Treasurer Jim Chalmers expects higher inflation and lower output as a result of the US election result, and warned “nobody wins” in a US-Sino trade war.
Treasurer Jim Chalmers expects higher inflation and lower output as a result of the US election result, and warned “nobody wins” in a US-Sino trade war.
Speaking at the Australian Institute of International Affairs national conference gala dinner on Monday night, Dr Chalmers said the commonwealth had been preparing for the result of the US election.
“Of course, we expect the incoming US administration to bring a different suite of policies, and we are confident in our ability to navigate that change, as partners,” he said.
“I’ve said publicly before that I commissioned Treasury modelling on different trade and tariff policy scenarios so that I could brief colleagues.
“In short, Treasury’s analysis demonstrated that we should expected a small reduction in our output and additional price pressures, particularly in the short term.”
The incoming Trump administration has flagged plans to impose tariffs on foreign goods imported to the US – including 60 per cent tariffs on goods made in China.
The proposed tariff rate is much higher than those imposed by Trump during his first term, which were between 7.5 and 25 per cent.
And it’s not just China in the firing line – with Trump touting 20 per cent blanket tariffs on imported goods from other countries during his election campaign.
He also promised the European Union would have to “pay a big price” for not buying enough US goods.
And Trump has flagged a renegotiation of the existing USMCA trade pact between the US, Canada and Mexico.
Dr Chalmers went on to warn escalating tensions across the world would impact Australia.
“A recent IMF report showed that while trade is deepening between countries aligned geopolitically, it is declining between those who are not,” he said.
“We are more exposed than others to this kind of global fragmentation.
“Traded goods and services are about a quarter of the US’s GDP. For the euro area that number is a bit less than a third; but for Australia trade is half our economy.”
With China accounting for more than one quarter of our total trade, Dr Chalmers said Australia could benefit from de-risking trade.
“Because of our combination of industrial, geographical, geological, meteorological, and geopolitical advantages, we stand to be among the biggest beneficiaries of de‑risking,” he said.
“We can make a bigger contribution to more resilient, diverse regional and global supply chains for energy, technology and critical minerals.
“And we can develop new industries to respond to global demand for green metals and green hydrogen.”
