Economists have expressed concerns that despite Australia avoiding immediate tariff increases, the nation’s economy could still face considerable repercussions. The Australian share market reacted negatively, experiencing a roughly one per cent decline following the announcement that other countries, particularly key trading partners, received higher tariffs. For instance, India faced a 25 per cent increase and Canada’s tariffs soared to 35 per cent, while Japan and South Korea negotiated deals that still leave their tariffs higher than Australia’s 10 per cent.
This broader increase in tariffs could hinder global economic growth, which in effect may reduce demand for Australian exports, jeopardising the nation’s economic stability. Shane Oliver, chief economist at AMP, indicated that the expectation of an average US tariff rise to around 20 per cent could have profound implications for both US and global growth. The uncertainty stemming from these tariff changes has further compounded worries about their long-term impact.
There is speculation around the timeline and legality of these tariffs — initially suggested to take effect immediately, US President Trump’s announcement has pushed this back to allow room for potential legal challenges. The unresolved question surrounding tariffs on Chinese goods adds another layer of unpredictability, especially as the current pause is set to end soon.
Andrew Hauser, deputy governor of the Reserve Bank of Australia (RBA), highlighted the elevated levels of uncertainty tied to these economic shifts and compared them to the prolonged effects of Brexit. He noted that early predictions concerning the immediate economic fallout from tariffs may have been overly pessimistic, yet expressed concerns about the deeper, lasting impacts on sustainable growth rates.
Australia’s relative exemption from escalating tariffs, attributed to its trade deficit with the United States, signals a strategic negotiation stance. The government clarified that recent pauses on biosecurity restrictions on US beef exports were scientifically driven rather than a bargaining tactic, although the timing might suggest otherwise.
With nations categorised based on their trade balances with the US, those in deficit, like Australia, faced lower tariffs compared to countries with significant surpluses, which were imposed hefty tariffs. While Australia has averted higher tariffs for now, the indirect effects resulting from elevated tariffs on other major economies raise profound concerns about the future of its economic growth. The potential for weakened global demand poses a significant threat that may challenge Australia’s economic resilience in the coming months.