30/11/2025
Overview of the $2.4 Trillion China Act
The "$2.4 trillion China act" refers to the escalated US tariffs on Chinese imports, implemented under President Donald Trump's administration starting in early 2025. These tariffs, building on prior trade measures, impose duties of up to 104% on approximately $2.4 trillion worth of annual Chinese exports to the US. The policy targets key sectors including electronics, machinery, steel, and consumer goods, aiming to reduce the US trade deficit with China, which stood at $279 billion in 2024. The tariffs were enacted via executive action under the International Emergency Economic Powers Act, following a brief court challenge in May 2025 that was overturned on appeal.
China's exports to the US totaled $427 billion in 2023, but projections for 2025 estimated $2.4 trillion in cumulative value across affected categories when including supply chain impacts. This figure aggregates the value of goods subject to the duties, representing about 25% of China's total global exports. The US, accounting for 17% of China's export market in 2024, is China's largest single trading partner.
Global Economic Impacts
The tariffs are projected to reduce global economic growth by 0.3% by 2030 under baseline reciprocal scenarios, according to Economic Modeling analysis. In a full decoupling scenario—where US-China trade drops by 95%—global GDP could contract by 2.6%. US inflation is expected to rise by 1.0 percentage point by the end of 2025 as import costs are passed to consumers, with manufacturing reshoring adding $160 billion monthly to US construction spending since 2022.
China's economy faces a 0.5% reduction in activity by 2030 from existing tariffs, escalating to 1.3% under decoupling. China's GDP growth, forecasted at 4.9% for 2024 by ANZ, is vulnerable due to its reliance on exports, which comprise 20% of GDP. Property sales in 70 Chinese cities have declined for 15 consecutive months as of September 2024, with construction starts and completions down year-over-year. The National Bureau of Statistics PMI index showed a declining trend from March 2024, reflecting manufacturing slowdowns tied to reduced US demand.
Worldwide retaliation could amplify effects: US economic activity might shrink by 2.2%, while China's growth falls 0.7%. The tariffs reverse post-WWII trade liberalization, ending the "Washington Consensus" era of deregulation and free markets, as noted by Commonwealth Bank chief economist Luke Yeaman in April 2025.
Impacts on Australia
Australia's $2 trillion economy derives 33% of its exports from trade with China, valued at $172 billion in 2024 with a $51 billion surplus. Key exports include iron ore ($136 billion annually, 60% to China), coal, natural gas, barley, wine, and education services, representing 8.2% of Australia's GDP. A slowdown in Chinese demand has already impacted sectors: iron ore prices, dependent on Chinese steel production for housing and infrastructure, fell amid 2024 property market declines. Wheat exports to China, Australia's largest by value for three years, dropped on regulatory rumors in September 2024, alongside declines in sorghum and barley prices.
The tariffs are expected to reduce Chinese demand for Australian commodities by 10-15% in 2025, per ANZ estimates, exacerbating a 2024 Chinese GDP slowdown. Australia's ASX 200 index plunged 3.2% on April 9, 2025, with mining stocks like BHP and Rio Tinto down 5-7% due to trade war fears. The Australian dollar fell below US$0.60 for the first time since the COVID-19 pandemic, trading at US$0.58 by mid-April 2025. Tourism from China, Australia's second-largest source with 1.4 million visitors pre-2020, faces further restrictions; flights remain 40% below 2019 levels due to lingering trade tensions.
In response, Australia rejected China's April 2025 trade overture for a bilateral deal to counter US tariffs, as announced by Deputy Prime Minister Richard Marles. This followed Prime Minister Anthony Albanese's statement that the 10% baseline tariffs had "no basis in logic" but warranted no retaliation. Australia's "Future Made in America" policy, a $22.7 billion package from the May 2024 budget, includes $7 billion in tax credits for critical minerals processing and $2 per kilogram incentives for green hydrogen, aimed at diversifying away from China amid US-led industrial shifts.
Key Figures Involved
- Xi Jinping: China's President, overseeing responses including potential fiscal stimuli announced at the 2024 National People's Congress. China's population peaked at 1.4 billion in 2021, with 45% working-age, contributing to labor constraints amid economic stalls.
- Donald Trump: US President, who enacted the tariffs as "reciprocal" measures against 60 partners, including China at 104%, India at 25%, and Japan at 20%. The policy follows his 2018-2020 trade war, which imposed 25% duties on $360 billion in Chinese goods.
- Anthony Albanese: Australian Prime Minister, leading diversification efforts. In April 2025, he emphasized preparation for global uncertainty without retaliatory tariffs.
Long-Term Risks for Australia
Australia's export dependency exposes it to a "significant risk" of revenue drops, with potential 0.5-1.0% GDP contraction by 2026 if Chinese growth dips below 4%. Past sanctions in 2020—banning $20 billion in Australian barley, wine, and coal—cost $51 billion overall. Diversification targets include Japan (10% of exports), South Korea (7%), India (5%), and the US (4%), but China absorbs 72% more exports than the next largest partner. Productivity declines and "economic shallowing" since 2020, per expert analysis, compound vulnerabilities, with single-market reliance threatening industries like mining (50% of exports) and agriculture.