The Trump administration has imposed taxes on imports from a number of important trading partners, prompting fears of a global trade war.
This is creating major disruption in global share markets, including in Australia, which is having a flow-on effect on superannuation balances.
What is Trump doing?
The Trump administration has imposed taxes on imports from a number of important trading partners, prompting fears of a global trade war.
This includes new tariffs of 25% on all imported steel and aluminium, including against allies and major suppliers Canada and Mexico.
The Trump administration rejected Australia’s plea for an exemption from the tariffs on steel and aluminium imports, which came into effect on Wednesday.
Trump’s tariff regime is set to expand to other sectors, such as agriculture and pharmaceuticals, in coming months.
How does this affect Australia?
John Quiggin, a professor of economics at the University of Queensland, said the immediate effect of the tariffs would be on steel and aluminium companies that export to the US.
He said there was “probably no need to panic” but Australians should expect the economy to “do a bit worse than it would have” otherwise.
“The bigger thing is that what Trump has been doing is disrupting the global economy and that will have effects everywhere,” Quiggin said.
“In general, the perception at the moment seems to be this is just not so much specific actions that will harm some companies, but just general chaos.”
The uncertainty has thrown share markets in Australia and abroad into turmoil.
US stocks had their worst day of the year on Monday amid fears of a recession, before the Australian market shed more than $45bn on Tuesday.
Why does it affect superannuation here?
Superannuation portfolios typically contain international and domestic shares.
So, if things are bad for the share market, then that affects the value of superannuation portfolios.
Research by SuperRatings found monthly Australian superannuation returns turned negative in February.
The research company said that, the tariffs on China and potential flow on effects to the Australian economy influenced share expectations, offsetting any potential benefit from the Reserve Bank’s decision to lowering interest rates last month.
The Association of Superannuation Funds of Australia chief executive, Mary Delahunty, said the US S&P500 stock exchange had fallen by about 9% from its recent highs in mid-February and the Australian market had decreased by a similar degree.
“Falling share prices in the US – and across the globe – are a matter of concern to those who are exposed to investments in shares,” she said.
“Given uncertainty around the shape and impact of US trade policy, further volatility in share prices is likely.”
Delahunty said people should remember that superannuation was a “long-term savings vehicle”.
What should consumers do?
Graham Cooke, head of consumer research at Finder, said Australians may already see a change to their super balances but, like Delahunty, it was the “long term that matters”.
“The Australians who are most at risk are those who will need to retire soon,” he said.
“[For those] who aren’t retiring for a while, there’s time for this to recover, but how they have their super allocated will make a difference.”
Cooke said it was “early days” but “if the markets keep crashing that’s when things start getting worrying”.
He suggested people who needed to access their super soon, or those who were especially concerned about the volatility in the market, consider allocating a higher proportion of their portfolio to a lower risk profile.
“The problem there is that when the market starts to recover, the super profile might move back slower,” he said. “It depends when people are thinking of retiring.”