The mining sector is braced for turbulence as Asian stock markets tumble in response to the U.S. tariffs announced over the weekend. The White House press secretary, Karoline Leavitt, confirmed that President Donald Trump’s threatened tariffs will be levied against major U.S. trading partners beginning February 1, including a 25% tariff on Mexico and Canada, 10% on China, and potential 100% tariffs on BRICS nations. The tariffs on oil and gas are likely to be implemented by February 18. This move has sent shockwaves through global markets, with Asian markets closing mostly higher on Friday but plunging on Monday.
The Australian stock market is at the epicenter of the storm, with the benchmark S&P/ASX 200 index falling below 8,400.00. Mining and technology stocks are leading the losses, reflecting the sector’s vulnerability to global trade tensions. BHP Group is down almost 2%, Fortescue Metals is sliding almost 5%, and Rio Tinto is declining almost 3%. The impact is not limited to mining; oil stocks like Woodside Energy and Santos are also feeling the pinch, down more than 1% and almost 1% respectively. Tech stocks are not spared either, with Zip sliding almost 5% and WiseTech Global losing more than 2%. The broader All Ordinaries Index is down 1.72%, adding to the gloom.
Gold miners are also taking a hit, with Newmont, Gold Road Resources, and Northern Star Resources each slipping almost 1%. Evolution Mining is losing more than 1%, and Resolute Mining is declining almost 8% after its CEO stepped down. The big four banks are not immune, with Commonwealth Bank, ANZ Banking, and Westpac each losing more than 1%.
The tariffs are expected to exacerbate inflation concerns, potentially forcing the U.S. Federal Reserve to hold off on interest rate cuts. This could lead to a prolonged period of higher borrowing costs, affecting investment decisions and capital expenditure in the mining sector. The Australian manufacturing sector, which moved back into expansion territory in January with a PMI score of 50.2, may also feel the strain as input costs rise.
The Japanese stock market is also sharply lower, with the Nikkei 225 falling more than 2%. Index heavyweights, automakers, and technology stocks are leading the decline. SoftBank Group is losing almost 1%, Uniqlo operator Fast Retailing is declining more than 2%, and Honda is sliding almost 7%. The manufacturing sector in Japan continued to contract in January, with a PMI score of 48.7, indicating further economic headwinds.
Elsewhere in Asia, Taiwan and South Korea are plunging 3.8% and 2.9% respectively, while New Zealand, Indonesia, and Hong Kong are lower by between 1.4% and 1.7% each. Malaysia and Singapore are down 0.1% and 0.2% respectively. China remains closed for the Lunar New Year break.
The U.S. dollar is trading in the higher 155 yen-range, reflecting the safe-haven status of the greenback in times of uncertainty. The Aussie dollar is trading at $0.609, highlighting the currency market’s sensitivity to global trade tensions.
This news is a wake-up call for the mining sector, which must now contend with the prospect of higher input costs, potential supply chain disruptions, and increased market volatility. Companies will need to reassess their strategies, focusing on cost management, supply chain resilience, and diversification to mitigate the risks posed by the tariffs. The sector’s response will shape its development in the coming months, with those that adapt quickly likely to emerge stronger from the turbulence. The mining industry must now navigate this complex landscape, balancing the need for growth with the challenges posed by global trade tensions. The coming weeks will be crucial in determining how the sector responds to these new realities.