According to new data from the Australian Treasury, the nation is expected to experience minimal adverse effects from the recent tariffs imposed by Donald Trump. The Treasury’s modelling indicates that the tariffs will result in a modest decline of 0.2 per cent to the GDP by the end of next year and a further slight decrease of 0.1 per cent by 2030. In addition, inflation is anticipated to rise by 0.2 percentage points this year due to the new import taxes applied by the US.
In stark contrast, China’s GDP is projected to fall by 0.6 per cent in 2026, while the United States may see an even larger reduction of 0.8 per cent by 2027, compounded by a significant inflation spike estimated at 1.5 percentage points for the US this year. Treasurer Jim Chalmers remarked on the anticipated severe impacts on both US and Chinese economies, while maintaining that Australia’s effects would be more manageable despite some expected hit to GDP and prices.
The Tariff situation is particularly complex for Australia, mainly because the nation faces a baseline tariff rate of 10 per cent, which is significantly lower than the higher rates applied to other countries. However, the Treasury acknowledges that certain sectors like agriculture, mining, energy, and durable manufacturing could be particularly vulnerable to these tariffs.
Chalmers emphasised an element of uncertainty surrounding these economic forecasts, acknowledging that the effects of the tariffs will not be felt uniformly across the economy.
On a related note, the falling Australian dollar, which has recently dipped below 60 US cents amidst concerns regarding the Chinese economy, suggests the market is anticipating a potential interest rate cut in May, with expectations of additional reductions later in the year. Currently, financial analysts are predicting about four interest rate cuts within this calendar year, with the possibility of a substantial 50 basis point cut in May.
Chalmers reassured the public that, although tariffs will considerably impact economies worldwide, Australia is still expected to experience growth. He acknowledged the warnings from economists regarding the risk of a global recession and reiterated that the consequences of the tariff decisions taken by Trump are significant and unwarranted. Regardless of these risks, the Treasury is optimistic about Australia’s economic trajectory, predicting growth is likely to continue in positive ways, although the identifiable risks are substantial.