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Treasury modelling says indirect impact of Trump’s tariffs likely to be worse than immediate impact for Australia

  • Written by Michelle Grattan, Professorial Fellow, University of Canberra



Donald Trump’s trade and tariff policy would bring a small reduction in Australia’s output and extra price pressures, especially in the short term, according to Treasury modelling.

But our flexible exchange rate and the independence of the Reserve Bank would help mitigate some of the effects.

Treasurer Jim Chalmers, who commissioned the modelling ahead of the US election, will outline the analysis in a Monday speech to the Australian Institute of International Affairs. Extracts were released ahead of delivery.

Chalmers warns the analysis found that globally the potential impact of Trump’s policies – which include a general 10% tariff and a huge 60% hit on Chinese goods – was much more substantial than the immediate effect on Australia.

“The timing of this, and the responses and ramifications that might follow – what economists call second-round effects – are difficult to predict.

"But we wouldn’t be immune from escalating trade tensions that might ensue.

"This is consistent with the views expressed by the Prime Minister, Treasury Secretary, Reserve Bank Governor, and CEO of the National Australia Bank.”

Chalmers says the government is confident of being able to navigate, “as partners”, the changes a Trump administration would bring.

“Nobody should underestimate our ability to make it work.”

In his speech, the Treasurer also talks up the role of Australia’s Ambassador to Washington, Kevin Rudd, in preparing for the new administration. Rudd’s future has been questioned by some, given his past strong language about Trump. Last week he deleted his old social media posts.

Chalmers says: “Prior to the US election, Ambassador Rudd helped many of us build and deepen our connections across the political aisle. He introduced me to Lael Brainard, the Director of President Biden’s National Economic Council and a key figure in Vice President Harris’ orbit.

"And he introduced me to Scott Bessent [a candidate for treasury secretary].

"We had a long discussion after dinner, at the Ambassador’s residence, two Thursdays ago.

"Getting more than a hour with a key member of President Trump’s economic team 12 days before the election was a very valuable opportunity.

"We spoke about monetary policy, inflation, and tariffs and trade.”

Read more https://theconversation.com/treasury-modelling-says-indirect-impact-of-trumps-tariffs-likely-to-be-worse-than-immediate-impact-for-australia-243150

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