Wall Street Declines on Continued US-China Trade Escalation

Australian share traders are expected to approach the end of the week with caution following a decline on Wall Street, where the S&P 500 fell 3.5% in response to continued trade tensions between the United States and China.

The US administration raised tariffs on a broad range of Chinese goods to 145%, a move aimed at addressing trade imbalances and concerns over supply chain security. While President Donald Trump described the decision as part of a broader strategy that would bring long-term benefits, markets responded nervously. The Nasdaq 100 fell 4.2% and the Dow Jones Industrial Average declined by 2.5%.

ASX investors may now face additional market volatility, early futures activity pointed to a softer open for the S&P/ASX 200, with mining, energy and technology stocks likely to be most sensitive to further developments.

China’s potential response remains a key variable. Goldman Sachs’ Hui Shan noted that Chinese policymakers are "calibrating the situation" and reviewing possible countermeasures, leaving the door open for additional trade actions. This has contributed to investor unease, especially in markets closely tied to Chinese demand, such as Australian iron ore and LNG.

Local resource companies including BHP, Rio Tinto, and Fortescue Metals may experience near-term volatility, while broader market sentiment could be influenced by the potential for reduced global consumer spending if trade-related costs increase.

Currency and bond markets also reflected a shift in sentiment. The US dollar registered its steepest daily decline since 2022, while demand for US Treasuries ticked higher. In digital assets, Bitcoin dropped 4.3% and Ether fell nearly 10%, highlighting a broader move away from risk.

Attention is now turning to how the Federal Reserve may interpret the trade developments. March inflation data showed signs of cooling, but it preceded the most recent tariff hikes. If these new levies result in upward pressure on prices in the short term, policymakers may delay any potential interest rate cuts.

Reports that the US is also considering limiting Chinese firms’ access to American capital markets, including delisting Chinese companies from American exchanges, have added a further layer of complexity.