A pledge from the US president to impose tariffs on steel and aluminium sent shares plunging in overnight trade. Fears of retaliatory measures and the potential for trade wars prompted investors to lock in recent gains.

The big winners are US steel and aluminium manufacturers, many of whom saw share price rallies of 5%-10%. Steel prices rose around 1% but oil and copper dropped on concerns about the impact of the new measures on global trade.

Markets received a sharp reminder of the initial negative reaction to the election of Mr Trump. The tariffs were announced without any policy framework. An explanation may come, but the initial market interpretation of the move is rank populism. The lack of structure makes anticipating further measures and possible responses to retaliatory moves difficult to predict. 

Asia Pacific markets will feel the downdraft but may outperform the 1.5% - 2% falls overnight. Futures markets indicate a drop of less than 1% in Australia at the market open. A fluid global trade environment may suit higher quality producers of raw materials, and Australian iron ore stocks could surprise on the upside today.