Donald Trump’s tariff wars could dampen Australian firms’ optimism in 2025

Australian businesses have taken an optimistic view for the next 12 months, boosted by the prospects of interest rate cuts, but it’s too early to tell how Donald Trump’s tariff wars could dampen conditions.

National Australia Bank’s December quarter business survey revealed there had been a sharp drop in the share of firms expecting inflation in the medium term (three to five years) to hit 3.5 per cent or more.

About 30 per cent of businesses surveyed now expect medium-term inflation to be about 2.5 per cent, within the Reserve Bank’s 2 per cent to 3 per cent target range. This was up from the 20 per cent recorded in the September quarter.

“This aligns with an improving 12 month outlook across other survey measures, and continued easing across cost measures,” NAB said on Thursday.

“Expected business conditions in the next 12 months . . . improved, possibly boosted by the prospect of rate cuts, recovering consumer demand and easing costs growth over 2025.”

With the survey conducted between mid-November and early December, CreditorWatch Ivan Colhoun said it was too soon for it to reflect any impacts of US President Donald Trump’s recent tariff news.

While Trump has agreed to hold off on imposing 25 per cent taxes on Canada and Mexico for 30 days, China hasn’t been so lucky, with all Chinese imports to the US now attracting a new 10 per cent tax.

“I’d expect that it is too early for this survey . . . to reflect much in the way of expectations let alone actuality from recent Trump tariff announcements,” he said.

“Interestingly, while current and near-term expected conditions have been easing, firms’ expectations about the next twelve months have remained pretty solid and improved this quarter.”

NAB said business conditions held steady in the last three months of 2024 and while confidence made a slight recovery, it remained in negative territory.