WEEKLY E-MAIL

23 June 2025

US-CHINA TARIFFS: A SHIFTING LANDSCAPE AND AUSTRALIA’S ECONOMIC BALANCING ACT

By Amelia Paullo

The tariff situation between the US and China continues to be a dynamic and complex issue, with significant implications for the global economy, including Australia. As of June 2025, a recent 90-day reprieve has seen both nations reduce some of their previously escalated tariffs, offering a temporary de-escalation in trade tensions. However, the underlying strategic competition and protectionist sentiments remain, ensuring continued uncertainty.

Current Tariff Landscape:

Following a period of significant tariff hikes, which at one point saw US tariffs on Chinese goods reach as high as 145%, and China’s on US imports at 125%, a temporary “deal” has seen these rates significantly reduced following recent talks between the two nations.

The US has brought tariffs on Chinese goods down to a 30% baseline (from 145%), while China has reduced its tariffs on US goods to 10% (from 125%). This 90-day pause, initiated in mid-May, aims to allow for negotiations on a broader, long-term trade deal.

However, it’s crucial to note that this is a temporary measure. Existing tariffs from previous administrations (both Trump and Biden) remain in place, and sector-specific tariffs, such as those on electric vehicles, steel, and aluminium, are still substantial. The US Court of International Trade recently enjoined, declaring unlawful and invalid, some of these fentanyl and reciprocal tariffs, but this ruling has been stopped pending appeal, meaning the tariffs largely remain in effect. The broader sentiment in both the US and China indicates a desire to reduce reliance on each other for critical inputs, suggesting that even after the 90-day period, significant tariffs are likely to persist, potentially in the range of 15-18% on average.

Impact on the Australian Economy:

Australia, a nation heavily reliant on global trade, particularly with China, finds itself in a delicate balancing act. China remains Australia’s largest trading partner, accounting for a significant portion of its exports, especially in resources like iron ore and energy.

The direct impact of the US-China tariff shifts on the Australian economy is currently estimated to be minimal. While a full-blown trade war with high tariffs would have negatively impacted global GDP and, by extension, Australia, the recent de-escalation offers a degree of relief. Economists suggest the temporary tariff reductions could add a small boost to Chinese and US economic growth, but the overall impact on Australia is considered negligible.

In essence, while the immediate impact of the latest US-China tariff adjustments on Australia appears limited, Australia’s challenge lies in navigating this complex geopolitical landscape, balancing its security alliance with the US with its vital economic relationship with China, while seeking to diversify its trade relationships where feasible.

Ongoing Market Volatility:

The US trade policies continue to cause considerable disruption and volatility in global financial markets. This uncertainty has positioned global trade as the top concern for investors worldwide.

While there have been temporary adjustments to tariffs and periods of de-escalation, the overall trade landscape remains highly fluid and unpredictable. This “storm cloud” of trade tensions continues to influence global financial markets, leading to heightened volatility and a cautious outlook.

As we’ve highlighted before, market volatility, particularly from policy shifts like these tariffs, underscores the critical need for portfolio diversification. While short-term market swings are normal, a well-diversified portfolio helps stabilise returns during uncertain periods, and we continue to encourage you to maintain a long-term perspective.

Amelia Paullo
Senior Financial Planner
SMSF Specialist Advisor™
Authorised Representative No. 1243426

If you have any questions or comments, please email me at amelia@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution.  The information here is of a generic nature, and does not take into account your investment objectives or financial needs.  No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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