A Glimpse Inside the 2025 Tariffs, Tensions and Trade wars
By: Robin Zhang and Lachlan Cai
Posted: 23rd April 2025
In 2025, global trade has been thrown into turmoil as the United States, under Donald Trump’s renewed leadership, reignites tariff wars against both allies and rivals. What began as a push to reduce America’s trade deficit has quickly spiralled into widespread disruption, shaking markets, straining diplomatic ties, and triggering a cascade of retaliatory measures across the world. This blog unpacks the key developments as of the 23rd of April, and explores how they’ve impacted Australia and the broader global economy.
Breaking Down the Tariffs
In February, Donald Trump imposed a 25% tariff on all imports from Canada and Mexico, reinstated a 25% tariff on Australian steel and aluminium, and introduced an additional 10% tariff on Chinese goods. Then, on April 2nd, he announced a sweeping 10% tariff on all imports into the United States. As the trade war between the US and China escalated, those tariffs climbed dramatically, reaching up to 145% on Chinese products. In retaliation, China imposed tariffs of up to 125% on American goods.
Amid the ongoing trade war, some countries, such as China, Vietnam, and Cambodia, have been significantly affected by the imposition of harsh US tariffs. China was arguably hit the hardest, facing tariffs as high as 145% on certain goods. In response, China has begun redirecting its trade efforts, seeking to strengthen economic ties with alternative partners. Similarly, Vietnam’s manufacturing industry—one of its primary sources of revenue—has been hit hard, with a 46% tariff making it difficult for the US to continue importing cheap clothing. Additionally, Cambodia, another country heavily reliant on its export sector, also faces tariffs of up to 49%, making it difficult to export large volumes of goods to the US.
Economic Consequences Across Borders
On April 2nd, a date President Donald Trump dubbed "Liberation Day", the United States announced tariffs worldwide, aimed at reducing trade deficits and curbing foreign competition. The US stock market saw an immediate downturn of 3%, with major indexes such as the S&P 500 dropping by over 11% and the Dow Jones Industrial Average plummeting over 9%.
Fuelled by Trump’s reciprocal tariffs, investors saw price slumps amongst high-performing stocks such as Nvidia (NVDA) by 6.87% and Advanced Micro Devices (AMD), anticipating a revenue loss of over 800 million USD as a direct repercussion of trade restrictions between the United States and China.
Contrary to Trump’s regime of bolstering America’s domestic economy, rapid price inflation of everyday goods was experienced by the population. With higher import costs compounded by supply chain disruptions, economists have speculated the heightened risk of an economic recession, a concern echoed by Federal Chair Powell, claiming tariffs were “significantly larger than anticipated”.
Donald Trump’s major tariffs that he has imposed have had a multitude of effects on the Australian economy. The 25% tariff on all Australian steel and aluminium exports to the US has heavily impacted the mining sector, which is a prominent part of Australia's exports. This disruption led to a significant decline in export volumes to the US, one of Australia's largest trading partners. Consequently, the Australian dollar weakened, falling to USD 0.59 on April 9th—its lowest point since the COVID-19 crash in March 2020. As a result of the dollar’s depreciation, Australia experienced rising inflation driven by higher import costs and reduced export activity.
The China-US trade war
While several Asian nations have entered negotiations with the US over the escalating “reciprocal tariffs”, China, despite being the most impacted, has notably refrained from engaging. With tariffs now reaching 145% on certain Chinese goods, President Xi has declined to partake in negotiations, opting to raise the stakes by imposing 125% tariffs on all US imports in retaliation.
However, if such tariffs persist, economists suspect that it will be increasingly difficult for both nations to achieve technological advancement and sustain a stable economy, with Trump himself saying, “at a certain point you make it where people don’t buy”. China accounts for almost 90% of rare earth metal processing and 70% of rare earth metal mining used for military-tech and electronic equipment. By imposing export restrictions to the United States, China can maintain its position as a global driver in manufacturing, while opening doors to military and technological leadership.
As the trade war drags on, tensions continue to rise. Under President Biden’s administration, the US recently banned Nvidia’s H20 chip—a product specifically developed to skirt previous export restrictions to China. While the move is seen by some as an attempt for the US to gain the upper hand in the tech race, Nvidia CEO Jensen Huang has voiced concerns about the financial hit this could bring. Despite the setback, Nvidia remains focused on maintaining its presence in the Chinese market, actively exploring ways to navigate around the evolving trade barriers originally introduced during Trump’s term.
For weeks, the United States and China remained in a stalemate, as neither budged to come to an agreement. However, signs of breakage have emerged from both sides, with Trump remarking that “the ball is in China’s court, and China needs to make a deal with us”.
What does this mean for us?
Australia’s political landscape is also feeling the pressure. Opposition leader Peter Dutton has criticised the Albanese government for failing to engage effectively with Washington, stirring domestic political tensions amid widespread concern over Trump’s trade policies. However, with Dutton’s views closely aligned to Trump’s, public support may waver, potentially impacting his chances in the upcoming federal election.
On the upside, economists are optimistic about new opportunities in the Indo-Pacific. As trade with the US becomes less attractive due to mounting tariffs, Australia could benefit from strengthened ties with regional partners. We may see more foreign goods entering the local market, and increased demand for Australian exports from countries now imposing retaliatory tariffs on the US. In the long run, this shift could diversify Australia’s trade relationships and reduce our reliance on American markets.
