Over the past week, global financial markets have experienced significant volatility following President Donald Trump’s announcement of sweeping tariffs, including a 10% levy on all imports, with higher rates on specific countries and a 34% tariff on Chinese goods. In retaliation, China imposed equivalent tariffs on $140 billion worth of U.S. imports, escalating fears of a trade war and its potential economic consequences. ​

Impact on the U.S. Stock Market

The U.S. stock market responded with sharp declines. The S&P 500 fell 17% from its February high, marking its worst week since March 2020. Investors are particularly concerned about reduced consumer spending and corporate earnings, as the tariffs may lead to higher prices and disrupted supply chains.

Impact on the Australian Stock Market

The Australian share market also faced substantial losses. On Friday, the S&P/ASX 200 Index fell 2.4%, equating to a $56.6 billion loss, the largest in eight months, and as of writing the market is off a further 6%, equating to a total loss of around 15% from its February high.

Historical Context: Previous Trade Wars

To further understand the current situation, it’s helpful to examine past trade conflicts:

• U.S.-China Trade War (2018-2019): The U.S. imposed tariffs on Chinese goods, leading to retaliatory measures from China. The S&P 500 experienced volatility during this period but managed to recover within several months as negotiations progressed and partial agreements were reached.​

•  U.S.-EU Steel and Aluminum Tariffs (2018): The U.S. imposed tariffs on steel and aluminum imports from the European Union, prompting retaliatory tariffs from the EU. The stock market faced short-term declines but rebounded as both parties engaged in negotiations and eventually reached settlements.​

• Japan-U.S. Trade Tensions (1980s–1990s): As Japan’s economy surged in the 1980s, the U.S. responded with protectionist measures, particularly targeting Japanese cars and electronics. The U.S. placed “voluntary export restraints” on Japanese car imports. Tensions led to friction but not a full-scale trade war. Stock market impacts were minimal, though Japan later experienced its own economic crash in the early 1990s.

In all instances, while markets experienced immediate downturns, they demonstrated resilience and recovered over time as diplomatic solutions were agreed.​

Long-Term Market Performance

Despite recent turbulence, the long-term performance of both the U.S. and Australian stock markets remains robust. For instance, the ASX 200 is still up around 33% over the past 5 years and S&P 500 over 80%.

Staying the Course

Market fluctuations, especially those triggered by geopolitical events like tariffs, can be unsettling. However, history has shown that markets recover over time. It’s crucial to remain calm and avoid making impulsive decisions based on short-term market movements. Maintaining a diversified portfolio and focusing on long-term investment goals can help navigate periods of volatility.​

While the recent tariffs have introduced uncertainty and market volatility, it’s essential to remember that such fluctuations are part of the natural market cycle. At Hewison Private Wealth we  construct portfolios to deal with short-term market shocks and our clients are well positioned to be proactive as investment opportunities present themselves.