Two big ticket items are shaping the economic landscape: Australia’s Federal Election on May 3, and a more unpredictable development – sweeping US tariffs under President Trump.

The election will influence domestic policy settings. But it’s the US tariffs that area already rippling through global markets, with real potential to spill into Australia’s economy – and our property sector.

What’s happening with the US tariffs? 

President Trump has announced the most dramatic shift in US trade policy in decades: a blanket 10% tariff on most imports, with much steeper ‘reciprocal’ tariffs for countries running large trade surpluses with the US. Effectively, this amounts to a 2.4% of GDP tax hike of the US economy.

Markets reacted fast. US GDP growth forecasts for 2025 have been cut from 1.3% to 0.6%. Inflation is now expected to hit 4%, unemployment is forecast to rise, and both business confidence and household spending are under pressure. A US recession is now firmly on the radar. 

China has taken the biggest hit. Some of its goods are now facing a 54% tariff, with Beijing responding in kind – 34% tariffs on US goods, followed by export controls and, more recently, a 125% tax on selected items. This was in direct response to the US lifting certain tariffs to 145%. 

China has called the tariffs “economically unsound” and lodged a complaint with the WTO. A 90-day pause for negotiations is now in place – but China isn’t participating. The outlook remains uncertain. 

What does this mean for Australia? 

Australia wasn’t exempt – we’ve been hit with the baseline 10% tariff. But with only around 4–5% of our exports heading to the US, the direct impact is limited – just a 0.1–0.2% drag on GDP. 

The real risk lies in the second-order effects. If China and other key trading partners in Asia slow down under the weight of these tariffs, their demand for Australian exports – particularly resources and pharmaceuticals – could shrink. That’s bad news for WA, and a broader drag on business and consumer confidence nationwide. 

Where do interest rates fit in? 

To cushion against these global headwinds, the RBA is widely expected to cut rates in May. Markets are pricing in up to four rate cuts across 2025 – a signal that the tariffs are likely to stick around for a while. 

Lower interest rates should support housing and consumer activity – but only if confidence holds up. That’s far from guaranteed in the current climate. 

Financial markets are already reacting. Global equities have taken a hit, and the ASX has followed suit. The Australian dollar briefly dropped below 60 US cents – a five-year low – reflecting broader concerns about global stability. 

What happens next? 

It all depends on how long the tariff standoff lasts. If this is a short-term bargaining chip, we could see a rebound in sentiment and market activity. But if it drags on, the risk of slower global growth – and a weaker outlook for Australia – grows. 

That said, economies adapt. Supply chains shift. New trade deals emerge. But there’s no sugar-coating it: tariffs are inflationary and inefficient. They raise prices, reduce productivity, and erode economic activity. 

Take a US-branded car built in China. If it now has to be fully manufactured in the US, costs skyrocket – wages, supply chains, land, warehousing.  

This article references findings from our April 2025 Economic and Residential Property Market Report. Read the full report here.