How Trump's tariffs could impact Australia's economy and property market

The re-election of Donald Trump as U.S. President has ignited discussions about his trade policies, particularly the threat and implementation of new tariffs. These measures, designed to protect domestic industries, could have significant ripple effects on global economies, including Australia's. In this article, we'll explore what tariffs are and how Trump's latest tariffs might influence Australia's economy and the housing market.

What are tariffs?

Tariffs are taxes imposed by governments on imported goods and services. By increasing the cost of foreign products, tariffs aim to protect domestic industries from overseas competition and generate government revenue. However, while they can shield local jobs and businesses, tariffs often lead to higher prices for consumers.

How? Tariffs are initially paid by importers, who are the businesses bringing goods into the country. However, while importers pay the tax upfront, they often pass the added cost onto consumers and businesses further down the supply chain.

Trump touts tariffs against Australia

In early February 2025, Trump announced that his government would be implementing 25% tariffs on steel imports and 10% tariffs on aluminium imports to the United States – with no exceptions – effective from Wednesday March 12, 2025. 

This move eliminated numerous exemptions previously granted by both his administration and that of his predecessor, Joe Biden. The new policy also introduced stringent requirements for steel to be "melted and poured" and aluminium to be "smelted and cast" within North America, aiming to prevent countries like Russia and China from circumventing existing tariffs.

Deputy Prime Minister Richard Marles argues that Australian metals boost U.S. jobs and supply chains and that Trump’s proposed tariffs could hurt Australian exports, despite them supporting key U.S. industries like construction, aerospace, and manufacturing. 

However, in a proclamation released shortly after the tariffs were announced , the White House accused the Australian government of breaking a promise to restrict aluminium exports – seemingly providing justification for the tariffs.

“The volume of US imports of primary aluminium from Australia has also surged and in 2024 was approximately 103% higher than the average volume for 2015 through 2017."

“Australia has disregarded its verbal commitment to voluntarily restrain aluminium exports to a reasonable level.”

– White House proclamation on tariffs, February 11 2025

Diplomatic efforts by Australian officials, including Ambassador Kevin Rudd, have been unsuccessful in obtaining exemptions from these tariffs. Complicating matters, former Prime Minister Malcolm Turnbull publicly criticised Trump's international conduct, leading to a sharp rebuke from the President, who labeled Turnbull a "weak and ineffective leader". This exchange may have further strained relations and diminished Australia's hopes for tariff exemptions.

How will Trump’s tariffs affect Australia’s economy?

Trump's recent tariff announcements could affect Australia's economy in several ways:

1. Higher interest rates and mortgage costs: The introduction of tariffs can lead to increased inflation as the cost of imported goods rises. In response, central banks, including the Reserve Bank of Australia (RBA), may consider raising interest rates to control inflation. Higher interest rates result in increased mortgage repayments, making homeownership more expensive for Australians and potentially dampening demand in the housing market.
2. Impact on Australian trade and exports: Australia's economy relies heavily on exports, particularly commodities like coal, iron ore, and natural gas. If Trump's tariffs escalate trade tensions, especially with major trading partners like China, Australian exports could suffer. A slowdown in these industries could lead to job losses and reduced economic growth, affecting consumer confidence and the housing market.
3. Global economic uncertainty: The implementation of significant tariffs can create uncertainty in the global economy, leading to volatile financial markets and reduced consumer confidence. During such periods, individuals may postpone major financial decisions, including purchasing property, which could lead to a housing market slowdown.

How will tariffs affect Australia's property market?

The aforementioned economic factors could impact Australia's housing market in a few ways:

Short-term market hesitancy

As proffered above, if inflation rises, the RBA may be inclined to raise interest rates – leading to higher borrowing costs for both new and existing mortgage holders. This may cause potential buyers and investors to adopt a more cautious approach, potentially reducing demand and slowing Australia's property price growth.

Increased construction costs 

Australia is already dealing with a housing shortage, and rising construction costs will only make things worse. A lot of building materials, like steel, timber, and electrical gear, come from overseas. If tariffs disrupt supply chains and push up prices, developers might have to put projects on hold or scrap them altogether. With fewer new homes being built, demand for the ones already on the market could go through the roof, driving prices higher. That could make it even tougher for first-home buyers to get in.

Long-term cooling of property prices

Prolonged economic challenges resulting from sustained tariffs could lead to a more significant downturn in the housing market, with potential declines in property values, particularly in regions heavily reliant on affected industries.

Staying informed and prepared

While the full impact of Trump's new tariffs remains uncertain, it's crucial for those involved in Australia's housing market to stay informed and consider these potential economic shifts when making decisions. Consulting with financial and property advisors and keeping abreast of global economic developments can help navigate these challenging times.

When diving into the property market, comparing home loans and doing your research is more important than ever, especially with the uncertainty tariffs can bring. Take the time to shop around, assess interest rates, and consider the long-term costs of different loans.