Trump’s tariffs confusion savages Australian shares, market slumps 1.8 per cent

Australian stocks have tumbled back under 8000 points amid confusion about US President Donald Trump’s tariffs and growing investor reassessment of his policy agenda.

The S&P-ASX200 on Friday followed US markets deeply into the red, crashing 1.8 per cent to a six-month low of 7948.2 points after more conflicting signals from the Trump administration on tariffs.

Ten of the ASX200’s 11 sectors finished under water, with technology and real property the hardest hit. The banks also extended their losses, with Commonwealth Bank surrendering another 3.3 per cent.

Underscoring the fragile global sentiment, a nervous Wall Street couldn’t muster a gain overnight Thursday, despite Mr Trump again tweaking his already sometimes “erratic” tariffs plan by announcing carmakers would be exempt from his 25 per cent levies on Canada and Mexico for one month.

His administration believes the rapid-fire tariffs will rejuvenate US manufacturing, but investors worry they will hurt business confidence and strain the economy, the world’s biggest.

There are also emerging concerns that Mr Trump’s supposedly business friendly policy agenda will not deliver the benefit to global equities initially thought at the time of his November election victory.

Investors had put their faith in the so-called “Trump put”, which assumed that he would do everything to keep US stock markets growing, even dropping policies if they rattled markets and investors.

However, while European and Chinese stocks continue to gain ground, the S&P500 index has fallen 4 per cent since the January 20 presidential inauguration and the Dow Jones industrial average three per cent, as US stocks have whipsawed on Mr Trump’s policy announcements.

That uncertainty and confusion has spread into other markets, with the fast-running S&P-ASX200 shedding nearly 5 per cent since Mr Trump took office to be down 2.6 per cent for the year after Friday’s plunge.

“Confusion reigns around the Trump Administration policy agenda,” Pepperstone head of research Chris Weston said.

“The lack of consistency to hold policy firm further limits the visibility US businesses have to position margins and to make strategic planning decisions,” Mr Weston said.

“Trump needs to portray control when putting through the hard policies. The price action in US risk markets speaks to the broad collective holding increased doubts that the Administration have that control.

“They see confusion and a rising risk that US public policy will accelerate job losses to the point that business confidence and household consumption trends will be taken over a threshold, which could be hard to reverse.”

AMP Capital chief economist Shane Oliver echoed those concerns, estimating the tariffs on China, Canada and Mexico will directly reduce US and Chinese economic growth by about 0.5 per cent.

“They could also add around 0.7 per cent to US inflation this year resulting in the US Federal Reserve keeping rates higher for longer,” he said.

More broadly, Dr Oliver said Mr Trump’s “erratic and inconsistent policy making with no certainty as to the end point on tariffs”, Elon Musk’s cuts to the US federal workforce, and geopolitical uncertainty, “all risk a wider hit to the US economy as consumers and businesses curtail spending in the face of policy uncertainty”.