Chart of the week: Australian retailers equipped to tackle Trump’s tariffs
Consumer staples offer a relatively safe haven.
This week’s Chart of the Week comes from Director of Equity Research, Johannes Faul’s 2025 Q1 update on Australian retailing.
Australian retailers are largely sheltered from the direct impact of US tariffs on China
However, we see two indirect risks emerging.
First, a potential economic slowdown could taper consumer spending. We believe consumer staples offer a relatively safe haven. Second, we anticipate disinflation in discretionary consumer goods from a surplus of Chinese products. While good news for consumers, cyclical retailers could be confronted with less revenue growth and declining operating leverage.
We believe the net impact of a near-term supply/demand imbalance of discretionary goods to be slightly negative, but immaterial for cyclical retailers over the long term.
Longer-term, we think tariffs will be either lowered or global production capacity adjusted to match demand. Although we believe a domestic economic slowdown is likely without fiscal and monetary countermeasures, we don’t believe it would be disastrous for consumer spending.
