Five ways Trump's tariffs will impact you
Starting August 1, US trading partners faced a wave of fresh levies.
US President Donald Trump signed in higher rates for many countries under a new executive order, but so far has left the original baseline tariffs at 10 per cent.
Australia does not have an additional 'reciprocal tariff' and only faces the base rate.
Australia's tariff rate will remain at the baseline of 10% as US President Donald Trump announced an increase for dozens of economies around the world.
AMP chief economist Shane Oliver said while Australia would not be directly impacted, there would be second order impacts.
'It is good news for Australian companies but the threat to global growth remains significant,' Dr Oliver said.
'The average tariff rate is 20 per cent …. well up from the two to three per cent tariff going to the US at the start of the year.
'There is going to be a hit to the US economic growth and global growth as there is a big increase compared to last year.'
This slowdown is the biggest threat to the Australian economy.
Interest rate
In a win for mortgage holders and a loss for savers, the fallout from Trump's tariffs could see interest rates cut further than previously anticipated.
Dr Oliver said on the back of slowing economic growth households with a mortgage could benefit from lower rates.
'It won't push prices up in Australia …. if anything, the weaker economic growth environment that might unfold could mean less inflation,' he told NewsWire.
'But there is this perverse thing because of the uncertainty imposed on global growth.
'It could mean lower than otherwise interest rates and households with mortgages will benefit from that.' The cash rate could fall due to the tariffs impact. NewsWire / Nicholas Eagar Credit: NewsWire
The RBA minutes from July showed while interest rates were kept on hold, the board was already debating the impact of Trump's tariffs.
The minority in favour of a cut argued that US tariff policy would be a drag on future global economic growth, Australia's economy is subdued, household spending was weak and the economy lost momentum.
'Uncertainty in the world economy remained pronounced and the material increase in US tariffs – even if not as extreme as had been announced in early April – would be a drag on future growth abroad, and thereby domestic economic activity and inflation,' the minutes of the RBA's monetary policy meeting said.
Jobs market
While interest rate falls could help mortgage holders, the same economic fallout could smash the Australian jobs market.
In its latest release of jobs data, the ABS revealed Australia's unemployment rate jumped to 4.3 per cent — its highest level since the post pandemic recovery.
Still, it remains lower than the long term average. The second order impacts could see Australians lose jobs. NewsWire / David Crosling Credit: News Corp Australia
Dr Oliver also said Australians might find the overall economic market tougher in the foreseeable future, which would impact jobs.
'If global growth is weaker that means less demand for our exports, less national income which could adversely affect economic growth in Australia, which could mean the jobs market may not be as strong as it has been,' he said.
'It might be a tougher economic environment generally for Australians meaning it's a little bit harder to get a job.'
Superannuation
Investments in shares and superannuation are tipped to be more volatile, although it is unlikely to see the same dramatic drop as the post 'Liberation day falls'.
When the tariffs were first announced on April 7, the ASX 200 wiped almost $110bn off as it fell by 4.2 per cent.
The market eventually fell to a low point of 7169 points before rallying 22 per cent to the end of July.
IG market analyst Tony Sycamore said currently the market reaction was 'subdued' to the tariffs, with investors learning tariffs could be negotiated.
'The combination of these factors has kept market volatility low at this point of time,' Mr Sycamore said.
'What could change this situation, is retaliatory tariffs from impacted countries, which in turn could lead to higher tariffs from the US than the ones announced this morning.' Australia's meat has so far been the surprising winner from the tariff fallout. NewsWire / Nikki Short Credit: News Corp Australia
Meat and livestock
Australian beef producers are so far the surprising winner out of Mr Trump's crackdown on imports, as limited stock and a lack of supply sees Australia emerge as the last man standing.
Commonwealth Bank sustainable and agricultural economist Dennis Voznesenski previously told NewsWire strong demand out of the US would continue to support new all-time highs.
'The US has largely four sources to import beef from abroad, being Mexico, Canada, Brazil and Australia,' Mr Voznesenski said.
'Mexico has a flesh eating bacteria called new age screw worm with the US closing the border to Mexico … Canada exports to the US are down 25 per cent from last year as they rebuild stock and as of August 1 President Trump plans to put a 50 per cent tariff on Brazil.'
The economist said US farmers currently had a multiple-decade low supply of beef, meaning they will need to continue to export from other countries.
'Typically with tariffs the objective is to the onshore industry. With some products you can restart quickly, but with cattle it's just not how it works, ' Mr Voznesenski said.
Buying medicines
Australians as a whole could be paying more for medicines as the US President took aim at 'foreign freeloading nations.'
In a group, which alluded to Australia's pharmaceutical benefit schemes, Mr Trump issued a letter to the bosses of 17 drug firms on Thursday demanding they extend 'most favoured nation' pricing to the US. The price of drugs could increase. NewsWire / Martin Ollman Credit: NCA NewsWire
'Domestic MFN pricing will require you, and all manufacturers, to negotiate harder with foreign freeloading nations,' Mr Trump wrote in the letters.
'US trade policy will endeavour to support this. However, increased revenues abroad must be repatriated to lower drug prices for American patients and taxpayers through an explicit agreement with the United States.'
