The S&P/ASX 200 Index (ASX: XJO) was heading higher in early trading until US Republican President-Elect Donald Trump announced new tariffs on imports from China, Canada, and Mexico.
The ASX 200 hit an intraday high of 8,433 points this morning, up 0.18% before the news broke.
The benchmark index then reversed course within two minutes of Trump's first announcement on the tariffs.
The ASX 200 quickly fell to an intraday low of 8,376.1 points, down 0.49%.
It is now rebounding and trading at 8,386.9 points, down 0.36%.
Image source: Getty Images
Why is the ASX 200 heading south?
In a post on Truth Social, Trump's own social media platform, at 10:35 am, the President-Elect said he would impose an extra 10% tariff on Chinese goods in response to an influx of drugs into the US.
The 10% tariff will be put on top of tariffs already in place.
Trump said:
I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States – But to no avail.
Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before.
Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.
In a second post, Trump said he would also introduce a 25% tariff on all imports from Canada and Mexico.
As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before.
Right now a Caravan coming from Mexico, composed of thousands of people, seems to be unstoppable in its quest to come through our currently Open Border.
On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!
The ASX 200 took an immediate tumble because many economists believe new tariffs on China will weaken its economy.
This would likely have a flow-on effect on Australia through reduced demand from our biggest trading partner.
The S&P/ASX 200 Materials Index (ASX: XMJ) was also trading higher on Tuesday until news of Trump's posts came through. A sharp fall ensued, followed by a mild rebound, which is underway now.
The major ASX iron ore stocks are trading as follows:
- Fortescue Ltd (ASX: FMG) shares are $18.41, up 0.16%
- BHP Group Ltd (ASX: BHP) shares are $40.11, down 0.02%
- Rio Tinto Ltd (ASX: RIO) shares are $117.28, up 0.49%
What's the rest of the market doing on Tuesday?
The financial and energy sectors are the worst performers of the ASX 200 at the time of writing.
The financial sector is down 1.32%, with ASX 200 bank stocks flailing since the market open.
Here's what's happening with the Big Four:
- Westpac Banking Corp (ASX: WBC) shares are $33.06, down 1.05%
- National Australia Bank Ltd (ASX: NAB) shares are $38.96, down 1.64%
- Commonwealth Bank of Australia (ASX: CBA) shares are $155.93, down 2.63%
- ANZ Group Holdings Ltd (ASX: ANZ) shares are $31.37, down 1.45%
The energy sector is down 1.54%, with ASX 200 oil shares hit hardest.
This follows a 3.15% dive in the Brent Crude oil price due to reports indicating Israel and Hezbollah may be close to reaching a ceasefire agreement within days.
Here's how some of the ASX 200 energy sector's major players are performing:
