Donald Trump’s introduction of sweeping tariffs has led to the stock market experiencing a significant downturn, traditional economic models being disrupted, and forecasters being compelled to drastically revise their predictions regarding interest rates. This is amid concerns that Australian households might be adversely affected by the resulting global economic fallout.

Following the trend set by Wall Street, the Australian Securities Exchange (ASX) also fell, with the benchmark S&P/ASX 200 experiencing a decline over consecutive trading sessions, resulting in a loss of nearly 3% of its value since the announcement of the “liberation day” tariffs.

The impact of these tariffs was not exclusive to the stock market. ANZ, one of Australia’s major banks, now predicts an additional three reductions in cash rates this year, contradicting their previous forecast of just one reduction. The bank has also left room for a substantial half-percent cut by May.

ANZ stated that if sentiment worsens and the outlook for global growth deteriorates sufficiently, they would not rule out a 50 basis point rate cut in May. According to estimates from IG Markets, the broader market is anticipating the cash rate to fall by nearly a full percentage point by the end of the year, potentially bringing the rate as low as 3.1%.

Despite the Reserve Bank confirming that they are “well placed to respond” to the tariffs as well as other global events, there is an expectation that rate cuts will be necessary to bolster flagging consumer confidence in Australia. However, a cycle of deep cuts could imply economic weakness and potential job losses.

While mortgage holders may welcome lower interest rates, the broader market response includes concerns about the economic and employment impacts of such a move.

Source: https://www.theguardian.com/australia-news/2025/apr/04/asx-impact-donald-trump-tariffs-australia-stock-market