IMF Flags $13 Billion Tariff Blow, Australia Plays It Down

IMF has cut Australia’s 2025 growth forecast to 1.6 percent, down from 2.1 percent.

Beef is displayed for sale at a butcher shop in Melbourne, Australia on April 4, 2025. Asanka Ratnayake/Getty Images

Australia is bracing for a $13 billion (US$8.3 billion) economic hit from President Donald Trump’s tariff blitz, according to the International Monetary Fund (IMF).

In its April 22 World Economic Outlook, the IMF downgraded Australia’s growth forecast for 2025 to just 1.6 percent—down from 2.1 percent in January.

Inflation is now expected to hit 2.5 percent, half a point above earlier estimates.

Chief Economist Pierre-Olivier Gourinchas said the post-war trading system is fraying and tariff rates are climbing to levels not seen in a century.

And Australia, caught in the middle of the trade war between the United States and China, won’t escape the fallout, the IMF warns.

Did the Treasury Play it Down?

Just weeks before the IMF report, Treasury called the impact of tariffs “modest.” Its latest modelling predicts a 0.2 percent hit to GDP by the end of 2025, and only 0.1 percent by 2030.

Officials cited Australia’s strong fundamentals: a floating exchange rate, a flexible labour market, and diversified exports. These, they argue, will absorb much of the impact.

Treasury even predicted the United States would suffer more from its own tariffs.

“United States GDP is expected to decline significantly,” the report stated, pointing to rising import costs.

Treasurer Jim Chalmers backed the optimistic view.

“Our economy is resilient, but not immune,” he said. “We’re making sure Australians benefit from change—not get crushed by it.”

The Reserve Bank of Australia (RBA) echoed the low-key response.

Governor Michele Bullock said the financial system is strong and positioned to handle global shocks.

Speaking at a Melbourne event, she said that current conditions don’t resemble a crisis.

“This isn’t like the 2008 meltdown,” she said.

The RBA is keeping in close contact with other regulators, both at home and abroad.

There are no signs yet of monetary policy shifts, but the central bank is watching developments closely.

Still, economists warn that the calm could be misleading.

Asia the Real Threat

Only about 5 percent of Australia’s exports go to the United States, which limits direct exposure. But experts say the indirect risks are bigger—and growing.

Veteran economist Saul Eslake said the danger lies in Asia. If countries like China, Japan, or Indonesia lose U.S. market access, their demand for Australian goods could fall.

“If Asian exports drop, they’ll scale back orders from Australia,” Eslake said. “That’s where the second-round effects start to bite.”

Economist John Humphreys agreed.

“Trump’s tariffs are bad policy,” he said. “But we’re still in a wait-and-see phase. Courts, Congress, and global negotiations could all shift the outcome.”

Meanwhile, Washington is going full throttle.

Trump’s tariffs on Chinese goods have jumped to 145 percent, while Beijing retaliated with 125 percent tariffs on U.S. exports.

But the United States isn’t just turning inward—it’s also cutting deals.

Since Trump’s April 2 announcement, over 75 countries have reached out to negotiate. The White House is racing to reshape global trade on its own terms.

Japan’s top trade envoy visited Washington last week and Trump called the talks “very productive.” Italian Prime Minister Giorgia Meloni also visited, expressing confidence in a new U.S.-EU deal.

“There are offers on the table with 15 countries,” said U.S. economic adviser Kevin Hassett.

He didn’t name them, but reports suggest Japan and Indonesia are offering to boost food and commodity imports from the United States.