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Trade Wars, Market Turmoil: Australia’s Digital Imperative - and Opportunity

Escalating US tariffs on China, Mexico, and Canada threaten global growth, yet Australia's low trade exposure offers a unique

David Kennedy · Venture Insights19 March 2025

0.3%↓

Potential reduction in global GDP over three years due to economic fragmentation

0.8%↓

Projected decline in US GDP by year three under a 10% tariff scenario

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Abstract

The OECD has downgraded global GDP growth due to escalating trade tensions, primarily driven by U.S. tariffs on China, Canada, and Mexico. Financial markets have sharply declined, while the risk of a U.S. recession continues to rise. The real threat is its dependence on U.S. tech giants, which imposes substantial economic costs outside traditional trade figures (see our report “The tariff debate ignores Australia’s digital dependence”). Australia will not escape the effects of the economic slowdown. What makes us see this as an opportunity? Australia’s low trade exposure to the U.S. market gives it freedom to respond that other countries lack. With global uncertainty growing, Australia has the opportunity to adopt a more strategic trade and technology policy to safeguard its economic future.

Key Takeaways

The OECD has downgraded global GDP growth projections from 3.2% in 2024 to 3.0% by 2026 due to escalating trade tensions.
US tariffs of 20-25% on China, Mexico, and Canada threaten to disrupt 40% of total US trade and global supply chains.
Australia's low direct merchandise trade exposure to the US provides a strategic 'degree of freedom' to respond to global shifts.

What's Inside

Trade turbulence hits growth forecasts

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Frequently Asked Questions

The OECD has downgraded global GDP growth projections from 3.2% in 2024 to 3.0% by 2026. Economic fragmentation resulting from these tensions is expected to reduce global GDP by 0.3% over the next three years.

No, Australia maintains low direct merchandise trade exposure to the U.S. compared to China, Mexico, and Canada, which collectively represent 40% of total U.S. trade. This provides Australia with a strategic 'degree of freedom' to adjust its policy response independently.

The Australian economy faces a multibillion-dollar hit by 2030 if current trade tensions persist. While direct trade exposure is low, the U.S. economy itself is projected to see a 0.8% GDP decline by year three under a 10% tariff scenario.

The core risk is a structural dependence on U.S.-based digital platform giants, which creates economic costs not captured in traditional trade data. Australia must address this by adjusting regulatory and tax treatments for these extractive platforms to safeguard its digital future.

Abstract

Key Takeaways

What's Inside

Trade turbulence hits growth forecasts

Frequently Asked Questions

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