The April 2026 Snapshot
Cash rate: 4.10% | China tariffs: 145% | ASX: $155bn wiped off — worst day since COVID
RBA Governor: "shifting and unusual uncertainty" | Banks: still tipping a hike | Markets: pricing next move for June
Trump's decision to hit China with 145% tariffs — effectively a near-embargo on many goods categories — sent the ASX into its worst single-day collapse since the COVID crash of March 2020, wiping $155 billion from the market. RBA Governor Michele Bullock says the situation is "unpredictable" and she cannot yet call what the RBA will do with rates. But Australia's major banks are still tipping at least one more hike, and markets are still pricing tightening — not cuts. Here is what the trade war actually means for your mortgage rate, what the RBA has modelled, and how to position yourself when the outlook is genuinely uncertain.
What Just Happened — and Why It Matters for Rates
The US escalated tariffs on Chinese goods to 145%, comprising a 125% reciprocal tariff on top of an existing 20% rate — a level described as effectively a near-embargo on many goods categories. The ASX immediately shed $155 billion, its worst single-day performance since the March 2020 COVID crash (SBS News).
The significance for Australian mortgage holders is not direct — US tariffs on Australian exports are modest by comparison. The risk runs through China, Australia's largest trading partner. China buys more than one-third of all Australian exports. A US-China trade war that slows Chinese industrial output reduces demand for Australian iron ore, coal, and agriculture, which flows into weaker Australian growth and — eventually — the RBA's rate decisions.
Why the Trade War Matters to Australian Borrowers
| Channel | Mechanism | Risk Level |
|---|---|---|
| Direct US tariffs | ~$34bn Australian exports to US affected | Low |
| China slowdown | China buys ~$218bn of Australian exports/yr | High |
| Commodity prices | Iron ore, coal demand falls if China slows | High |
| Australian growth | Weaker exports → slower GDP → RBA may cut | Medium |
| Inflation (fuel) | Middle East conflict still pushing prices up | High |
The RBA's Three Scenarios
Rather than committing to a single forecast, the RBA has modelled three scenarios for how the trade war could play out — each with different implications for rates (AAP News, April 2026):
RBA's Three Trade War Scenarios
1. TRADE WAR ESCALATES: Full retaliation by all countries. Unemployment could reach 6% in Australia. RBA would be forced to cut rates to support growth.
2. TRADE PEACE: US and China reach a deal, tariffs reduced. Global growth stabilises. RBA continues hiking to contain domestic inflation.
3. BASELINE (current): Tariffs cause some disruption but trade flows adjust. RBA stays patient, decisions made meeting by meeting.
Governor Bullock described the current environment as "shifting and unusual uncertainty" and said the RBA is watching the US situation closely but cannot yet call what rates will do. The RBA's message: patience, not panic (SBS News, April 2026).
Where Banks Stand on Rates Right Now
Despite the tariff shock, the major banks are not forecasting cuts. The base case remains tightening:
Bank Rate Forecasts — As of April 2026
| Bank | Next Move | Peak Rate | Notes |
|---|---|---|---|
| Westpac | Hike (+25bp) | 4.85% | 3 more hikes: May, June, August |
| CBA | Hike (+25bp) | 4.35% | One more hike then hold |
| NAB | Hike (+25bp) | 4.35% | Watching trade war closely |
| ANZ | Hike (+25bp) | 4.35% | One more hike then hold |
Westpac forecast sourced from Westpac IQ, "Revised RBA rates view: two extra hikes, 4.85% peak, later reversal", 30 March 2026. Markets are pricing the next hike for the June meeting — slightly delayed from May — but are still pricing tightening, not easing.
AMP's chief economist Shane Oliver — an independent voice, not a major bank — is calling for cuts, but this is a minority view among forecasters. All four of Australia's major banks remain in the tightening camp.
What This Means for Your Mortgage
Here is how your repayments change under the two scenarios now in play:
Extra Monthly Repayments vs Today (4.10%), 25yr P&I loan
| Loan | Today (4.10%) | +1 hike (4.35%) | Westpac peak (4.85%) |
|---|---|---|---|
| $500k | $2,667/mo | +$73/mo | +$218/mo |
| $700k | $3,734/mo | +$102/mo | +$306/mo |
| $1M | $5,334/mo | +$146/mo | +$437/mo |
Approximate figures based on a 25-year principal-and-interest loan. Actual impact varies by lender, remaining term, and loan type.
The key message: plan for a hike, not a rescue. The dominant scenario across all four major banks is still tightening. The trade war introduces downside risk — but that risk has not yet translated into a change in rate direction.
How to Position Your Loan Right Now
- Plan for at least one more hike. Whether it comes in May or June, it's still coming. Make sure your budget handles 4.35%. Use our repayment calculator to check your numbers.
- Be cautious about long fixed terms. Fixing for 3–5 years right now means betting rates stay elevated for that entire period. If the trade war worsens and the RBA pivots, variable borrowers benefit first.
- A split loan is the most defensible hedge. Fix a portion for repayment certainty, keep the rest variable. In an environment the RBA itself describes as "unpredictable," flexibility has real value. Read our fixed vs variable guide for a full breakdown.
- Watch Q1 CPI data (due late April). This is the most important near-term data point. If inflation shows signs of easing, the case for pausing in May strengthens. If it surprises to the upside, hiking continues regardless of tariffs.
- Check your current rate. Whether rates go up or stay flat, being on a rate 0.5–1% above market is costing you money now. A broker review takes 30 minutes and costs nothing.
The Bottom Line
The trade war has introduced genuine uncertainty into Australia's rate outlook — but it has not yet changed the direction. The RBA is watching, not pivoting. Banks are still tipping hikes. Markets are still pricing tightening.
What has changed is the tail risk. If the trade war escalates to the point where Australia's growth and employment weaken significantly, the RBA's own modelling shows it would cut rates. That scenario is now more plausible than it was a month ago. It is not, however, the base case.
The honest advice for any borrower: plan for the hike that's coming, build a buffer for the next one, and structure your loan with enough flexibility to benefit if the outlook changes.
Written by Amit Narang, Mortgage Broker | Credit Representative 558902 of Outsource Financial Pty Ltd (ACL 384324)
Sources: SBS News, "Reserve Bank governor Michele Bullock says Australia 'well placed' to handle volatility", April 2026; SBS News, "ASX takes major hit amid fears of a US recession after Trump tariffs", April 2026; AAP News, "RBA watching US as tariffs set back economic growth", 2026; Westpac IQ, "Revised RBA rates view: two extra hikes, 4.85% peak, later reversal", 30 March 2026; RBA Statement on Monetary Policy, February 2026; Lowy Institute, "Trump's tariffs: Australia hit with a stick while our region was clobbered"; Australian Industry Group, "Research Note: The impact of US tariffs on Australian industry".
Not Sure How to Position Your Loan in an Uncertain Market?
We can review your current rate, model different rate scenarios for your loan balance, and help you decide whether fixing, splitting, or staying variable makes the most sense right now. No cost, no obligation.
Book a Free Loan Review