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This included a Universal Import tariff of 10% on goods imported from other countries. Canada and Mexico were exempt due to tariffs that had been previously applied to them.

57 other countries or blocks had higher tariffs applied. These included China with an additional 34% tariff and the EU with a 20% tariff. Asia was also hit hard by higher tariffs with Japan suffering a 24% tariff and Taiwan a 32% tariff.

Australia had a 10% tariff applied, the lowest of any country to which a tariff was applied. However, many of our trading partners have suffered substantial tariff imposts and this will likely impact on the Australian economy in time.

Following the US announcement, several affected countries announced retaliatory measures:

• China: Imposed a 34% tariff on all U.S. imports starting April 10, 2025.
• European Union: Expressed intentions to implement counter-tariffs on U.S. goods.
• Canada and Mexico: Announced plans for retaliatory tariffs on American products. Canada has already applied tariffs on some US goods.

The magnitude of the tariffs applied were based on the US’s trade position with each country or block rather than the magnitude of any tariffs applied by a country on US goods.

To avoid tariffs, companies would need to manufacture goods in the USA. As supply chains are complex and global, changing supply chains will take years in many cases. In deciding what to do about their supply chains, companies need to make a calculation as to whether the tariffs will continue to apply throughout President Trump’s term and be maintained by future administrations.

The tariffs are likely to have an inflationary impact in the USA and impact the competitiveness of the affected economies.

Market reactions

Equity markets reacted to the tariffs announcements negatively with further falls following the announcements of retaliatory measures.

Since the announcement most major equity markets including the Australian equity market have fallen by more than 10%. More falls are currently expected. The Australian dollar has also fallen by around 5% against the US dollar.

Outlook

It is very difficult to predict what will happen in markets from here. Stocks are now materially cheaper than they were at the start of the year. On the other hand, erratic policy making in the US has, and continues to do damage to the global economy and company earnings. Further escalation and indeed even a continuation of current policy would result in further damage and the likelihood of recession materially increasing.

The outlook is difficult because it depends so much on the actions of one man, President Trump, and his interactions with other world powers. The pressure to roll back the tariffs is increasing all the time and could be done in a face saving manner quite quickly. Any hint that tariffs might be rolled back by a “great deal” would likely see markets retrace their steps. We expect this to be the case at some point, when is more difficult to say.

What to do

At such times it is generally wise to adhere to your investment strategy and to remember that successful investing requires a consistent application of strategy, patience and a longer term timeframe.