Why Donald Trump’s 104 per cent tariffs on China goods will be good for Aussie consumers – but there’s a big catch

Donald Trump’s 104 per cent tariffs on China could in fact be good news for Australian consumers – but only for a short time.

The US government’s new import tariffs, coming into effect on April 9, are a response to China slapping 34 per cent duties on American goods and services.

In coming months, the retaliation could bring down consumer prices as Australia is flooded with a glut of cheap Chinese goods that would otherwise have been destined for the US, like electronic appliances and clothing.

Grattan Institute chief executive Aruna Sathanapally, an economist, said this could bring down local inflation too.

‘We’ve potentially got things that could bring down prices in terms of global trade being redirected from the US to other markets,’ she told Daily Mail Australia. 

‘Inflation has already really dropped quite dramatically over the past two years – we’re now moving into a new phase.’

But a weak Australian dollar, now trading at a new five-year low of 59 US cents, means some imports sold in Australia, like cars, could end up being more expensive, especially if they had not been originally destined for the US. 

Many Australian imports are also invoiced in US dollars even if they are manufactured in Asia.

‘The lower Australian dollar will, all other things being equal, make those imports more expensive,’ she said. 

‘It might have a different effect on different categories of goods – you might have a world where some things are cheaper and some things are more expensive because prices don’t necessarily all travel in the same direction.’

Electric vehicle prices might not even come down at all, considering former US president Joe Biden had already moved to ban Chinese cars from being sold in the American market on national security grounds. 

A slowdown in China, Australia’s biggest trading partner, also risks pushing up unemployment in Australia as a weaker mining sector undermines broader business confidence – leading to less investment and hiring. 

‘The long-term effects are bad for everybody so even if you might see a short-term correction in prices in certain categories, the global economy is going to be smaller and less efficient than it was,’ Ms Sathanapally said.

The futures market is expecting the Reserve Bank to cut rates four more times in 2025, which would take the cash rate from 4.1 per cent now to 3.1 per cent. 

‘The Reserve Bank might be looking to cut rates because otherwise there’s a risk that the economy slips into very low growth and unemployment goes up or potentially the economy slips into a recession,’ she said. 

While Treasury isn’t forecasting a recession, its Pre-Election Economic and Fiscal Outlook released this week warned the Trump tariffs were a danger to economic stability.

‘This escalation in trade hostilities has created significant economic uncertainty and exacerbates the risks to the economic and fiscal outlook,’ it said.

Home loan entrepreneur Mark Bouris, the executive chairman of Yellow Brick Road, said talk of a recession was overblown, following an election campaign trail prediction from Opposition Leader Peter Dutton.

‘I don’t know why everyone’s carrying on about recession,’ Mr Bouris told Sydney radio 2SM broadcaster Chris Smith.

‘One, it’s too early to say; two, there’s absolutely no data to indicate that there is a recession either going to happen or is about to happen or has happened.’ 

Mr Bouris said Reserve Bank deep rate cuts would most likely stop a recession.

‘If GDP starts to drop and heads to that zero territory or negative territory, mate, the Reserve Bank’s going to start responding with interest rate reductions like you’ve never seen before,’ he said.

‘That in itself would generate more excitement and more activity in the marketplace and we’ll do what we always do in Australia, when others don’t, we will avoid a recession.’

Australia hasn’t experienced a recession since the 2020 Covid lockdowns but last year’s annual growth pace of 1.3 per cent was weak by historic standards.

Treasury sees gross domestic product growth rising to 2.25 per cent in 2025-26, which would still be below the long-term average of 3 per cent.