Stocks on Wall Street lost their brief lustre as optimism that Donald Trump’s US administration will reach deals to reduce tariffs was soon replaced by the reality that China will face import duties of 104% just after midnight on Wednesday in the US.
The S&P 500 was down 1.6% in afternoon trading, reversing earlier gains, after US Trade Representative Jamieson Greer said there won’t be any exemptions to the global tariff regime in the near-term while the White House negotiates with individual nations.
The administration also confirmed China’s steep tariffs will come into effect, with the world’s second-biggest economy knuckling down in its opposition, saying it will “fight to the end” if the US continues with its programme.
“It's all about tariffs still,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “A colleague asked yesterday when ‘Trump’ would not get a mention in this daily report, and I couldn’t answer.”
European stock markets had rallied earlier in the session as investors were optimistic the US will negotiate trade deals to mitigate the tariff regime. The UK’s FTSE 100 index rose 2.7% - its biggest one-day gain since 2022 – with finance minister Rachel Reeves saying she’ll meet US Treasury secretary Scott Bessent soon as part of broader talks for a new trans-Atlantic economic partnership.
The White House has scheduled talks with South Korea and Japan, while Italian prime minister Giorgia Meloni is due to visit next week.
Grumbling billionaires
Criticism of the Liberation Day tariff regime has escalated, with billionaire hedge fund manager Bill Ackman again turning to X urging Trump to pause the programme to avoid major global disruption.
The impact of the turmoil was clear for Indonesia when markets reopened yesterday after the weeklong Eid holiday, with the Indonesia Stock Exchange sinking as much as 9.6% to end the day down 7.9% and the rupiah tumbling to a record-low 16,868 per US dollar, prompting the country’s central bank to prop up its currency.
New Zealand’s Reserve Bank will review monetary policy today, giving an early indication of how central banks will respond to the new trade paradigm. The central bank is expected to cut the official cash rate a quarter-point to 3.5%.
“The Bank will be Orr-less (hopefully not oar-less) and is unlikely to have all the answers,” BNZ’s Wong said. “The bank would be wise to keep its options open regarding the speed and extent of any future policy easing.”
The kiwi dollar dropped to 55.48 US cents at 7am in Auckland from 56 cents yesterday.
The reversal in investor sentiment is expected to seep into the antipodes, with Australian futures pointing to a 0.3% decline for the S&P/ASX 200 index.
Reporting by Paul McBeth. Image from Aaron Greenwood on Unsplash.