Trump tariffs send ASX tumbling and raise expectations of further interest rate cuts this year

Donald Trump’s sweeping round of tariffs has sent the stock market tumbling, upended economic models and prompted forecasters to dramatically overhaul their interest rate predictions amid fears Australian households will be caught in the global fallout. The ASX followed Wall Street lower on Friday, with the benchmark S&P/ASX 200 falling on back-to-back trading days to shed almost 3% of its value since the “liberation day” tariffs were unveiled. The effects were not limited to stocks. ANZ prediced another three cash rate reductions this year, after previously only expecting one. It redrew forecasts, including room for a bumper half percentage point cut in May. “We would not rule out a 50bp [basis point] cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently,” ANZ said on Friday. Sign up for the Afternoon Update: Election 2025 email newsletter The broader market was expecting the cash rate to fall by almost a full percentage point by the end of the year, according to IG Markets, taking the cash rate to as low as 3.1%. The Reserve Bank, which held rates steady earlier this week, said it was “well placed to respond” to tariffs and other global events. There is an expectation that rate cuts will be required to offset deteriorating consumer confidence in Australia. While interest rate cuts would be welcomed by mortgage holders, a cycle of deep cuts would also be a sign of economic weakness likely accompanied by job losses. Richard Holden, a professor of economics at the UNSW business school, said sliding share prices were a sign businesses were pessimistic about future sales, especially to China. “I’m most worried about China,” he said. “That makes China poorer, and when China gets poorer … they’re going to buy fewer goods and services from Australia.” While the US hit Australia with a 10% tariff, many ASX companies are exposed to countries that face much stiffer US import duties, including China, which faces a new 34% tariff on top of the 20% levy previously announced. But even companies primarily selling to Australians, such as retailer Harvey Norman, saw their share prices hit, as investors braced for the prospect of a global recession. “Consumers sit there and they look at this and say, ‘It’s not a great time to buy a new fridge, or a car or a new computer’,” said Holden. Australian headquartered surgical glovemaker Ansell, which generates more than 40% of its revenue through US sales, said on Friday it would increase the prices of its protective clothing to “fully offset” the impact of tariffs. The company sources most of its US-bound products from facilities in Asia, which was hit with large tariffs. It relies on manufacturing facilities in Malaysia (24% tariff), Sri Lanka (44%), Thailand (36%), Vietnam (46%) and China (34% on top of previously imposed 20% tariff). Shares in Ansell are down by about 10% since the tariff announcement. Those companies exposed to energy markets, such as oil and gas producer Woodside, suffered some of the steepest losses on the ASX during the past two trading days over concerns that a global recession would severely curb demand for their products.