US President Donald Trump’s ongoing tariff policies continue to create a stir, marked by legal battles and the looming July 24 expiry of current duties. Despite courts occasionally ruling against these measures, and others preserving them on appeal, markets have increasingly learned to “tune out” the associated noise. Initial market panic in 2025, which saw the ASX fall 7.5 per cent in three trading days, quickly gave way to a deeper understanding, guided by what analysts term “four Es”: expectations, exemptions, evasion, and enforceability. Trump’s threats, including a potential 100 per cent charge on Australian drug imports, are now largely seen as more economic bark than bite.
The resilience of markets stems from several factors. Exemptions, for instance, significantly narrow the scope of tariffs; over half of all US imports were duty-free even before recent Supreme Court rulings, covering critical items like smartphones, semiconductors, Australian beef, and aircraft parts. Evasion is also prevalent, with methods such as transshipping evident in the boom of Chinese exports to Southeast Asia and subsequent leap in US imports from ASEAN nations. Furthermore, the sheer scale of enforcement presents overwhelming obstacles; America’s Customs and Border Protection agency, with limited personnel, conducted a minuscule 465 inbound audits for over 50 million shipments in fiscal 2025, underscoring the difficulty in policing a globally intertwined supply chain.
Consequently, the widely feared tariff hit has not materialised as anticipated. While initial market reaction to “liberation day” duties in 2025 was severe, leading to scenarios of trade devastation being priced in, global trade actually grew 3.4 per cent that year, and Australian goods exports to the US surged 66.5 per cent as exporters front-ran feared levies. The ASX recovered all early April declines by April 24, 2025. Actual US tariff rates, initially feared to average 28 per cent post-liberation day, have consistently dropped, now standing at under 7 per cent. Deal-making, exemplified by the critical minerals agreement with Australia and other pacts, further mitigates economic effects. The MSCI World stock index continues its ascent, hitting record highs, demonstrating markets’ enduring belief that tariff fear far exceeds actual impact.
