Trump tariffs spark five-year Aussie Dollar low

The Australian dollar has hit a five-year low as China hits back against Donald Trump’s trade war.

The Aussie Dollar is flirting perilously close to 60 US cents, surpassing the low recorded at the start of the Covid-19 pandemic.

Massive losses across global sharemarkets spell trouble for superannuation balances.

The Australian Dollar is closely tied to the strength of the Chinese Yuan, because the Australian economy is strongest when China has plenty of money to buy our products. Beijing has responded to Trump’s tariffs, matching the 34 per cent tariff on Chinese products.

However the US already had a 20 per cent levy in place, so effectively any product going from China to the US now has a 54 per cent tariff.

Since Trump’s sweeping global tariffs announcement on Wednesday, some $8.1 trillion has been wiped from share markets around the world.

The massive shake-up rocked US share markets, and the ASX is tipped to drop 4.29 per cent when it opens on Monday.

China described the US tariffs as bullying.

“It is a typical unilateral bullying practice that endangers the stability of the global economic and trade order. China firmly opposes this,” a Commerce Ministry spokesperson said. The ministry also says it will file a World Trade Organisation lawsuit.

The huge selldowns and loss of value on sharemarkets immediately affects Australians’ superannuation balances.

But the tariff fight will likely boost the case for more interest rate cuts in Australia. Economists think the tariffs will slow growth in the Australian economy, and push the RBA to provide more rate relief.

To end the week, the Australian Dollar was fetching 60.46 US cents, a 4 per cent loss on Friday. The Aussie Dollar has not been that weak against the Greenback since April 2020.

A weak Australian Dollar makes imported items more expensive.