Interested in learning more about the recent US tariff announcements and how they’re impacting global share markets? Here we take you on a deeper dive into what has been happening.
What are tariffs?
Tariffs are a tax imposed by governments on imported goods, often used as a tool to protect a country’s industries by making these imported goods more expensive to favour locally made products. The additional cost is often passed onto customers which can increase prices and cause inflation.
What’s happened?
The US administration implemented or increased a range of tariffs across February and March, focusing largely on US imports from Canada, China and Mexico. All aluminium and steel exporters to the US, including Australia, had 25% tariffs imposed on these goods. These “trade wars” have unsettled global markets as pricing impacts flow through to companies, countries and share markets.
More recently on 2 April, the US Government announced their “liberation day” with more tariff news. These ‘reciprocal’ tariff announcements were further reaching than many had anticipated. Given the potential for these far-reaching tariffs to cause price rises and impact economic growth and interest rates the result has been widespread uncertainty across global markets.
Key tariffs
Announcements influencing markets include:
- A baseline tariff of 10% on all imports to the US.
- Higher country specific tariffs paid by US importers for goods including from China (34%), the EU (20%) and Canada (25%).
- Tariffs on specific goods and sectors including steel and aluminium (25%) and vehicles and vehicle parts (25%).
How does this affect Australia?
- The baseline 10% tariff is on all imports from Australia which is also the lowest rate announced globally.
- The tariffs on all vehicle imports of 25% and a tariff on all aluminium and steel imports of 25% will affect Australian exporters, although Australia only ships around 5% of our total exports to the US.
How does this affect investment markets and super?
- Although some tariffs have already started, questions remain on whether they will all be implemented and when. This is a key driver of ongoing uncertainty.
- Increased uncertainty can reduce consumer confidence which in turn can lead to lower household spending on goods and services.
- With less spending by consumers and businesses, US economic growth may stall.
- While US growth may fall, inflation may also rise due to the higher prices from the tariffs.
- This is why share markets in the US and globally have reacted badly to the news.
- The impact for Australia may be that it increases the chance the Reserve Bank of Australia cuts interest rates again in May. Markets are now expecting multiple rate cuts by the end of 2025 which would bring some relief to mortgage holders.
- The risks are changing constantly as the news evolves and are being closely monitored by our investment team.
- Changes in investment prices change the value of your super account. Markets go up and down all the time and your super will do the same.
- We have been through an unusual period in recent years where share markets have been only trending upwards, but it is normal for markets to experience drawdowns from time to time.
As long-term investors, we’re cutting through the market noise…
As we head through an uncertain 2025, it’s worthwhile remembering:
- Market volatility creates buying opportunities at the right price
- Super is generally a very long-term investment – it’s expected that share markets often go up and down in the short term, but they are likely to deliver strong growth over the long term.
Rest is watching and analysing the tariff news closely and managing our portfolios to ensure they are well-positioned for this period of uncertainty. We believe that the tariff headlines will continue and while uncertainty remains high, volatility is likely to remain in investment markets for some time. In a challenging environment diversification can be key, with different and varied sources contributing to keep our diversified portfolio returns more stable.
If you’d like to know more about super, markets and volatility, you can learn more about it in our article about why super balances go up and down.
Want to stay in the know? Be sure to read our most recent quarterly market update for more details.