Australian shares have skyrocketed in early trade after US President Donald Trump declared a 90-day tariff pause for many countries, bringing some relief to investors worried about the global economic impact of US trade policies.
While the local rally is so far more muted than the record-busting gains on Wall Street overnight, it will be welcomed by investors who have endured a gut-wrenching week of market chaos since Mr Trump outlined his so-called “Liberation Day” reciprocal tariffs last week.
But in the US overnight, Mr Trump said he would temporarily lower many new tariffs, but raised the levy on imports from China to 125 per cent.
The pause on tariffs from dozens of trading partners came less than 24 hours after they kicked in.
The S&P-ASX200’s rally started slow, with a tentative gain of just 1.4 per cent in the first few minutes of trade but gathered momentum to climb 3.8 per cent to 7654.80 points by 8.10am — the highest point for the week so far.
The increase in China tariffs was in retaliation to China’s announcement of a levy of 84 per cent on US goods starting April 10.
While Trump’s announcement still left investors with uncertainty about his ultimate tariff policy, traders took the opportunity to shop for beaten-down stocks. Since Mr Trump announced broad tariffs late on April 2, stocks had fallen more than 12 per cent, for their biggest four-day selloff in five years.
“Markets had been looking for a reason to rally for a few days. Markets can only sustain extreme conditions for so long before exhaustion sets in, rather like a toddler and a tantrum,” said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis.
“The 90-day suspension does allow nice breathing room to allow negotiation to settle in and market valuations have clearly been reset. Yet the uncertainty for companies remains.”
After Mr Trump’s reversal, Goldman Sachs said it was rescinding its recession forecast and reverting to its previous baseline estimate for the economy to grow in 2025.
US stock market indices rocketed sharply higher on Mr Trump’s announcement, reversing four days of losses. The S&P 500 index leapt by 7 per cent, which puts it on track for its largest single-day gain in five years.
“We are living minute-to-minute,” said Eric Diton, president and managing director at Wealth Alliance.
“There was a whole bunch of petrified people out there trying to grasp at something positive,” he said. “I don’t think this is the bottom, that can’t be called until we see actual deals signed.”
When asked later about the reason for his decision, Mr Trump told reporters: “Well, I thought that people were jumping a little bit out of line.”
“They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid,” Mr Trump said at the White House.
Treasury Secretary Scott Bessett claimed to reporters that Mr Trump had always intended to put the brakes on the wide-ranging tariffs the president announced last week.
