Trade and US Tariffs: Explainer and lessons for Australia

This BCEC Federal Election 2025 Briefing Note assesses trade and US tariffs, including an explanation and learnings for Australia.

Through the imposition of trade tariffs, the US administration has fundamentally disrupted the global economic landscape, posing new challenges to economies worldwide, including Australia.

Lately, the almost daily announcements of new, reduced, or deferred tariffs have introduced massive uncertainties for governments, central banks, businesses, and investors.

This note looks to explain the economic basis for tariffs, the apparent motives and impact of the so-called ‘Liberation Day’ tariffs, the benefits of trade, the exposure of the Australian economy to tariff wars, as well as discussing potential responses.

Key insights

• Despite claims to the contrary, the US Liberation Day tariffs are not ‘reciprocal’.
• The risks to Australia from US tariffs are as much indirect as direct, via their impacts on global markets and the economies of our regional trading partners.
• Australia’s trade with China was worth $2,600 per Australian household in 2022-23, and lowered prices by 4 per cent.
• Australia’s strategy of protecting fair trade while diversifying export markets should drive payoffs in the longer term.
• There are good prospects for beef exporters to pivot to new markets on the back of US tariffs. But Australia needs to be proactive in the face of competition from Brazil as an alternative supplier of displaced trade.
• Financial markets have priced in rate cuts from the RBA in response to an expected slowdown in global economic activity from the US tariff cuts.