Treasury Predicts Impact of Trump Tariffs on Australian Economy Will Be ‘Modest’

Meanwhile, the Australian Treasury said China’s impact will be ’significant.’

Australian Labor Treasurer Jim Chalmers at Parliament House in Canberra, Australia on March 24, 2025. AAP Image/Lukas Coch

Treasurer Jim Chalmers has released analysis predicting the impact of Trump’s tariffs on the Australian economy to be “modest.”

Chalmers asked the Treasury secretary to update modelling in response to the “Liberation Day” reciprocal tariffs on all goods imported into the United States.

Australia will be subject to a 10 percent tariff on all imports, while steel, aluminum and automotive products will receive a 25 percent tariff.

The analysis comes as Australian markets took a hit on April 7, with the benchmark S&P/ASX 200 index sliding more than 4 percent.  However, in earlier trade the ASX 200 slid 6 percent before bouncing back. The Australian dollar has also dropped to 60 US cents

“The effects on the Australian economy are expected to be modest, however, some parts of the agriculture, energy, mining and durable manufacturing sectors will be more adversely affected than others,” the analysis sent to The Epoch Times states.

The modelling notes that Australia’s macroeconomic policy settings including flexible exchange rate and credible inflation targeting framework would help mitigate the impacts on the economy.

“However, this modelling does not fully capture the negative impact of trade hostilities. It does not capture the impact of uncertainty, volatility in financial and economic markets, or the potential for additional trade disruptions,” Treasury added.

An aerial view of a Cosco Shipping container ship, China's largest shipping line, loaded with shipping containers in the Port Of Long Beach in Long Beach, Calif., on April 3, 2025. Mario Tama/Getty Images

While Australia has been hit with the baseline tariff, multiple nations including China, Europe, Taiwan and Switzerland faced much higher import duties.

China will be subject to a 34 percent reciprocal tariff on top of its current 20 percent tariff, taking its total hit to 54 percent.

The Australian Treasury analysis predicted the tariff changes would have a “significant impact” on the global economy.

“United States GDP is expected to decline significantly as a result of the tariff policy changes, primarily as a result of imported goods becoming more expensive,” Treasury said.

“By 2027, the level of real US GDP is estimated to be around 0.8 percent lower relative to a baseline scenario with no tariffs, while inflation is estimated to increase by around 1.4 percentage points.”

Yet U.S. Treasury Secretary Scott Bessent has pointed out on NBC that crude oil prices have plunged meaning cheaper petrol for average Americans that will actually offer relief from inflation.

“Oil prices went down 15 percent in two days, which impacts working Americans more than the stock market does. Interest rates hit their low for the year, so I’m expecting mortgage rates to pick up.”

Meanwhile, the Australian Treasury said the impacts on gross domestic product in China and other nations with high tariffs would also be “significant”

“Retaliatory actions further amplifies the impacts. GDP in China is estimated to be around 0.6 percent lower relative to a no tariff scenario, almost entirely reflecting the U.S. tariff changes,” the analysis noted.

However, Treasury reiterated the impact on the Australian economy was expected to be “more modest.”

“The impact of the U.S. tariff policy changes and announced countermeasures by China, are expected to result in a modest reduction in Australia’s output and additional price pressures, particularly in the short term.”

Treasury Predicts 0.1 Percent Decline in GDP, 0.2 Percent Inflation Bump

Treasury impacted that Australia’s real GDP would decline by 0.1 percent and inflation rise by 0.2 percent in 2025 compared to a situation with no tariffs.

“Over the medium- while the effect on inflation is temporary However, the impacts will be unevenly distributed, with trade-exposed industries including agriculture, energy, mining and durable manufacturing most affected.”

Speaking to reporters in Sydney on July 7, Treasurer Jim Chalmers highlighted the recent market volatility was being driven by the global fallout from the tariff decision.

“We are seeing very substantial volatility now in global stock markets and in our own markets as well. Today in Australia the market lost about 4 percent of value on Friday, the U.S. about 6 percent,” Chalmers said.

“What we’re seeing here is the impact of a series of bad decisions taken about tariffs. And the whole world is trying to get their head around the impacts on their own economies and the global economy as well.

Paterson Claims 10 Percent Tariffs a ‘Significant Blow’ to Exporters

Meanwhile, Coalition campaign spokesman James Paterson accused the Prime Minister Anthony Albanese of desperately trying to “play down the seriousness of these tariffs” on Australian exporters.

Paterson said, “I don’t agree and I don’t think exporters would agree either.”

“I think a 10 percent impost on their exports to the United States is a really significant blow to their businesses, and what we owe them are our best efforts to ensure the best deal possible and hopefully an exemption from these tariffs,” he said on Sky News Weekend Live.

Paterson said although the prime minister was doing a “victory lap” and claiming Australia got a great deal, “we’ve actually only got the same deal that the Islamic Republic of Iran got from the United States. That’s an authoritarian government which has threatened to assassinate President Trump." 

“We only got a deal as good as Yemen has got. That’s a country which is right now run by the Houthi terrorist organisation that President Trump ordered the bombing of a few weeks ago. So we need to secure a better deal."