ASX Tanks 3.75% as $160 Billion Wiped Off Market Amid Trade War Panic

Key Highlights:

• ASX 200 plunges 287.7 points as investors brace for US-led global trade turmoil
• $160 billion wiped off ASX at open; CBA and BHP tumble over 8%
• Energy, Financials, Materials lead sector-wide declines
• Rising fears of recession as China hits back with 34% US import tariffs

A wave of panic selling swept through the Australian share market on Monday morning, wiping out more than $160 billion in value within the opening minutes, as fears of a full-blown global trade war rattled investor confidence.

The S&P/ASX 200 Index nosedived 3.75% to 7,380.1, its lowest level since late 2023, following steep losses on Wall Street. The All Ordinaries (XAO) slid 3.77% to 7,552.0, as risk-off sentiment dominated across all asset classes.

“This is one of the most dramatic starts to a trading week in recent memory,” said IG Australia analyst Tony Sycamore. “China’s retaliation to the Trump tariffs is fuelling fears of a 2008-style liquidity crunch.”

“This wasn’t just a sell-off — it was a sharp repricing of risk,” said one Sydney-based fund manager. “Investors are waking up to the reality of a more fragile global outlook.”

Trump Tariffs Trigger Global Contagion

The market freefall followed Friday’s collapse in US equities, where the S&P 500 plunged nearly 6% after China unveiled 34% retaliatory tariffs on all US imports in response to Donald Trump’s “Liberation Day” trade regime. The measures are set to take effect later this week, igniting worries of a deepening economic slowdown.

Trump’s tariff announcements — including 10% levies on goods from Australia and the UK and 20% on the EU — have sparked fears that the global supply chain could seize up. Australia, seen as heavily exposed due to its close trade ties with China, became an immediate collateral victim.

“The door for negotiation remains open,” said Sycamore, “but there’s a real risk that relief won’t arrive fast enough to avoid recession.”

Broad-Based Carnage on the ASX

There were no safe havens on the local bourse. All 11 major sectors ended the session in the red, with Energy (-7.45%), Materials (-4.92%), and Financials (-4.08%) leading the decline.

The ASX 200 Banks Index fell 4.36%, while the Resources Index dropped 5.5% as traders dumped cyclical stocks. Giants Commonwealth Bank and BHP both shed more than 8% in early trade, significantly denting the nation’s largest portfolios and superannuation funds.

Small Caps, Big Losses

The ASX Small Ordinaries Index dropped 4.01% to 2,751.6, underperforming the benchmark. Mid and micro caps such as St Barbara (-13.83%), Ora Banda Mining (-13.17%), and Orthocell (-11.74%) posted double-digit losses.

“There’s a massive flight to cash and quality,” said a Sydney fund manager. “The kneejerk reaction has been brutal, especially for the small-cap end of the market.”

Commodities & Currency Under Pressure

Global commodity prices failed to cushion the blow. Brent crude fell 2.47% to $63.96, while WTI dropped to $60.42. Even gold, typically a haven asset, slipped 0.31% to $3,026.10.

In foreign exchange, the Australian dollar dropped to US$0.6003, marking a 0.63% decline as investors sought the safety of the greenback. The local unit also slid against the euro, yen, and pound, further reflecting the market’s fragile risk appetite.

Volatility Soars; VIX Hits 25.9

The ASX Volatility Index (VIX) spiked to 25.9, indicating high near-term uncertainty and investor anxiety. This level suggests markets expect further swings in the coming weeks, especially as geopolitical developments unfold.

“The elevated VIX reflects extreme caution,” said a strategist from NAB. “No one wants to catch the falling knife right now.”

Super Funds and Portfolios Hit

Today’s sell-off will be felt far beyond trading desks. The plunge in blue-chip stocks and index funds has eroded the value of millions of superannuation and investment portfolios, deepening losses that began last week after Trump’s initial tariff announcement.

Market watchers are now debating whether the ASX has entered correction territory, or if further downside is in store should the US-China standoff escalate.

Outlook: Bracing for the Next Blow

While there’s still hope for diplomatic resolution, the pace and scale of the sell-off point to deep underlying anxiety.

“Markets don’t like uncertainty — and right now we’ve got plenty of it,” said a JP Morgan strategist. “Until the world knows how far Trump will go and how China will respond, we’re stuck in no man’s land.”

With no clear catalysts on the horizon, traders are preparing for a volatile week ahead — one that may test the resolve of even the most seasoned investors.

With global sentiment deeply shaken, the ASX may continue to see sharp swings. While some investors may view the correction as a buying opportunity, others are bracing for further downside — particularly if geopolitical uncertainty escalates.