Markets fall as Trump triggers trade war

Good morning. Here's what happened overnight and what you need to know today.

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1.

Trump trade: The S&P 500 plunged up to 2% overnight as investors braced for a trade war triggered by US President Donald Trump’s 25% tariffs on imports from Mexico and Canada and 20% tariffs on Chinese goods. Canada responded with immediate 25% tariffs on C$30 billion of US imports, with the potential to expand to C$125 billion in 21 days. Prime Minister Justin Trudeau called Trump’s move “a very dumb thing to do”. China announced 10%-15% tariffs on a range of US imports from 10 March, while Mexico will unveil its response on Sunday if the tariffs remain. Stocks in automakers, homebuilders, aerospace suppliers, steelmakers, airlines and hotels fell. The Dow Jones was 1.24% lower Tuesday afternoon (Wednesday morning AEDT). Ford and GM were more than 2% lower each, and Boeing was 5% lower. The S&P 500 has erased nearly all gains since Trump’s election. Treasury Secretary Scott Bessent defended the tariffs, and some strategists believe Trump may only step in if the index drops 10%. (Bloomberg)(Reuters)

2.

Tit for Tat: China retaliated to US tariffs with 10%-15% increases to import tariffs on US agricultural and food products, and banning imports on US soybeans and lumber. The tariffs will cover USD21 billion ($33.7 billion) worth of American goods. China’s soybean imports suspension impacts three US companies, CHS Inc, Louis Dreyfus Company Grains Merchandising LLC and EGT. The import ban announced by the Chinese customs department on Tuesday came just hours after it imposed import levies across US farm products. The customs department also suspended log imports from the US, citing pests found in shipments. China’s response follows Trump’s Monday decision to raise import charges on China to 20%, and indicates that the nations' tit-for-tat tariffs are descending into an all-out trade war. Trump launched a new lumber tariff probe on Monday, and his 25% tariffs on imports from Mexico and Canada will take effect from today. (China Customs Department statement)(Reuters)(Capital Brief)

3.

Panama deal: Hong Kong-based CK Hutchison Holdings agreed to sell a 90% stake in Panama Ports Company and an 80% controlling interest in subsidiaries operating 43 ports across 23 countries to a BlackRock-led consortium for USD22.8 billion ($36.7 billion). After adjustments for minority interests and shareholder loan repayments, CK Hutchison will receive about USD19 billion in cash, the companies said. Panama Ports Company operates the Balboa and Cristobal ports at the Panama Canal’s entrances. The deal follows pressure from US President Donald Trump to curb Chinese influence in the region and comes as Panama’s government reviewed CK Hutchison’s contract and launched an audit. The Trump administration and US Congress were briefed, an unnamed source told financial media. The acquiring consortium includes BlackRock, its infrastructure arm Global Infrastructure Partners and Geneva-headquartered Terminal Investment Limited. The acquisition, which requires government approval, is BlackRock’s largest infrastructure deal. (Capital Brief)(Joint statement)(Bloomberg)

4.

Era of Rearmament: European Commission President Ursula von der Leyen proposed a ‘ReArm Europe’ package to mobilise €800 billion ($1.35 trillion) for defence after US President Donald Trump paused military aid to Ukraine, casting doubt on the US’s commitment to protect allies on the continent. The plan includes €150 billion in loans to member states for defence investment and a mechanism allowing €650 billion in additional spending over four years without triggering the Excessive Deficit Procedure. EU leaders will discuss the proposal at Thursday’s emergency summit. Von der Leyen said the package aims to boost defence spending while ensuring fiscal flexibility. The loans would encourage states to “pool demand and buy together” pan-European military equipment for Ukraine. She added: “We are in an era of rearmament... Europe is ready to assume its responsibilities.” (EU Statement)(Reuters)(Capital Brief)

5.

Plastic world: Abu Dhabi National Oil Company (Adnoc) and Austria’s OMV have agreed to merge their petrochemical businesses, creating Borouge Group International, valued at over USD60 billion ($96.74 billion). The new entity will acquire Canada’s Nova Chemicals, becoming the world’s fourth-largest polyolefins producer and second-largest outside China. Polyolefins, plastics derived from oil and gas, are used in everything from packaging, automotive parts and construction materials. The deal is part of Adnoc’s strategy to diversify into fossil fuel-derived chemicals as demand for gasoline and diesel declines with the rise of electric vehicles. The merger combines two joint ventures: Borealis, 75% owned by OMV and 25% by Adnoc, and Borouge, 54% owned by Adnoc and 36% by Borealis. The deal includes the USD13.4 billion acquisition of Nova Chemicals and an €1.6 billion cash injection from OMV. The merger is expected to close in early 2026. (Capital Brief)(ADNOC release)(OMV release)

6.

Sweetheart deal: Offering YouTube a carve out from its new social media age restrictions would further entrench Google’s market power and give its video platform a monopoly on users under 16 years old, according to TikTok public policy director, Ella Woods-Joyce. In submissions to the government, TikTok warned the proposed rules undermine Labor’s online safety framework, stymie fair competition and fail to safeguard against “inevitable and unpredictable” product evolution. “The inevitable consequence of the named exclusion will be to ring-fence a significant competitive advantage in the form of a monopoly over not only users under 16, but also users over 16,” reads the submission, seen by Capital Brief. TikTok argued that “carving out a sweetheart deal” for one platform while subjecting others to “stringent compliance obligations” would undermine the government’s digital competition reform efforts. It joined Meta and Snap in formally opposing the proposal after Labor sought feedback in a February discussion paper. (Capital Brief)

7.

Supermarket sweep: The federal Greens have launched a plan to establish a prices commission to work alongside the consumer watchdog in cracking down on price gouging. The prices commission would be a separate Commonwealth entity similar in size and structure to the Productivity Commission and would pass along referrals to the Australian Competition and Consumer Commission (ACCC) for investigation. The Greens also want new price gouging and divestiture powers introduced that would then be enforced by the ACCC and the courts. The ACCC delivered the final report into the supermarkets to the federal government on 28 February, but it has yet to make the document public. The interim report, released in August 2024, described a highly concentrated supermarket sector dominated by Coles and Woolworths. Concerns about land banking of retail sites and the power imbalance from suppliers were flagged. (Capital Brief) Correction: This entry has been updated to clarify that it was the ACCC that delivered the final report from the supermarkets inquiry, rather than the federal government.

8.

Barrel drop: Saudi Aramco reported a 12% drop in 2024 profits and said it will cut its dividend as the price of oil continues to fall. The oil major posted net income for the year of USD106.25 billion ($170.27 billion), compared with USD121 billion in 2023. Aramco’s 2024 revenues of USD436 billion fell shy of 2023’s USD440.9 billion. The company said it will pay a total dividend of just over USD85 billion, a sharp drop on the USD124 billion paid out the year prior. Subdued oil prices and production, nearing their lowest levels in three years, are focusing attention on the Aramco dividend and how the kingdom plans to fund multi-trillion dollar projects like NEOM and the 2034 FIFA World Cup. Crown Prince Mohammed bin Salman also pledged to invest USD600 billion into the US, raising speculation that Saudi Arabia may need to take on new debt to fund the projects. (Saudi Aramco) (Bloomberg)(Capital Brief)