Investors brace for Trump tariffs in 2025, but fresh hope emerges

Hefty new taxes on US imports from various countries was a Trump election platform, but what does it mean for your shares?

These US car imports could soon face heavy tariffs. Picture: AFP

Trump tariffs will loom over financial markets in 2025 but may not be as nasty as the president-elect previously flagged.

Economists and analysts say a threatened 60 per cent tariff on Chinese exports to the US would be bad for share investors and the global economy, and this is a key reason why the incoming business-friendly president is unlikely to follow through.

Betashares chief economist David Bassanese said the net effect of tariff increases would be negative for global equity markets as they put upward pressure on inflation.

“It remains to be seen whether Trump’s bark is worse than this bite,” Mr Bassanese said.

“Trump has form in threatening major policy changes as a negotiating tactic, and the threat of large tariff increases could be just the opening salvo in a protracted set of negotiations with trading partners.

“Ultimately it seems unlikely that Trump would want to do anything that unduly hurts the US economy … his pick for Treasury Secretary is a hedge fund billionaire who likely won’t act contrary to Wall Street’s wishes.”

Tariffs on US imports could push up inflation, experts say. Picture: AFP

IG market analyst Tony Sycamore said the impact on markets would depend largely on the size of the tariffs and whether tax cuts came before the tariffs. “I feel like Trump’s ready to go this time around,” he said. “In 2016 he was probably a bit ­surprised.”

Mr Sycamore said Mr Trump’s choice of Scott Bessent at Treasury Secretary was “a good appointment” that should hopefully moderate some of the president-elect’s more aggressive policies.

“Bessent wants tariffs laid in gradually – this is a little more sedate than what we saw in the lead-up to the election,” he said.

Threats of 60 per cent tariffs on imports from China were “extreme”, he said, but he did not believe they would go that high.

“A 60 per cent tariff on China would certainly impact stockmarkets globally,” he said, adding that it would lead to trade wars, tit-for-tat actions, higher inflation, lower growth and central banks not cutting interest rates as quickly. “Generally, it’s a case of which way do we go first – tariffs or tax cuts?” AMP head of investment strategy and chief economist Shane Oliver said Mr Trump’s recent social media posts indicating a 10 per cent tariff on China and 25 per cent on Canada and Mexico created volatility, and there would be more “twists and turns”.

“Trump is saying from day one it’s likely he will give countries a chance to negotiate before the tariffs hit,” Dr Oliver said.

“While a 10 per cent tariff on China is far less than the 60 per cent talked about in the campaign – which may be seen as good news for Australia given our exposure to China – the fact that it’s related to drugs and not trade suggests there is still more to come.”

Dr Oliver said the uncertainty around tariffs would be a dampener on business confidence and produce volatility in investment markets, but Mr Trump had shown he was sensitive to sharemarket movements and he might back off if stocks fell sharply.

“The bottom line is that there is a long way to go regarding tariffs in the US. The story could take various twists and turns. This could cause significant volatility in investment markets but ultimately various constraints will limit what Trump can do on tariffs versus his more market- friendly policies regarding tax cuts and deregulation,” he said.

“While Trump’s policies will create a lot of uncertainty and disruption as he uses tariffs and other things as part of a maximum pressure strategy to negotiate better outcomes for the US, his first term as president tells us he ultimately wants to see shares up, not down.

Scott Bessent is a popular Trump pick for Treasury secretary. Picture: AFP

“He was also elected on a mandate to get the cost of living down for Americans, not to push it up. This could ultimately mean more of a focus on his tax and efficiency policies as opposed to his populist measures like tariffs.”

Mr Bassanese said while higher tariffs might arguably boost the competitiveness of US business against import competition, this would be unwound to the extent other countries retaliated with higher tariffs on US exports or devalued their currencies against the US dollar.

“A tit-for-tat trade war might also reduce business confidence globally, leading to a curtailment in employment and investment – which would be a further negative for equity markets,” he said.

“Australia’s market, especially the resources sector, could be especially hit hard if tariffs on Chinese imports led to a downturn in the Chinese economy.”

Originally published as Investors brace for Trump tariffs in 2025, but fresh hope emerges