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Understanding the Impact of Tariffs and Global Trade

June 30, 2025 • 5 minutes

In today’s interconnected world, what happens in one country’s economy can have ripple effects across the globe. Whether it’s changes in trade agreements, disputes between global powers, or the introduction of tariffs, these shifts can impact what we pay at the shops, the performance of our superannuation, and the success of Australian businesses.

But what exactly are tariffs? How do they influence global trade? And what does it mean for your financial wellbeing here in Australia? Let’s unpack the big picture and break it down into practical terms.

What Are Tariffs?

Tariffs are taxes that governments place on imported (and sometimes exported) goods. Their primary purpose is to make foreign products more expensive, giving local industries a competitive edge.

There are two main types of tariffs:

  • Ad valorem tariffs are calculated as a percentage of the product’s value (e.g. a 10 per cent tax on imported cars).
  • Specific tariffs are fixed fees based on quantity or weight (e.g. $2 per kilogram of imported rice).

In practice, tariffs can show up in many ways. For example, when Australia exports wine to China and faces a tariff hike, those bottles become more expensive for Chinese consumers, potentially reducing demand for Aussie wine producers.

How Tariffs Affect Global Trade 

Tariffs may seem like simple taxes, but they can have wide-reaching effects on how countries trade. When one country imposes a tariff, the other may respond with one of their own – this is known as a retaliatory tariff. If things escalate, we end up with a trade war, as seen between the US and China in recent years.

These disputes can disrupt supply chains, raise prices on everyday goods, and create uncertainty in international markets.

From a business perspective, tariffs influence where goods are sourced, how much they cost to produce, and which markets are worth entering. For example, if Australia imposes high tariffs on imported steel, local steelmakers may benefit, but builders and manufacturers relying on affordable steel might face rising costs, which can then be passed on to consumers.

On a larger scale, free trade agreements – like the Australia-UK Free Trade Agreement or those under the World Trade Organisation (WTO) – aim to reduce or eliminate tariffs to promote smoother, more predictable trade between countries.

The Impact on Australian Businesses and Consumers

So, what does this all mean for us here in Australia?

For businesses, tariffs can mean:

  • Higher export costs if their goods are targeted by foreign tariffs.
  • Limited access to overseas markets.
  • Increased local demand if imports become too expensive.

For example, during the Australia-China trade tensions, several sectors took a hit. China imposed tariffs on Australian barley and wine, causing significant losses for local producers. Conversely, some industries benefited when imported goods became pricier, prompting consumers to turn to homegrown alternatives.

For consumers, the impacts can be more subtle but no less significant:

  • Imported goods (such as cars, electronics or clothing) may cost more.
  • Retailers might pass tariff-related price increases down the line.
  • Food prices may fluctuate based on supply chain disruption.

Tariffs can also affect jobs, especially in industries tied to international markets. Export restrictions may lead to cutbacks, while increased domestic demand could create new roles. It’s a delicate balance.

What This Means for Your Finances

While tariffs and global trade might feel like a distant topic, they can impact your personal finances more than you realise.

For investors, tariff changes can shake up markets. Companies reliant on international trade may see their share prices fluctuate. For instance, if a major exporter loses access to an overseas market due to rising tariffs, their profits – and investor returns – can drop.

Tariffs can also feed into inflation, as higher import costs push up prices across the board. In turn, this can influence interest rates and affect your mortgage repayments or investment yields.

On a broader level, tariffs and trade policy can impact the overall economic outlook. If global trade slows down, it can trigger market volatility or slow growth, which can affect superannuation returns, business performance, and investment confidence.

To protect your wealth in this shifting environment, it’s crucial to:

  • Diversify your portfolio.
  • Stay informed about global economic changes.
  • Plan ahead with a trusted financial adviser.

How Inovayt Can Help

Understanding how global trade and tariffs impact your finances isn’t easy, but that’s where we come in.

Whether you’re a first-time investor, a small business owner, or planning for retirement, our expert advisers are here to help you:

  • Navigate global market uncertainty with confidence.
  • Adjust your financial plan to changing economic conditions.
  • Build a diversified investment strategy that aligns with your goals.

We believe financial advice shouldn’t just react to global shifts – it should anticipate them. If you’re unsure how tariffs or international developments could impact your money, contact our expert team today.

Wondering how global tariffs impact you?

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