Any hopes that tariffs levelled by the new Trump administration would not impact Australia have been dashed. President Donald Trump is due on February 11 to reveal new levies of 25 per cent on steel, iron and aluminium imports into the US. Trump promised in the run-up to the election to increase tariffs, focusing on goods from China, Mexico and Canada coming into the US.  If implemented, Trump’s move means Australia faces increased tariffs on its steel, iron and aluminium exports despite an existing trade agreement between the two countries.  “A tariff on Australian goods, despite us having a long-standing free trade agreement with the United States and agreements around exemptions for Australian produced goods during the previous Trump administration, would be a slap in the face for Australian industry and our mutually beneficial economic and security arrangement,” Australia Industry Group chief executive Innes Willox says.  So, what does that mean for a property industry still coping with the fallout from  supply chain disruptions sparked by the pandemic, shipping line disruptions and political turmoil as well as a tough economic situation at home? ▲ Trump says he will announce 25 per cent tariffs on all iron, steel and aluminium imports into the US. Not the first time This isn’t the first time a Trump administration has raised tariffs on Australian goods.  In 2018, his administration set a 25 per cent tariff on Australian steel and iron, and a 10 per cent tariff on aluminium. At the time, the Federal Government brokered a deal with the US Government to allow Western Australia-based BlueScope, then our sole steel exporter , to export 300,000 tonnes of steel to its California-based subsidiary without paying a levy.  In 2023, Australia shipped $378 million of steel and iron to the US, and $438 million of aluminium exports was shipped to the US in 2024, according to the United Nations Comtrade Database. BlueScope has since opened plants in the US and has said it plans to weather the storm. The thinking behind tariffs on foreign goods is that it subsidise domestic goods, reducing imports and increasing net exports. But, Oxford Economics chief US economist Ryan Sweet, says the incentive applies to all countries. “Each country’s best response is to employ tariffs, resulting in a suboptimal outcome for all,” Sweet says.  He is most worried about the potential for escalation.  “Tariffs are a slippery slope,” Sweet says.  “Trump’s tariff announcement included an escalation clause that would increase US tariffs on countries that retaliated.” Retaliation would mean a trade war, the possibility of which has already been raised by German Chancellor Olaf Scholz.  Property a trade war casualty? The nature of such a trade war may well be the aspect the property industry needs to consider most deeply. But it isn’t necessarily the end of the world.  AMP chief economist Dr Shane Oliver thinks the impact for Australia’s property sector may be minimal.  ▲ Construction workers in the US. “To be honest I only see a minor impact on the property market,” Oliver says.  He says how intense the trade war gets may determine whether property prices increase or interest rates drop.  “The trade war for Australia means slightly lower economic growth and is ambiguous for inflation so should mean lower than otherwise interest rates which should be a small positive for the property market,” Oliver says.  “The main risk would be if the trade war escalates so badly that it knocks the economy into recession, causing much higher unemployment and forced property sales, which would be bad news for property prices despite lower interest rates.” Jitters around interest rates Some experts are concerned that the tariffs and a trade war will impact interest rates despite recent predictions that a cut by the Reserve Bank of Australia (RBA) is coming, driving up consumer spending and providing some breathing room in the Australian economy.  It’s one of the reasons Ray White chief economist Nerida Conisbee is keeping an eye on China’s reaction. “The real challenge comes from the impact of tariffs on China,” Conisbee says.  Australia currently exports 85 per cent of its iron ore to China while China exports less than 1 per cent of its steel products to the US. Conisbee believes that China would initially sell goods to Australia more cheaply to make up for the drop in exports to the US but that this would be temporary.  “China’s rising inflation—and to a lesser extent the US—will eventually be passed on as increased cost of goods for Australians,” Conisbee says.  “Australia’s inflation rate is currently coming down and is potentially low enough for the RBA to cut interest rates later this month.” If the RBA increases interest rates due to a trade war, Conisbee says, it won’t help stop the underlying cause of the inflation. “Australian rate rises will not stop a trade war,” Conisbee says.  ▲ Ray White chief economist Nerida Conisbee says it is important to keep an eye on how China reacts to the tariffs. Jury’s out on supply chain Her worry about China also raises another concern: a potential increase in the cost of materials.  Oliver is not as concerned.  “It’s possible China responds with more policy stimulus which it’s been keeping in reserve to support its economy, but it’s also at risk if Trump ramps up the China tariff to 50 to 60 per cent as he has threatened in the past,” Oliver says. But Oliver says we may end up exporting less to China as it adjusts its strategy. “For Australia, the direct impact of Trump’s tariffs should be minor, but it is vulnerable to an indirect impact which could result from a fall in global trade and less demand for our raw materials from China,” Oliver says.  He also claims that any concern about supply chain disruptions will be offset by a drop in demand and cheaper goods coming through to Australia.  “RBA Deputy Governor Hauser argued that the impact on inflation from US tariffs is ambiguous with disrupted global supply chains offset by somewhat lower demand and potentially more cheaper goods finding their way to Australia,” Oliver says. Ledlin director Oscar Ledlin doesn’t agree. “Supply chain and logistics disruptions are a likely consequence of the tariffs,” Ledlin says. “If the tariffs target countries like China, a major exporter of steel, iron and aluminium, then global supply shrinks, driving prices up.  “While Australia produces our own raw materials, we are still part of a wider global market.  “If global demand for non-tariffed sources of these materials increases, local prices will follow.” ▲ Ledlin director Oscar Ledlin is certain that the tariffs will increase the cost of construction materials. As well, Ledlin says that suppliers formerly producing for the US market “will likely cut back on production and, rather than oversupply, they’ll reduce the supply while global demand remains unchanged, driving price increases.” Shipping costs and currency exchange rates are also on his mind. “Broader trade tensions have historically impacted global oil prices,” Ledlin says.  “Paired with redirection and changes to global shipping routes, increased freight costs are a foreseeable problem for 2025.  “As the global markets react to trade tensions, currencies fluctuate.  “If the Australian dollar weakens against the US Dollar, the cost of imported materials from even non-tariffed countries increases.” Ray White capital research head Luke Dixon says US-based companies working on Australian projects are likely to continue unless they are exposed to rising costs. “The residential build-to-rent sector may see lower US investment interest, given how exposed it is to construction costs,” Dixon says.  “Companies like Greystar have made significant investments here in large scale housing projects, which may become less feasible if material costs skyrocket.” Where to from here Australian Industry Group’s Willox says the Government must intervene.  “It is now up to the Federal Government to quickly step in and protect Australian industry and producers from being caught up in a rapidly escalating global trade war,” Willox says. Oliver says that things remain uncertain as long as more announcements are on the horizon. “But it looks like we have further to go on the trade war front with likely more tariff announcements on other countries and products ahead,” Oliver says. “Which means ongoing uncertainty for a while yet.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.