While pointing out the full impact was currently unknown, Dr Oliver said it was conceivable individual Australians or the government would have to pay more for medicines.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
AU Financial Review
a few seconds ago
- AU Financial Review
Life's better as a big fish: Pokies company's bid for super's billions
Australia's $4.1 trillion superannuation sector has to be one of the best things about the country's equity capital markets. Super funds own nearly half the Australian equities market and have been buying another $7 billion of shares every three months.
West Australian
a few seconds ago
- West Australian
ANZ stuns homebuyers with hike in mortgage rates for digital bank customers ahead of expected RBA cut
A big four bank has stunned prospective homebuyers by hiking mortgage rates — just days before the Reserve Bank is expected to deliver a third round of relief for struggling households. ANZ dropped the bombshell on Thursday, revealing its digital bank ANZ Plus would add 0.16 percentage points to its owner-occupier loans, taking the rate to 5.75 per cent. Investment loans will rise by the same margin to 6.05 per cent. The move flies in the face of a near-certain cut in the official cash rate due to come early next week after the RBA holds its two-day meeting. Last week's quarterly inflation data showed the closely-watched measure of underlying consumer prices — which strips out any volatility in movements — had dropped to 2.7 per cent, well within the central bank's 2 to 3 per cent target range. The RBA wrong-footed many investors last month by keeping borrowing costs unchanged at 3.85 per cent against widespread bets on a cut. Governor Michele Bullock later said the board wanted to see the quarterly consumer price data for confirmation that pressures were abating. But the resilient job market could still derail further relief. ANZ's move to lift rates came as rival NAB jumped early and lowered fixed mortgage rates. It announced anyone willing to lock in their mortgage rate for one or two years could get a 0.25 percentage-point reduction on the previous rate. The bank has knocked 0.1 percentage points off the interest rate for three-to-five-year fixed mortgages. NAB's reductions apply to investment properties as well. A 25 basis-point reduction in mortgage rates will save a household $90 a month on repayments if they are an owner-occupier, paying principal and interest, with a $600,000 debt and 25 years left on the loan. A mortgage holder owing $1 million would save $150 a month with a quarter-point cut. A host of smaller lenders moved quicker than the big four in cutting rate offers. Multiple lenders outside the big four have their lowest offerings at 4.94 per cent for two and three years. 'While an RBA cut looks to be a near-certainty, if you've got a mortgage, don't bank on any extra cash until it lands in your bank account,' Canstar data insights director Sally Tindall Tindall said this week. 'The RBA has shown it doesn't dance to the beat of market expectations — it's the one steering the ship. 'Banks are also at the helm of your mortgage and while we expect the big banks to step up to the plate and pass the next cut on in full, there's no guarantee every lender will do this.' ANZ, Commonwealth Bank, NAB and Westpac are all tipping a 25 basis-point cut from the RBA next week. The Australian sharemarket indicates a 51 per cent chance the RBA will make a 0.5 percentage point cut.
Perth Now
a few seconds ago
- Perth Now
Australian shares ease back from record highs
Australia's share market is taking a breather after setting records but managed to hold onto most of its recent surge. The S&P/ASX200 edged 10.2 points lower, or down 0.12 per cent, to 8,833.5 in Thursday morning trade, while the broader All Ordinaries lost 7.8 points, or 0.09 per cent, to 9,103.3. The local bourse hit new all-time highs on Wednesday on expectations of cheaper borrowing costs and commodity price strength supporting the materials sector. "The steadiness in precious metals suggests investors remain risk-averse, while the calm overall tone points to traders avoiding extremes despite ongoing macro uncertainty," Moomoo market strategist Paco Chow said. "If investor bullishness over corporate earnings and rates cuts continues, we could see Australia become the ultimate 'value play' in the coming weeks." Six of 11 local sectors were trading lower by midday with industrials, financials and energy stocks leading losses but none down more than 0.3 per cent. The consumer staples and discretionary sectors, along with real estate and IT stocks were at the other end of the scale, each up between 0.3 per cent and 0.4 per cent. Three of the big four banks were trading lower with CBA having sunk 0.3 per cent to $178.63, while ANZ eked a 0.4 per cent lift to $30.98. AMP overcame an early dip to lift more than one per cent after posting a nearly five per cent drop in interim net profit, as chief executive Alexis George touted strong cashflow in its wealth business and decreasing costs at an earnings briefing. Australia's materials sector eased by less than 0.2 per cent, as large cap iron ore miners BHP, Fortescue and Rio Tinto faded from recent strength, but gold miners continued to rally with Westgold Resources a top performer and up more than six per cent. Gold futures continue to edge higher to trade at $US3,445 ($A5,292) an ounce, less than two per cent from all-time highs. Energy stocks fell 0.4 per cent by lunchtime, tracking with a dip in oil prices overnight after the White House flagged progress on potential talks with Russia over an end to the Ukraine war. Exchange operator ASX Limited has sunk more than seven per cent after tagging TPG Telecom in an announcement relating to TPG Capital, a private equity firm not listed on the Australian exchange. The bungle temporarily wiped more than $400 million from the telco's market cap. Investment giant UBS has reiterated its "sell" rating on the beleaguered market operator, which is also under pressure from regulators over the long-delayed replacement of its settlement system. The Australian dollar is buying 65.11 US cents, up from 64.88 US cents at Wednesday's ASX close.
