Markets in a spin as US begins to reveal is tariff plans

AUD – Australian dollar

Let the volatility begin. In the minutes following President Trump sharing his administration’s reciprocal tariff plans, the AUD plunged as risk appetite faltered. The AUD tracked sideways for much of the domestic and overnight sessions, as investors sidelined major bets ahead of today’s all important US tariff update, before bouncing through US$0.6325, following reports the US tariff program would be more lenient than initially feared. However, the upswing was short-lived as it emerged the 10% blanket tariff was the minimum the US would implement immediately, with higher reciprocal tariffs to take effect from April 9 and additional tariff rates would then be applied against countries the US deems to be the worst offenders when assessing barriers to trade. While it’s early days, it’s evident the Trump Administration will not back away from its tariff agenda, and early signs suggest a trade war is imminent. Having pitched back below US$0.06270 the AUD is vulnerable to further risk off selling. We are closely monitoring market reactions and emerging headlines in shaping expectations for direction.

Key Movers

Price action through the early hours of Thursday morning has been driven by evolving headlines and updates from the Trump Administration about its reciprocal tariff agenda. Risk appetite enjoyed a boost leading into the President’s Rose Garden address as reports suggested the US planned to implement a basic 10% blanket tariff. Such a program would be far more lenient than markets first feared, and investors looked to capitalise, propelling risk equities and risk correlated currencies higher. The upswing was however short-lived as it quickly emerged the 10% tariff was simply a starting point with higher, more punishing tariffs to follow. A 20% tariff will be imposed on European exports to the US, while a further 34% tariff will be applied on goods imported from China. In response, the euro has slipped off highs above 1.0920 and now trades below 1.0850. On the flip side, the Canadian dollar has enjoyed strong gains as Canada and Mexico have been afforded exemptions to additional tariffs as long as goods continue to be compliant with the USMCA trade agreement. The CAD bounced off lows just above US$0.6970 and now trades above US$0.7030.

While it is still early days, it is evident the Trump administration is not afraid of a trade war, the impacts of which would flatten global growth expectations. We are keenly attuned to headlines as they emerge and of course the response from key European and Chinese officials. We can expect plenty of volatility in the hours and days to come.