Aussie share market tanks as investors show nerves over Donald Trump’s tariffs on Mexico, China and Canada

The Aussie share market has started the week deep in the red, plunging almost 2 per cent as investors weigh the impact of US President Donald Trump’s savage wave of tariffs slapped on Mexico, Canada and China.

One leading market analyst described the crippling impost as the most significant trade shock since the 1930 when a round of US tariffs exacerbated and extended the Great Depression.

The ASX200 dived 1.8 per cent in the first 30 minutes of trade, coming off last week’s record highs, and had only pared a fraction of those losses close to the half-way point in the session to 8394.6 points — still down 1.7 per cent.

The US dollar and oil rallied on news of the tariffs. But the Aussie dollar was smashed, dropping to a four-year low of 61.41¢.

Not one sector was spared in the rush for the exit, with real estate, banking, health care, consumer and discretionary and miners taking the full brunt of investor jitters.

The US President over the weekend followed through with his election promise to hit Mexico, Canada and China with tariffs, triggering countermeasures from all three countries.

Tariffs of 25 per cent were placed on imports from Canadian and Mexico while China copped an extra 10 per cent levy. There was a carve out for Canadian oil and gas, which will cop a 10 per cent tariff.

The new measures for the US’s three largest trading partners start on Tuesday and are tipped to affect more than 40 per cent of US merchandise imports.

Mr Trump said the tariffs were part of an attempt to stop US imports of the killer drug narcotic fentanyl, which he says is increasingly being made in Canadian labs owned by Mexican drug bosses using ingredients imported from China.

The synthetic opioid has been linked to tens of thousands of deaths over the past decades.

But iit didn’t take long for three countries to respond.

Canadian Prime Minister Justin Trudeau slapped retaliatory tariffs of 25 per cent against $US155 billion ($253b) of US goods soon after the Trump administration announced the tariffs.

Mexico also vowed retaliation following the news, though did not reveal specifics.

President Claudia Sheinbaum slammed Mr Trump’s tariffs and said she had instructed the secretary of the economy to “implement the Plan B we have been working on, which includes tariff and non-tariff measures in defense of Mexico’s interests”.

China said it would file a lawsuit with the World Trade Organisation in response to the duties, and “take necessary countermeasures”.

“This is the most significant trade shock since the Smoot-Hawley tariffs of the 1930s, which are widely blamed for exacerbating and prolonging the Great Depression,” said RBC Capital Markets chief economist Frances Donald.

“This shock far surpasses the 2018 tariffs in magnitude, diminishing the value of that period as a helpful guide for the economic impact ahead.

“For context, in 2018, the US average import tariff rose from 1.5 per cent to roughly 3 per cent. Under the new policy, the US average tariff rate [rises] to nearly 11 per cent, the highest average ratio since the 1940s.”

The global upheaval rattled Aussie investors.

Among the big iron ore majors, Fortescue, Rio Tinto and BHP were all down more tan 2 per cent but gold miners appear to have dodge the worst of the retreat from diggers and shippers.