Treasurer sounds the alarm over impact of US President Donald Trump’s new trade war

Treasurer Jim Chalmers has sounded the alarm over the “seismic” economic impact of US president Donald Trump’s new trade war.

Treasurer Jim Chalmers has sounded the alarm over the “seismic” economic impact of US president Donald Trump’s new trade war amid reports of a new threat to $30 billion in beef exports and pharmaceuticals.

Attacking Mr Trump’s tariff agenda as an act of economic self-harm that is self-defeating and self-­sabotaging, Dr Chalmers will warn in a major speech on Tuesday that the impact of the trade war could be up to four times larger than the direct effects of tariffs on our economy.

The OECD outlook released on Monday night revised up ­global inflation forecasts and downgraded GDP growth projections warning of the impact of trade barriers and uncertainty on inflation.

In the speech, the Treasurer warns that while the impact of US steel and aluminium tariffs will be 0.1 per cent of GDP by the end of the decade it could get much worse.

“The direct impacts are concerning but manageable. It’s the broader indirect impacts that come from this serious escalation of trade tensions around the world, which is much more concerning to us,’’ Dr Chalmers told ABC radio on Tuesday morning.

Treasurer Jim Chalmers. Picture: NewsWire / Glenn Campbell

“This is a new world of uncertainty and the pace of change in the world when it comes to rewriting the rules economic engagement has quickened since the new administration took office in the US.

“And so some of these developments, they’re not surprising, but they are seismic.

“And for Australia, we have a lot at stake as a trading country. And so what we need to do is, first of all, understand the impacts, direct and indirect impacts are far more concerning, and our strategy in the budget and in our economic plan is not to go for retaliation, but to go for resilience, to make our economy more resilient at a time of very serious global economic uncertainty.”

‘8 per cent’: New tariff threat

Overnight, the Australian Financial Review has reported that Australia faces a potential tariff of between 2 per cent and 8 per cent on the $30 billion of exports sold to the United States, such as beef and pharmaceuticals.

This compares to rates of 25 per cent to 100 per cent Mr Trump has threatened in relation to China, Canada, Mexico and Europe on select goods.

By April 2, Mr Trump is expected to reveal the next steps for imposing reciprocal tariffs. Australia does not impose trade tariffs on the US.

“We’re engaging across a number of ministers in our government. Ambassador Kevin Rudd is doing a good job engaging with American counterparts as well,” Dr Chalmers said.

“Obviously, the imposition of any additional tariffs would be very concerning. We’re not unique here. We’re not uniquely disadvantaged by the sorts of tariffs coming out of DC, but we deserve better as a long term partner and ally, these sorts of tariffs are self-defeating.

“They’re a recipe for less growth and higher inflation, not just in the US, but around the world. And that’s one of the reasons why the OECD overnight downgraded their expectations for growth because of these trade barriers and this escalation of trade tensions and so it’s very concerning to us.”

US President Donald Trump talks to members of the media. Picture: Jim Watson / AFP

Speaking at the Queensland Media Club in Brisbane on Tuesday, Dr Chalmers will say the spillover effects of trade tariffs would have “consequences for us”.

“Treasury estimates the direct hit to GDP from steel and aluminium tariffs would be less than 0.02 per cent by 2030,” he will say.

“So the direct overall impacts on Australia should be manageable. But when you add in the indirect effects, the hit to GDP could be more like 0.1 per cent by 2030.

“Even in the most ­benign scenario, global growth over the next three years is expected to be its weakest since the 1990s”.

He warned the tariff threat will hurt the United States.

“They are self-defeating, and self-sabotaging,” Dr Chalmers will say.

“More trade restrictions mean less growth and more inflation. The impacts of what we’re seeing will not be confined to one industry, or one community, or one quarter. These were two of the core conclusions of the OECD’s outlook report overnight.

“Trade barriers are a key reason why its economists expect slower growth. At the same time, they think ­inflation will linger for longer across the globe. The risk of recession in the world’s largest economy is rising too.”