The IMF has reduced Australia’s 2025 growth forecast from 2.1% to 1.6%.
Australia has been hit by $13 billion (US$8.3 billion) economically by President Donald Trump’s tariff blitz, according to the International Monetary Fund.
On April 22, the IMF downgraded Australia’s growth forecast for 2025 to just 1.6%, down from 2.1% in January.
Inflation is currently expected to reach 2.5%, half above previous estimates.
Chief economist Pierre-Olivier Gourinchas said the postwar trading system was fraying and tariff rates have risen to levels not seen in the first century.
And Australia, caught up in the middle of the US-China trade war, will not escape fallout, the IMF warns.
Did the Ministry of Finance play that?
Just a few weeks before the IMF report, the Treasury called the tariff impact “slack.” Its latest modeling predicts a 0.2% hit to GDP by the end of 2025, with just 0.1% by 2030.
Authorities cited the strong foundations of Australia: floating exchange rates, flexible labor markets, diversified exports. They argue that these will absorb much of the impact.
Related Stories
The Treasury even predicted that the US would suffer from its own tariffs.
“We are expected to see a significant decline in US GDP,” the report said, pointing to rising import costs.
Treasurer Jim Chalmers supported optimism.
“Our economy is resilient, but we don’t have immunity,” he said. “We are making sure Australians benefit from change. We are not crushed by that.”
The Reserve Bank of Australia (RBA) reflected a modest response.
Gov. Michelle Bullock said the financial system is strong and is located to handle global shocks.
Speaking at an event in Melbourne, she said the current situation didn’t resemble a crisis.
“This is different from the 2008 meltdown,” she said.
The RBA is in close contact with other regulators both domestically and internationally.
There are no indications of change in monetary policy yet, but central banks are closely watching development.
Still, economists warn that calmness can be misleading.
The real threat of Asia
Only about 5% of Australia’s exports are sent to the US, limiting direct exposure. But experts say the indirect risk is greater and growing.
Veteran economist Saul Eslake said the danger lies in Asia. If countries like China, Japan or Indonesia lose US market access, demand for Australian goods could drop.
“If Asia’s exports fall, they will scale back the orders from Australia,” Eslake said. “That’s how the second effect starts to bite.”
Economist John Humphries agreed.
“Trump tariffs are a bad policy,” he said. “But we are still in the waiting stage. Courts, Congress and global negotiations can all change the outcome.”
Washington, on the other hand, will be full throttle.
Trump’s tariffs on Chinese goods jumped to 145%, but Beijing retaliated with a 125% tariff on US exports.
But the US is not only moving inward, it is also cutting back on its trade.
Since Trump’s announcement on April 2, more than 75 countries have contacted negotiations. The White House is competing in itself to restructure global trade.
Japan’s top trade envoy visited Washington last week, and Trump called the talks “very productive.” Italian Prime Minister Giorgia Meloni also visited and expressed confidence in a new deal with the new United States.
“We have offers at the tables in 15 countries,” said Kevin Hassett, a US economic advisor.
He did not name them, but the report suggests that Japan and Indonesia are offering to boost imports of food and goods from the United States.
