It also explains why Australian shares repose was so restrained. Our sharemarket is pretty much the epitome of “risk off”. It is dominated by an oligopoly of banks and mining companies, followed by a rump of cyclical stocks, rather than the growth stocks that dominate the US sharemarket.
Thus, the ASX 200 reacted by struggling to move up by more than half a per cent by lunch on Tuesday – in what looked like a pretty flaccid response to saving the world economy.
The reality is that we should feel a bit luckier than we probably do.
The Australian sharemarket experienced a more muted response to the ceasefire in trade wars.Credit: Louie Douvis
Remember the Australian shares were not as hacked up as those in the US. Sure, Australian shares felt the wall of heat created by Trump’s “Liberation Day” tariff announcement and fell an alarming 8 per cent over a couple of days, but when, over the same period, the Nasdaq experienced a near 14 per cent freefall, investors left their stomachs behind.
And yes, we have been subject to a 10 per cent tariff on goods we export to the US and a 25 per cent tariff on steel and aluminium.
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But the direct damage to Australian companies and consumers is small relative to other countries that are very large exporters to the US and are more caught in the Trump crosshairs.
As a nation, we are something of an island of relative calm.
That said, we certainly have a number of companies with direct exposure to the US that have been negatively affected by US tariffs.
Macquarie lists a number that will be direct beneficiaries of a pickup in US economic activity that should flow from Trump walking away from the more extreme tariffs he had previously announced. These companies include Block (which owns Afterpay), James Hardie, Computershare, Reece, Worley, Flight Centre, Lovisa and Breville. The last three on that list jumped 5.7 per cent, 4.6 per cent and 8.2 per cent respectively.
Breville will benefit from Trump walking away from the more extreme tariffs.Credit: Louie Douvis
And then there are the bigger companies that stood to lose from a tariff-induced slowing of the China economy. Chief among these are the large iron ore companies including BHP, which gained 2.6 per cent, Rio, which rose 2.4 per cent, and Fortescue, which was trading up 3.7 per cent by the afternoon session.
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Ultimately, an improvement in consumer and business sentiment after the buffeting both received over the past six weeks should help cyclical stocks and banks.
This doesn’t mean that we won’t see tariff break-out battles along the way – of which the global pharmaceutical industry will be one.
But it feels like May 12, 2025, should be the real Liberation Day.
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