interest rates to 0.5% in January on the view Japan was on the cusp of sustainably achieving its 2% inflation target, Reuters reports.
Trump’s decision to impose sweeping tariffs worldwide, including on Japan, has complicated the BOJ’s plan to continue raising interest rates from still-low levels.
Photograph: Yoshio Tsunoda/AFLO/REX/Shutterstock
Ueda said the BOJ’s past decisions to raise interest rates were made with a focus on underlying inflation, which has gradually accelerated toward 2%. The decisions were also based on the view that removing excessive monetary support now would help the BOJ avoid raising rates sharply later to combat a too-high inflation rate, and ensure Japan’s economy achieves sustainable growth, he added.
When asked by a legislator to deliver stronger language committing to combat economic headwind from Trump’s tariffs, Ueda said only that there was still uncertainty about how US trade policy would unfold.
We will scrutinise developments, analyse how they affect the economy, prices and markets to come up with solid projections.
Australian shares plunge 2%
More here from Jonathan Barrett on Australia’s stock market tumble today:
Australian shares fell by a steep 2% in the opening minutes of trading this morning, erasing yesterday’s bounce as hopes deteriorate that the world’s two largest economies will strike a trade deal.
The sharp price moves come shortly before the US is scheduled to hit China with additional tariffs, due to come into effect just after 2pm (Australian eastern standard time).
Taking into account past announcements, Chinese goods entering the US will face a 104% tariff as part of Donald Trump’s new trade regime. Analysts at IG warned on Wednesday that the Australian economy would be hit by the trade barrier, saying:
If China does dig in, tariffs on its imports to the US will rise to a staggering 104%, a dire outcome for Australia’s trade-dependent economy and a potential catalyst for another round of broader risk aversion.
Australia’s benchmark share index fell to below 7,350 points in the opening minutes of trading today, taking it back to the level it closed at on Monday, which was the worst trading day in almost five years.
