Investors have resumed purchasing Australian shares, despite the looming threat of a tariff dispute between the US and China that could disrupt global trade. The benchmark S&P/ASX 200 rose by 1.5% in early afternoon trading on Tuesday, recovering some of the significant losses seen the previous day when the share market experienced its worst session in five years.

This partial recovery in the ASX comes before a critical moment, as Donald Trump has threatened to increase tariffs on China by an additional 50% from 9 April if China does not remove its retaliatory tariffs. In response, China’s commerce ministry has vowed to combat US tariffs “to the end.”

Investors are reportedly seeking signs of a resolution in the tariff dispute as a possible indication of a sustained recovery in equity markets, according to fund managers. However, analysts predict that if the tariffs persist, a full-blown trade war, recession, and a liquidity crisis similar to the early pandemic could occur.

The Australian dollar was trading at US60.3c on Tuesday afternoon, representing a modest rebound for the day, although still lower than last week’s 64c mark reached before Trump’s tariff announcements. A weaker currency is generally negative for Australian travellers and consumers purchasing foreign goods but positive for exporters.

The Australian dollar’s value is closely tied to commodity prices, particularly iron ore, which could decline if global economic activity slows, particularly in China. Despite the market disruption, long-term institutional investors reduced their share exposure in anticipation of the “liberation day” tariff announcement.

Source: https://www.theguardian.com/business/2025/apr/08/asx-200-australian-stock-share-market-tariff-threats