ASX set to rise, Wall Street advances amid doubts about Trump's tariffs
The S&P 500 was edging up by 0.1 per cent and within 0.2 per cent of its all-time high set on Thursday. The Dow Jones was up 54 points, or 0.1 per cent, in mid-afternoon trade, and the Nasdaq composite was 0.3 per cent higher. The Australian sharemarket is set to advance, with futures pointing to a rise of 57 points, or 0.7 per cent, at the open. The ASX slid by 0.1 per cent on Monday.
The Australian dollar was 0.5 per cent lower at 65.46 US cents at 5.16am AEST.
Stock indexes elsewhere around the world were mixed in their first trading after Trump announced plans over the weekend for 30 per cent tariffs on goods from Mexico and the European Union. They won't take effect until August 1, the same deadline that Trump announced last week for updated tax rates on imports from Japan, South Korea and a dozen other countries.
The latest postponements for Trump's tariffs allow more time for him to reach trade deals with other countries that could lower the tariff rates and prevent pain for international trade. They also feed into speculation that Trump may ultimately back down on his tariffs if they end up creating too much damage for the economy and for financial markets.
If Trump were to enact all his proposed tariffs on August 1, they would raise the risk of a recession. That would not only hurt US voters but also raise the pressure on the US government's debt level relative to the economy's size, particularly after Washington approved big tax cuts that will add to the deficit.
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'We therefore believe that the administration is using this latest round of tariff escalation to maximise its negotiating leverage and that it will ultimately de-escalate, especially if there is a new bout of heightened bond and stock market volatility,' according to Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management.
'As usual, there are many conditions and clauses that can get these rates reduced,' said Brian Jacobsen, chief economist at Annex Wealth Management. 'That's probably why the market might not like the tariff talk, but it's not panicking about it either.'
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