It was a poor month for the Australian share market, with the All Ordinaries index closing the month 4.1% lower at 6,117.3 points. The Australian Dollar fell 0.8%, with 1 Australian dollar currently buying 76.75 US cents.
As expected, in the March board meeting, the Reserve Bank of Australia (RBA) board kept the official Cash Rate on hold at 1.50% per annum. The RBA board met again today, and have once again kept rates on hold for the month of April.
Global share markets returns were also poor in March, as fear of a trade-war between the United States and China intensified. The United States Dow Jones index fell by 3.7%, the London FTSE fell by 2.4%, the Japan Nikkei 225 fell by 3.1% and the Hong Kong Hang Seng Index fell by 2.4% in the month.
In a trade-war, countries impose tariffs and other barriers on imported products, often in retaliation for actions taken by a trading partner. While President Trump's recent announcements should not be a surprise, especially given the comments in his June 2015 presidential announcement speech, investment markets have reacted poorly to the trade restrictions.
President Trump first announced in March that he is planning to impose a 25% tariff on imported steel and a 10% tariff on imported aluminium. This was followed-up last week when the President directed the United States trade representative to level tariffs on about US$50 billion worth of Chinese imports.
In retaliation, China announced its own tariffs on Friday last week on $3 billion worth of United States imports (including fresh and dried fruits, nuts, wine, steel pipes, pork and recycled aluminium), which Beijing said was in response to the steel and aluminium tariffs announced in March. Beijing has yet to retaliate to the most recent round of trade restrictions.
Regardless of your political view, the net result of a trade-war for consumers is generally poor.
Higher steel and aluminium prices in the Unites States will mean that the price of cars, appliances, packaged food and everything else that uses steel or aluminium is bound to go up. The reverse is true for the Chinese consumer in relation to the tariffs on Untied States imports.
The "pro-protectionist" view is that tariffs provide more local jobs and protect local industries. Ironically, even the United States aluminium industry's trade group acknowledge the smelters remaining in the United States cannot make enough additional aluminium to replace the supply coming from overseas (meaning the net result will be higher prices).
Regardless of your view on free-trade, it does seem as though this issue will continue to fuel volatility in global share markets for the coming weeks and months.
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.