US import laws update: How Trump’s tariffs could affect Australian retail

Just as retailers began to brace for the elimination of the de minimis rule, fashion’s global supply chain is now facing the import consequences of Donald Trump’s US presidential election win.

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With the holiday season just around the corner, here, we go through the proposed tariffs and the likely flow-on effect for Australian retailers before Trump is inaugurated into the White House (again) on January 20 2025.  

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The Trump tariff

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Trump has proposed a 10%-20% duty on all imports entering the US, and 60%-100% on Chinese goods, with a possible 25% tariff on all imports from Mexico. The tariffs would hit China with significantly higher duties while the 10% universal tariff would apply to more than $3.8 trillion in annual US imports. Locally, Australian exporters sent $22 billion worth of goods to the US in 2023-24, led by trade in beef, gold, and pharmaceutical products.

What this means for retail 

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With Trump campaigning for an aggressive expansion of US cross-border tariffs, retailers and manufacturing companies have started to “front load” shipments and orders, especially from China, ahead of any changes in tariff policy. 

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As retailers race to bring goods into the country ahead of Trump’s inauguration, analysts have predicted container prices are set to rise, while brands could face higher warehousing costs in order to store higher levels of inventory. Additionally, retailers may have to relocate operations outside of China to countries including Bangladesh, India, and Vietnam.

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Trump's tariff proposals could also reduce American consumers' spending power by between $46 billion and $78 billion each year, according to a National Retail Federation study, of which apparel, furniture, and footwear would be some of the most affected categories. The NRF reported this would lead to “dramatic” double-digit-percentage price spikes. On top of this, The Tax Foundation calculated Trump tariffs would hike US taxes by $524 billion annually, reduce gross domestic product by at least 0.8%, and cut employment by 684,000 full-time equivalent jobs potentially impacting retail workers. 

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Considering the current volume of trade between Chinese manufacturers and US retailers, economists say it will be impossible for consumer prices to remain the same—even though retailers choosing to increase prices over taking hits to profit would likely fuel inflation and see a decline in retail volume growth. And, while the economy and consumers are used to the increased cost of living and price hikes, the tariffs could still result in lowered consumer demand.

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If Trump’s new tariffs spark a trade war, the impact on the global economy could be significant. 

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What happened during Trump's last term 

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Donald Trump’s first term as US president impacted global trade in various ways, including: 

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Tariffs and trade wars: Trump implemented tariffs on many imports, particularly from China, and while Australia was not targeted with specific tariffs like China was, changes in US trade policy had a flow-on effect for trading partners, consumer spending, and retail imports from Australia. ​​However, the low tariffs of the first term and low inflation rate did not impact prices like they are set to this time around. 

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America First: Trump’s “America First” policy was brought in on the basis of encouraging local production. This affected countries with significant US trade imbalances and led to added customs requirements. However, Australia generally maintained a strong trade relationship with the US, so retail goods from Australia (such as fashion, food items, and wine) were less directly affected.

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Free trade agreements: Currently 96% of Australia’s imports to the US are currently tariff-free, under a 20-year-old free trade agreement (AUSFTA). This agreement likely protected Australian goods from tariffs, mitigating the potential negative impacts of any broader policy changes. 

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Pandemic and supply chains: Toward the end of the Trump administration, the pandemic heavily impacted global supply chains highlighting the need for Australian retailers to diversify trade partners. The pandemic led to many logistical challenges for Australian exports and changes in consumer demand.

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What happens now 

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As uncertainties hang in the air, retailers should be aware Trump may be able to act within just months to impose his new tariffs. 

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While the direct impact on the Australian economy isn’t clear, current trade with the US has dropped from above 5% in 2016 to less than 4% now, so there may be less of an impact if in the case Australia is targeted. However, if China comes under pressure, the problem could arise for Australian retailers who manufacture goods in China and are potentially impacted by second-order effects.

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The AFR reported that National Australia Bank chief Andrew Irvine warned there could be an “adverse effect” on the local economy from Trump’s tariffs. He explained a stronger US economy, while positive for Australian exporters, could result in higher-for-longer inflation and US interest rates.

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Australian brands and retailers selling to the US will need to recalibrate pricing strategies, and shipping policies and assess changes to customer demand in order to maintain profitability as the new laws come to light. 

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Watch this space for more on Trump’s tariff outcomes as his second presidency comes into full effect. 

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Main Image credit: Zeke Goodyear

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