With President Donald Trump officially inaugurated for a second term, Australian businesses must prepare for a rapidly shifting economic and geopolitical landscape. Trump’s “America First” agenda is back in full force, with a wave of executive orders and policy shifts already taking shape.
From sweeping tariffs to changes in foreign policy and climate commitments, the new administration’s direction will have significant implications for Australia’s trade, investment, and regulatory environment.
This edition of Nexus APAC Insights covers five key areas businesses should closely monitor in the coming months. While some policies will create challenges, others may offer opportunities for Australian businesses willing to adapt and capitalise on evolving market dynamics.
1: Tariffs and Supply Chains
Australia is likely to be directly affected by Trump’s proposed 10% tariffs on all international imports to the US. Dr Medo Pournader, an expert in supply chain management at the University of Melbourne, anticipates that our exports of meat products, wine, machinery, pharmaceuticals, aluminium, minerals, and ores will be most heavily impacted.
More significant tariffs on Canada, Mexico, and China will also have rippling consequences. As a key trading partner, the proposed tariff of up to 60% on Chinese imports may impact Australian businesses through reduced export demand and disruptions to global supply chains. According to the Australian Financial Review, 40% of economists believe Trump’s second administration will harm Australia due to trade disruptions and inflationary risks.
On the other hand, 17% of those economists anticipate potential benefits from the tariffs. Australia may experience increased or new import opportunities from international countries and businesses affected by tariffs seeking to diversify their supply chains away from the US. Australian products could also become more appealing to US companies if tariffs disrupt imports from traditional suppliers. As a potentially cheaper alternative, Australian exports may be able to capture a larger market share in America. The Conference Board reports that 71% of US CEOs plan to alter their supply chains in the next three to five years or are already doing so, up from 54% in 2024.
Australian businesses should consider adapting their operational and financial models in response to these developments. There may also be opportunities to re-evaluate the benefits of investing in domestic manufacturing, innovation, and infrastructure.
2: AUKUS
Trump’s isolationist ideology and “America First” mentality, which shaped his last presidency and current election promises, could present challenges for the future of the AUKUS agreement. While a complete withdrawal is unlikely, experts suggest Trump may seek increased financial contributions from Australia.
However, countering China’s military expansion and increasing influence in the Indo-Pacific region remains a top priority for Trump’s second administration, and AUKUS is a critical tool in achieving this objective.
On 16 January, Senator Marco Rubio, Trump’s presumptive nominee for Secretary of State, offered strong reassurances regarding the administration’s commitment to AUKUS, stating that there would be “very strong support” for the deal within the administration.
3: China Policy
Trump’s aggressive tariff policies are expected to exacerbate tensions with China, though his stance on other issues remains ambiguous. For instance, his commitment to Taiwan’s defence has been unclear, with recent suggestions that Taiwan should contribute more financially.
Trump’s cabinet includes notable China critics such as Senator Marco Rubio and National Security Advisor Michael Waltz, which suggests a hardline approach.
The nominee for Secretary of Defense will likely influence how US-China relations evolve. During his confirmation hearing, Mr Pete Hegseth told the US Congress that he would ensure the Pentagon recognised the Chinese Communist Party as “front and centre” among foreign threats to the US.
Australia may face expectations to align with the US stance. Many ASEAN countries, including Indonesia and Vietnam, will likely seek a moderate, balanced approach. Key regional influences, including India and Japan, may support a tougher approach. Nonetheless, the posturing of the next Trump administration on foreign policy toward China will have a ripple effect throughout the Indo-Pacific region.
4: Inflation
Trump’s proposed economic policies could have significant implications for Australian inflation. High tariffs on Chinese goods may increase the cost of imported goods, contributing to inflationary pressures. The potential reduction or withdrawal of the US from global markets could further disrupt trade and increase costs for Australian businesses and consumers.
Australian Financial Review economist Susan Stone argues that given the oversized role the US dollar has on international markets, many of Trump’s proposed policies will likely raise volatility in commodities markets and negatively impact Australian producers.
However, some experts argue that Australia’s limited direct trade ties with the US may buffer the impact. Should Trump’s policies result in higher economic growth in the US, global demand for Australian exports may rise, potentially stabilising inflationary pressures.
Nevertheless, Deputy Chief Markets Economist Jonas Goltermann notes, “uncertainty around the incoming Trump administration’s plans on fiscal and tariff policy as inauguration day draws nearer suggests that more volatility [in the Australian dollar] may lie ahead.”
5: DEIs and Climate Policy
In anticipation of Trump’s return, major US corporations are scaling back Diversity, Equity, and Inclusion (DEI) initiatives and climate commitments. Companies such as Harley Davidson, Ford, Walmart, UBS, and McDonald’s have already halted DEI programs since November 2024.
President Trump may reintroduce his 2020 executive order “to combat offensive and anti-American race and sex stereotyping and scapegoating,” as he has since vowed to ban “woke” inclusivity programs within the American Government.
Six major US banks have abandoned the United Nations-led Net Zero Banking Alliance in preparation for shifts in America’s position on climate policy. Trump is expected to reverse some of the Biden administration’s climate measures, including exiting the Paris Agreement, cutting support for electric vehicles, rolling back emissions standards, and reducing clean energy tax credits.
Trump’s nominee for Chair of the Securities and Exchange Commission has also voiced his opposition to climate disclosure laws. Although the Australian Government pledged to enhance climate disclosure regulations by 2026, the Coalition has signalled opposition, promising to repeal these regulations if elected in 2025.
All businesses, including Australian companies, should have strategic plans for approaching policy changes while maintaining their values and integrity under Trump’s second administration.
In summary, a second Trump administration presents both challenges and opportunities for Australian businesses. Companies should remain vigilant, adapt to changing trade and regulatory environments, and explore new market opportunities. Engaging with industry associations and government bodies will be essential to navigating this evolving landscape.
Photo credit: AP
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