Weaker export conditions, difficulties with sourcing imports, and a more uncertain business environment that is hindering new orders and investment, are among the consequences for Australian businesses of US trade policy.
The findings of the report, which was written by the Australian Industry Group, makes for “sobering reading”, according to the Group’s CEO, Innes Willox, who also commented: “The new tariffs announced by the US are arguably the greatest disruption to the global trade system in a century. While Australia has been spared some of the highest tariffs, our economy is far from immune. Some exporters will find it harder to access key markets, while impacts spreading across global supply chains will have complex impacts on all our trade-engaged industries.”
A massive series of changes has been introduced into US trade policy.
A key change is the imposition of a 10 per cent baseline tariff on most imported goods, effective 9 April 2025. “Most goods originating in Australia are subject to this tariff on import into the US,” the Australian Department of Foreign Affairs and Trade has said. It adds that the De Minimis rule has been suspended, so all goods valued at USD$800 or less are now subject to tariff rates. Steel, aluminium, automobiles, copper, copper-products, and a range of wooden products, lumber, and kitchen furniture are all among the tariffed products. And tariffs are due to rise in January 2026.
The AIG report indicates that the impact on Australia will be broad, with US tariffs most directly affecting Australian advanced manufacturers. Supply chains are being disrupted, with 47% of industrial businesses as defined by the AIG, are now experiencing disruptions.
About 42% of Australian respondents to an AIG survey have reported impacts on their export activities and 53% report impacts on their imports. A quarter of those surveyed who have not yet been impacted expect effects on imports and a third of those currently unaffected envisage impacts on the export side over the coming year.
About 25% of Australian industrial companies surveyed report no effects as yet and do not envisage future effects.
The Group notes that Australia exports about $20 billion to the US each year and these exports will now be subject to tariffs. These exports account for about 4% of Australian exports and 0.8% of Australian GDP. Commonwealth modelling suggests Australian GDP could be reduced by 0.1% in 2025 and 0.2% in 2026.
As the average effective tariff applied to US imports is about 18.6% (sources vary on the exact amount) and given that the US is the world’s largest goods marked with US$3.3 trillion of imports (accounting for about one sixth of the global total), then the effects on global trade will be profound, the AIG indicates.
The precise impact of the tariffs has not been determined as the final rates of tariffs have yet to be set. However, the Budget Lab at Yale University reckons in a 17 October 2025 statement that US real GDP growth over 2025 and 2026 will be about 0.5% percentage points lower each year owing to the new tariffs. “In the long run, the US economy is persistently -0.4% smaller, the equivalent of $125 billion annually in 2024$”.
However, the AIG believes it has identified several likely areas that could change because of the tariffs.
There could be reduced US market access and lower export revenues. Alterations in the prices of goods across the supply chain could be observed; the scale and direction will be dependent on industry-specific factors. Trade could be diverted from the US to Australia, which could increase the supply of imports and lower prices in the lower market. Such diversion could have a broad impact on the Australian market. Tariffs will likely inhibit investment, especially while policy continues to change. And, finally, businesses will need to increase trade documentation thereby increasing the compliance burden, the AIG believes.
