Tariffs were never the answer: Experts

The tariffs doled out - and then largely wound back or paused by - the Trump administration are unlikely to help the US realise its economic priorities, an industry conference has heard.

Opening the Stockbrokers and Investment Advisers Association's (SIAA) 2025 conference, The Asia Group's Australia Practice chair Arthur Sinodinos said trade tariffs were never the answer to the challenges facing the US.

"In this context, the challenge America faces is not bilateral trade balances - sure, there are trade issues with China in terms of IP being stolen, not following all the World Trade Organisation rules - but fundamentally, the trade imbalance the US has with the rest of the world is a function of its savings and investment balance," he said.

"... the tariffs may impact at the margin for them, but in the end all it does is increase costs, displaces competitive production and leads to lower and slower growth."

Westpac chief economist Luci Ellis agreed, labelling Liberation Day "an act of economic self-harm by the US."

"Tariffs are self-destructive... it was never going to be the case that the tariff rates announced that day, or the three-digit tariff rates announced on China, were ever going to stick. And sure enough, within 10 days we'd already seen the 90-day pause, the US negotiating with itself and unilaterally offering a carve-out on electronics and the like," Ellis said.

"They're not going to stick at the rates announced because that is basically the US harming itself and everybody else going, 'Okay, go for it.'"

She added that if we land with most countries having a 10-20% tariff, that is not going to convince anyone to relocate production back to the US.

"The idea that these tariffs at non-destructive rates are going to induce a relocation of production, it's just not going to happen," she reinforced.

Part of the reason for this is that the US dollar is currently overvalued, Ellis explained, saying it's about 15% overvalued when using the normal metrics.

"The US is currently quite overvalued and quite uncompetitive, so a 10-20% tariff is not going to make a difference," she said.

Ellis added that the US exceptionalism narrative has already faded, saying things like DeepSeek and the meeting with Ukraine president Volodomir Zelenskyy, made people realise the US may not be a reliable trade or security partner.

However, she said it's has quickly become clear that, while investors may not be able to get out of the US, they are already looking elsewhere.

"For example, if you're a bond investor, there is no alternative - you cannot get that kind of depth and liquidity elsewhere, but everyone just wants to be a bit less long the US than they were before," she said.

"So, the US is going to take a growth hit... We don't think there will be a full-blown recession, but it is going to be very damaging, even with the lower negotiated tariffs."

When it comes to negotiating with China, as for who holds the strongest hand, Sinodinos said: "I would say in the longer-run sense, the US has the stronger hand, but China have played their hand very well in this current situation and Xi Jinping would have come out of this feeling more confident in dealing with the US."

"But, in the long run, do not bet against the US. We have administrations come and go, but what's important about the US is they're still at the forefront of technology, they still have the biggest military in the world, and they're still fundamentally a democratic country... they're still the underwriter of the global order and we need to be continuing to engage them in a mutually beneficial way."