The US and China's neck-and-neck battle over trade disputes may have come to a standstill — at least for now. But market players say the direct impact on Australia's economy and property markets may be muted.
Earlier Monday morning US time, the US and China said in a joint statement that they would temporarily reduce tariffs each country has imposed on each other for a period of 90 days as they renegotiated. That means the US will lower its 145% tariffs on Chinese imports down to 30%, while China would bring down its fees on American goods from 125% to 10%.
But monetary policy and domestic consumer confidence are more likely to move the market — especially the property sector — experts say.
"Lower inflation and the prospect of a cut in interest rates next week provides more of a boost to consumer confidence than anything overseas," Hobart-based economist Saul Eslake told Australian Broker.
"The biggest risk to Australia out of all of this was not the tariffs that the US was proposing to impose on imports of Australian stuff. It was the indirect effects of the tariffs that they were proposing to impose on China, which might have affected China's appetite for our iron or coal and natural gas and other products," Eslake continued. "So that threat has been postponed for at least 90 days, and hopefully during the next 90 days, both sides will agree to dial down the temperature in a lasting way. That's not to say, of course, there won't be some lasting damage."
US President Donald Trump made good on his plans to implement tariffs shortly after taking office at the start of the year, his second stint as the world leader. The US president then upped the ante in early April when he unveiled a sweeping round of tariffs — dubbed the Liberation Day tariffs — which tacked on a blanket 10% import levy to all countries globally, including Australia. The news sent markets plummeting globally, while simultaneously causing recessionary fears to surge. The tensions between the US and China quickly escalated, with the both superpowers imposing triple-digit trade fees.
The recent truce between the two superpowers removed a layer of global uncertainty, causing markets around the world to rise. And while the ongoing tariff tensions may have caused a short-term dip in retail spending, it may also drive the Reserve Bank of Australia (RBA) to consider cutting interest rates as a form of economic stimulus to counter potential trade-related headwinds.
Meanwhile, brokers say 2025 is busier than ever, thanks in part to February's rate cut, and the market's wide-held belief that the central will slash interest rates once more at its May 19 to 20 meeting on monetary policy. Steady employment rates and the Labor party's recent re-election promises on housing reform are also fuelling the market. In addition, all four of Australia's Big Four banks are anticipating further rate reductions in 2025.
"Certainly, global economic growth will take at least some hit because of the US’s travails. Yet for countries other than the US — including Australia — the current situation also presents opportunities," said Luci Ellis, chief economist at Westpac Group.
