United States President Donald Trump’s tariffs – ranging from 20% on Chinese imports to 25% on goods from Canada and Mexico – have triggered global retaliation, disrupting supply chains and fuelling economic uncertainty. We’re not immune, as the US has imposed a 25% tariff on Australian steel and aluminium.
The flow-on impact through shifts in confidence, international trade and financial flows could reshape the housing market. But will this pressure cause housing prices to tumble, or could immigration trends and supply constraints push them even higher? Let’s break it down.
Australia’s trade exposure: Why we’re not feeling the full force – yet
At first glance, Australia’s direct trade exposure to the US seems minimal. Australian steel and aluminium exports to the US represent less than 0.2% of the total value of our exports. The US accounts for only 4.6% of Australia’s total merchandise exports as of 2024 (figure 1). This limited trade connection shields Australian businesses from the brunt of Trump’s tariffs.
Figure 1. Australia’s merchandise exports by destination.
But here’s the catch: Australia is deeply linked to the global economy, particularly China. If US tariffs slow down China’s economy, Australia could feel the pinch, especially in mining and agriculture. With less demand, export income might shrink, and job growth could slow, which could cool the housing market.
Two key factors, however, are helping to cushion the blow.
- Stimulus measures from trading partners: When trading partners get hit by tariffs, they often roll out economic policies to soften the blow and keep demand steady. For example, China has already signalled plans to loosen monetary and fiscal policies in 2025 to keep growth on track despite US tariffs. That could be good news for Australia, helping sustain export demand and stabilise economic conditions.
- Exchange rate movements: The Australian dollar has fallen 3.5% against the US dollar and 2.5% on a trade-weighted basis since November 2024 (figure 2). While that might sound like bad news, a weaker currency makes Australian exports more competitive, helping counter some trade challenges.
Figure 2. Australian dollar v US dollar & trade-weighted index (TWI).
Even in worst-case scenarios, the Reserve Bank of Australia (RBA) estimates that a 40 percentage point increase in US tariffs on Chinese goods would only reduce Australia’s GDP by 0.2 percentage points over 12 months – a relatively small impact.
But while trade figures and currency shifts paint a reassuring picture, uncertainty is a different beast altogether.
The real threat: Global uncertainty and its ripple effects on housing
The threat and imposition of tariffs have driven up global and domestic policy uncertainty in early 2025 (figure 3). When uncertainty rises, it sends ripples through financial markets, consumer confidence and investment decisions. However, the impact on the housing market is not so clear-cut, as different forces push in opposite directions.
Figure 3. Economic policy uncertainty.
How uncertainty could weigh on the housing market:
- Consumer and business confidence: When uncertainty is high, both consumers and businesses become cautious. Australians might hold off on major purchases, including homes, until things feel more stable. Domain research found that political uncertainty reduces the volume of property transactions. Political uncertainty can arise at any time during or outside elections.
- There is evidence that political uncertainty leads to delays in home buying. If this hesitation extends to broader spending, it could even lead to job losses and lower incomes, which could weigh on house prices.
- Wealth effects: Market volatility can shake confidence and limit people’s ability to buy property. For example, from the recent highs in mid-February to lows in mid-March, equity prices have declined by 10% in the US and 9% in Australia. Since many Australians have investments in the stock market, these losses could reduce both their appetite and capacity to buy homes.
How uncertainty could support the housing market:
- Policy response: To counteract the economic drag from tariffs and uncertainty, policymakers might introduce stimulatory measures. This could include lower interest rates or increased government spending, both of which could support housing market conditions.
- Increased immigration: If global uncertainty makes Australia look like a stable place, migration could rise. More people moving to Australia would naturally boost demand for housing and housing market conditions more broadly since supply usually takes time to catch up.
- Increased investment in Australian real estate: When market volatility spikes due to uncertainty, investors may turn to property since it tends to offer more stable returns. On top of that, a weaker Australian dollar can make property here more attractive to foreign buyers, as it lowers their purchasing costs. Altogether, increased interest from investors can help support house prices.
The impact of tariffs on Australia’s inflation and borrowing costs is unclear. Tariffs may drive up inflation by making imports more expensive. If prices rise too much, the RBA might hold off on or deliver fewer interest rate cuts, keeping borrowing costs higher than they would be otherwise and slowing housing demand. On the other hand, tariffs can also slow down the global economy, which might offset any imported inflationary pressures. In addition, Trump’s tariffs could also help lower inflation in Australia if more countries start selling their products and services here to bypass US tariffs, helping to drive prices down. That could lead to lower borrowing costs.
Overall, the housing market is caught between competing forces, and whether uncertainty ends up being a drag or a boost depends on how these dynamics play out. To date, the impact of uncertainty on the housing market has been relatively small.
Construction costs: The hidden housing market pressure
Since 2020, construction costs have skyrocketed 43%, far outpacing wages and overall inflation (figure 4). A part of this comes down to global supply chain disruptions. If more building materials get hit with tariffs or supply chain issues worsen, construction costs and timelines could take another hit. That means fewer homes getting built, which could push rents and house prices even higher.
Figure 4. Construction costs.
The risk is somewhat limited since Australia’s construction industry doesn’t rely heavily on imported services and products (Master Builders Australia 2021). Still, certain materials could face bottlenecks, adding more pressure to the market.
References
Domain (2025), Mythbusting: The impact of a federal election on the property market, March.
https://s3.ap-southeast-2.amazonaws.com/ffx.adcentre.com.au/domain/2025/CRTV-4451/DomainInsight-Mythbusting+Federal+Election+Report+2025.pdf
International Monetary Fund (2024), World Economic Outlook, October.
https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024
Master Builders Australia (2021), Response to draft Productivity Report Vulnerable Supply Chains, May.
https://www.pc.gov.au/__data/assets/pdf_file/0004/275665/sub051-supply-chains-attachment.pdf
Reserve Bank of Australia (2025), Statement of Monetary Policy, February.
https://www.rba.gov.au/publications/smp/2025/feb/pdf/statement-on-monetary-policy-2025-02.pdf