📈What does Trump’s tariffs mean for the global economy? - March 2025 📈

Donald Trump’s return to presidency has caused the re-emergence of tariffs as a significant concern that is certain to impact both the American domestic economy and the global economy, including Australia.

On the 27th of February 2025, President Trump announced that the United States would levy a 25% tariff on Canadian and Mexican goods, effective from the 4th of March. Trump justified these tariffs by citing protection of domestic employment, halting illegal immigration, and combating fentanyl trade, though they primarily serve as protectionist economic measures. However, Canada and Mexico have both signalled their intentions of retaliatory measures.

Trump has also implemented 20% tariffs on Chinese imports, citing economic protectionism and national security concerns, including the fentanyl trade. This has raised significant concerns in the global economy, as China’s likely retaliation—similar to the 2018 US-China Trade War—could slow global growth and drive-up inflation.

Trump has additionally levied a 25% tariff on all aluminium and steel goods, including Australian imports. The US, the world’s largest steel importer, implemented this measure to protect domestic steelmakers, which will raise steel prices and cause increased inflation. However, Australia exports over $250 million worth of steel and aluminium to the US annually and thus the tariffs threaten steel and aluminium industries directly and have the potential to harm other sectors such as manufacturing due to increased production costs.

Mutual tariffs between the US and China could also disrupt global supply chains, particularly those involving Australia, leading to higher costs and supply delays. Moreover, rising trade tensions and uncertainty globally may also weaken consumer confidence leading to heightened currency volatility. Additionally, as the US tariff policy raises international trade costs and decreases product demand, foreign businesses might seek alternative markets like Australia to ‘dump’ excess stock, resulting in the need for protectionism.

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