This week you’ll see loud headlines about new US tariffs aimed at parts of the pharmaceutical industry, and fresh brinkmanship in Washington that could end in a government shutdown. Noise levels are high. Signal, less so. Dr Shane Oliver, AMP’s chief economist, argues the risks to Australian investors are smaller than the headlines suggest.

What’s happening?

Last week the Trump administration announced new tariffs aimed at parts of the pharmaceutical industry. The move targets selected drugs and inputs across the supply chain and triggered a round of headline risk for health care stocks globally.

At the same time, Congress is staring at an end-of-September deadline to pass a funding bill. Without a deal, parts of the US government would shut down until lawmakers agree on a stop-gap or a full-year package.

Those two storylines have converged into this week’s market narrative. Investors are watching tariff details trickle out while tracking whether Capitol Hill can avoid a lapse in funding. The mix has lifted the volume on short-term noise.

Enter AMP's chief economist, Dr Shane Oliver.

Steady as she goes, says AMP chief economist

Oliver’s rationale is simple: expect theatre, expect some volatility, but do not overreact.

A US shutdown will create a lot of drama but is unlikely to have much economic impact. To pass a funding bill the Republican’s need 6 Democrat Senators but the Democrats want expiring health care subsidies to be extended in return. It's possible they agree a stop gap funding measure until November because that will be closer to when the subsidies expire and then allow a shutdown in order to achieve maximum political advantage.

Either way the impact of a shutdown is likely to be minor: since 1976 there has been 20 US government shutdowns with an average duration of 8 days; the last one was in 2019 and lasted 34 days; the impact on GDP has been minor as any disruption is made up for immediately after the shutdown ends; similarly the impact on share markets has tended to be minor although it can be associated with volatility. That said it could delay key jobs and inflation data releases. And it may be more of a risk now with high price to earnings valuations for shares.

When it comes to pharma, Dr Oliver says that the full impact is unclear, but it's likely to be negligible. That's for a few reasons:

The impact of the pharmaceutical tariffs on Australia is unclear but is likely to be small. Last year Australia exported $2.1bn of pharmaceuticals to the US. Only 6% of this was medicines which is less than 0.01% of GDP. The bulk of it was blood products from CSL and it's unclear how much of that would be branded or patented and CSL has indicated it does not expect to be impacted given its heavy US manufacturing presence. But even if all of our pharmaceutical exports are impacted the effect on the economy would be minor as last year they were less than 0.1% of GDP and much would be diverted to other markets.

For Australian investors, that points to a practical playbook. Keep an eye on CSL headlines and pharma peers for idiosyncratic updates, but do not treat the tariffs story as a macro shock. Watch for delayed US payrolls and inflation prints if a shutdown happens, since timing can tug at short term sentiment. Valuations are elevated, so swings can feel sharper, yet history suggests drawdowns tied to shutdowns have been brief.

Hold your nerve, keep your time horizon, and treat the next few weeks as a test of patience rather than a test of your portfolio. The noise is loud. The experts here say the hit should be small.