Australian shares avoid dipping, Wall Street spirals after Trump escalates trade war

The Australian stock market opened lower this morning, subsequently recovering after US President Donald Trump threatened hefty tariffs on European wine and alcohol, escalating trade war tensions. This move has sparked concerns in the market regarding global trade tensions, with investors closely monitoring developments.

According to the *Australian Financial Review*, the S&P/ASX 200 initially fell at the open today before turning positive. As of 10:19 am, the index was up 0.2%, or 12.7 points, to 7761.80 points. While the All Ordinaries index rose by 0.2%, other parts of the banking and financial sectors recorded losses.

A sell-off accelerated on Wall Street, impacting the Australian market. Even some positive news from the US economy failed to stem the decline. The S&P 500 fell 1.5% in afternoon trading, accelerating its losses and putting it on track to close more than 10% below its record high from a few weeks ago. Wall Street refers to such a sharp drop as a "correction," and if the index closes below that level, it would be the first correction for US stocks since 2023.

The Trump administration's trade policies continue to trigger market volatility. Trump threatened 200% tariffs on Champagne and other European wines unless the EU dropped its "nasty" tariffs on American whiskey. This followed the EU's announcement of tariffs on American steel and aluminum in response to US tariffs on European steel and aluminum. American families and businesses have already reported declining confidence due to the Trump administration's erratic tariff policies, raising concerns about reduced spending, which could weaken economic vitality.

Nevertheless, there was some good news from the US economy as well. A report showed that inflation at the wholesale level was lower than economists had expected last month. This followed a similarly encouraging report a day earlier about the inflation felt by US consumers. Meanwhile, another report showed that fewer American workers than economists had expected filed for unemployment benefits last week. This is the latest sign that the job market remains relatively solid overall. Should this trend persist, it could allow US consumers to continue spending, which is a major engine of the American economy.