US President Donald Trump’s newly unveiled “liberation day” trade policy could possibly raise new home building costs in Australia and increase pressure on the Reserve Bank to cut interest rates sooner.  

Last week, Mr Trump imposed sweeping new tariffs – taxes on imported goods – of at least 10% on most countries, including Australia. Notably, Norfolk Island, an Australian external territory, was hit with a 29% tariff.

According to Ray Dalio, Chief Investment officer of Bridgewater Associates, tariffs serve several economic and strategic purposes. Firstly, they "raise revenue for the country imposing them that both the foreign producers and the domestic consumers pay," he said.

However, tariffs also can contribute to a decline in global production efficiency and can contribute to stagflation—simultaneously slowing economic growth and increasing prices.

Domestically, tariffs protect local companies from foreign competition. While this protection can reduce the incentive for efficiency, it also increases the likelihood of business survival, particularly if overall demand in the economy is sustained through supportive monetary and fiscal policies.

Also, in times of major international conflicts, Ray says tariffs play a strategic role by helping a country retain the capability to produce goods. Moreover, tariffs can help address imbalances in both the current and capital accounts. “In plain English, means reducing the dependencies on foreign production and foreign capital which is especially valued in times of global geopolitical conflicts/wars,” Ray explains.

In announcing the new trade policy, for example, Mr Trump took aim at Australia’s longstanding ban (it was more a restriction than a ban)[i] on fresh beef from North America, imposed in 2003 due to concerns about mad cow disease. “We imported $US3 billion of Australian beef from them just last year alone,” Mr Trump said. “They won’t take any of our beef. They don’t want it because they don’t want it to affect their farmers.”

For Australian property, REA Group said there was a chance the tariffs could impact new home building costs[ii]. REA Group senior economist Eleanor Creagh said, “If we end up with higher prices for goods used in construction, that could increase prices when it comes to new builds and renovations.” 

This is troubling given the average cost of completed homes in Australia has risen from $345,410 in 2019-20 to $443,828 in 2023-24. During this period, the average annual cost increase was 6.7%[iii].

Eleanor Creagh said the tariffs could also have implications for interest rates in Australia. “On the other hand, if there is a hit to global growth, we could see that bring forward the pace of the Reserve Bank’s interest cuts which could stimulate homebuying demand,” she said.  

To discuss your real estate plans for autumn and beyond, contact your local Raine & Horne office today.

[i] https://www.abc.net.au/news/2025-04-06/trump-claims-australia-bans-american-beef-imports-incorrect/105139686

[ii] https://www.realestate.com.au/news/tug-of-war-how-the-trump-tariffs-could-sting-aussie-housing/

[iii] https://www.abs.gov.au/articles/home-building-through-pandemic