The elephants are fighting. Overnight the Trump administration slapped unprecedented tariffs of 104% on Chinese exports. China v USA!
How did investors respond? The 4% gain the S&P 500 put on in the morning was swiftly erased leaving it down 1.6% at the end of the days trading. The NASDAQ came off slightly worse, closing at -2.2% for the day.
The ASX 200 SPI is currently indicating our market to open 1.89% lower.
China’s response to the tariffs indicates these two economic elephants won’t be budging any time soon. Chinese Premier Li Qiang – President Xi’s 2IC – reiterated China has plenty of policy tools to offset any negative impacts. Li was optimistic about the back half of 2025.
Why we’re watching BHP and RIO
The US versions of BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) fell 5% and 4%, respectively, overnight. With great uncertainty in the commodity space, the price of iron ore hit a seven month low of $94.90. We’re expecting similar selling of the mining giants on our local exchange.
Our coal miners – Whitehaven Ltd (ASX: WHC), New Hope Ltd (ASX: NHC), Yancoal Ltd (ASX: YAL) and South32 Ltd (ASX: S32) will be interesting to watch as well. Lost in the China tariffs was Trump’s announcement of his support for the local US coal industry, “All those plants that have been closed are going to be opened if they’re modern enough, or they’ll be ripped down and brand new ones will be built.”
This is great news for those American kids dreaming of being coal miners who never thought they’d have a pathway…
One more area to watch today will be the likes of Woolworths Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES) and Telstra Group Ltd (ASX: TLS). So far these dominant domestic stalwarts have held up well to the volatility being domestically focused and suppliers of everyday staples and services. They have significantly outperformed the broader market year to date; WOW +2.4%, COL +10.2%, WES -2.54% and TLS +7.44% compared to the S&P/ASX 200 (ASX: XJO) at -8.80%.
1 ASX ETF to watch
We recently had Betashares’ Hugh Lam on The Australian Finance Podcast and he highlighted the Betashares Australian Quality ETF (ASX:AQLT).
For Rask, I’ll continue to watch this ETF to see if higher quality business can better weather the storm and spring back quicker than the broader index. Year to date AQLT is below the market, at -11.49%. Predominantly due to the declines in expensively priced businesses – but whose quality we can’t fault – such as the mighty Pro Medicus (ASX: PME).
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