close
close

Association-anemone

Bite-sized brilliance in every update

How Trump will affect Australia’s economy – Forbes Advisor Australia
asane

How Trump will affect Australia’s economy – Forbes Advisor Australia

Australian dollar

Trump’s election also led to an early pullback for the Australian dollar, which fell 1.5 cents against the greenback in the hours after Trump’s win.

On November 7, the day after Trump’s victory, the Australian dollar fell to 66 cents, its lowest level since August.

It came after a drop in the price of gold, which was driven by a stronger US dollar and expectations that inflation and interest rates would remain high or not fall as quickly under the Trump presidency.

RBA deputy financial markets governor Christopher Kent told a budget estimates hearing that Trump’s tariffs could push the US dollar higher (and other currencies lower).

“We don’t know how big and to whom they will be applied, but the US dollar should go up because US customers will buy less goods from the rest of the world and need less currency. , but it means less demand from the US for global goods,” he said.

Commercial rates

Which brings us to tariffs. Australia entered into a free trade agreement with the US about two decades ago, where almost 97% of our imports are now tariff-free.

Trump has long promised a radical protectionist stance that would impose trade tariffs of between 10 percent and 20 percent on global imports, with a 60 percent tariff on goods from China. It’s worth noting that Australia narrowly avoided new tariffs on domestically made steel under the first Trump administration.

Now experts are warning that direct tariffs on US imports not only hurt Australia’s exports, but could also spark a trade war between the US and China. China is Australia’s largest trading partner – accounting for almost a third of our two-way trade – which, as former US ambassador Arthur Sinodinos notes, puts Australia “in the crossfire”.

“If we have international trade wars, that will have an impact on global trade and investment,” he told the ABC.

“It will flow to Australia because of the impact on the Chinese economy if (Trump) can get the whole program through.”

Economist Steven Hamilton of George Washington University said the economy would likely be worse under Trump.

“You can’t expect to put a 10% to 20% tax on everything and expect inflation to go down,” Hamilton told the ABC.

“Tariffs will hurt American consumers, raise prices. They will have flow-on effects for other countries.

“It’s also going to have effects on the flow to Australia through China: if you put a 60% tariff on Chinese goods, they’re going to produce a lot less goods and they’re going to want a lot less (Australian) iron ore.”

Will AUKUS be scrapped?

One of the major defense agreements signed in recent times was the AUKUS pact, a tripartite agreement between Australia, the US and the UK. At the heart of the pact is the provision of nuclear-powered sovereign submarines, including the transfer of the Virginia-class submarines from the US to Australia.

Trump has a history of withdrawing from multilateral agreements he deems harmful to the US — the Paris climate agreement being the most notable in recent memory.

Now some experts question whether the AUKUS deal will make it to the cutting room, which would not be a problem for lobby group Labor Against War, which has called on the government to scrap the deal.

“It is completely intolerable for Australia to continue in lockstep with a militarized US government led by an unstable president,” spokesman Marcus Strom said.

However, Hockey believes not much will change about Australia’s defense links.

“Donald Trump views Australia very favorably when it comes to issues like national security. I think that will flow to AUKUS, that he will not want to change the relationship with AUKUS,” he said.