Trade war could cost Australia $3 billion by 2030

Australia's Treasurer Jim Chalmers has shared a stark warning about the economy ahead of the upcoming federal budget. He says that a global trade war could significantly harm Australia's economy by 2030. Recent estimates from the Treasury indicate that tariffs on steel and aluminium from the United States may have a manageable impact, cutting around 0.02 percent of Australia's GDP, or about half a billion dollars. However, the indirect effects of these tariffs are expected to be more significant, potentially reducing GDP by about 0.1 percent, or around $3 billion. Chalmers emphasized that the global economy is facing “turbulence.” He pointed to slowing growth in both China and the United States and rising unemployment worldwide. He argued that these tariffs are coupled with risks of lower economic growth and higher inflation. In a speech today, Chalmers will address the broader consequences of a potential trade war. He warns that the overall impact could reach up to four times larger than the direct effects of tariffs on Australia. Chalmers explained that retaliatory actions in trade create lasting economic damage. Despite these challenges, Chalmers has assured that Australia's response will not involve lowering tariffs excessively. The Organisation for Economic Cooperation and Development (OECD) has also expressed concerns about trade policies and their effects on global growth and inflation. The OECD has downgraded its growth expectations for Australia. While growth is expected to remain stable this year, it may slow by 0.7 percent to 1.8 percent in 2026. Additionally, inflation rates could decrease to 2.4 percent in 2025 and 2.2 percent in 2026, as long as trade tensions do not worsen.