The US stock market dropped sharply this week, could have on the local economy — and Australian shares have followed suit.
And with Trump's confirmation Australia would not be exempt from 25 per cent tariffs on steel and aluminium exports — the tariffs kicked in at 3pm AEDT on Wednesday — the sell-off of Australian shares continued on Wednesday.
The S&P/ASX 200 index lost $34 billion in value, following from a loss of $25 billion on Tuesday.
It's now headed towards a "correction", meaning the ASX200 has declined 10 per cent or more from its most recent peak.
And it's having an effect on Australians' superannuation accounts.
The Australian stock market has dropped after United States President Donald Trump introduced a 25 per cent tariff on Australian aluminium and steel. Source: SBS News
Why Trump's tariffs may have flow-on effects for your superannuation
If you've noticed your superannuation take a dip, you're not the only one.
This is because super funds typically have about 60 per cent invested in share markets, says AMP chief economist Shane Oliver.
"The reason super funds have a high exposure to shares is because they provide higher returns for investors over long periods. But the price of that is the share markets can be quite volatile."
Professor Tim Harcourt, chief economist at the University of Technology Sydney, , "a trade war can drive down share prices if there's going to be a global downturn".
Trump has announced tariffs on key trading partners China, Mexico and Canada and the European Union (EU). Canada, China and the EU have already responded with tariffs of their own.
Prime Minister Anthony Albanese has confirmed the government will not impose reciprocal tariffs to avoid "escalating trade tensions" and "economic self-harm".
"Such a course of action would only push up prices for Australian consumers and increase inflation," he added.
The Australian share market responds to the health of the United States economy, said Susan Thorp, a finance professor at the University of Sydney.
"The health of the US economy matters to the whole world because it is so large, and especially to small economies like Australia that rely on stable and efficient international trade," Thorp told SBS News.
"So share markets in Australia respond to news from the US, as well as to local news, because what happens overseas affects us."
This can have flow-on effects for Australians' super balances.
"The rapid switches in US policy create uncertainty that make it hard for businesses and policy makers to plan," she said.
"Investments like superannuation rely on future economic outcomes that have become more uncertain over the past month. Investors are cautious in uncertain environments and tend to hold back."
So, should Australians be worried about their super balances?
While some Australians may see an immediate drop in their balances, superannuation is a long-term investment and can withstand volatility. Thorp said that in the long term, our balances will still rise.
"Superannuation savings are invested in shares, along with other assets like bonds, cash, property and infrastructure," she told SBS News.
"Large superannuation funds invest in these assets both in Australia and overseas."
It's not the first time the Australian stock market has seen a dip. Source: SBS News
"Investment returns on superannuation do go up and down with returns in financial markets. Being able to tolerate that variation means that we get higher returns over time."
What Australians will be affected by the drop?
If you're young, have a decade or more left to work, or have a lower balance, Thorp says you'll fare through this trough.
"If you have a decade or more left to work, short-term dips are probably not going to matter," she said. "Younger people have longer to recover from dips."
Additionally, she says those with lower balances have less at stake.
However, those most vulnerable to these market volatilites are older Australians who have retired or have a few more years of work left.
"People with higher balances, with fewer years of work remaining, or who are retired are the most vulnerable," she said.
The decline in your super might make you more inclined to check your balance regularly to see if there are any dips. But Thorp cautions against this as there are natural fluctuations that come with our retirement fund.
"Financial markets are ‘noisy’. There are a lot of day-to-day changes that wash out over months and years, so some tracking of balances is useful, but too much can be confusing," she said.
"It’s good to remember that a major part of our super savings is what our employers contribute from our earnings, and that matters as well as returns."
