Forget Tuesday’s budget. Trump’s liberation day will shape the world

Tuesday’s federal budget is vital to the re-election chances of Anthony Albanese.

But the political importance of March 25 is likely to be overwhelmed by the geopolitical and global economic fallout from April 2.

Prime Minister Anthony Albanese is poised to call an election in the days after the budget.Credit: Dominic Lorrimer

That’s the day US President Donald Trump starts outlining the suite of reciprocal tariffs his administration have promised to impose on allies and foes.

Trump is calling it “liberation day” but economists and politicians around the world are using more colourful words to describe the probable fallout from what is looming as a global economic shock.

In a string of interviews leading up to Tuesday, Treasurer Jim Chalmers has consistently used the word “uncertain” to describe the global outlook. While not directly referencing Trump, that’s the uncertainty that is keeping Chalmers and Treasury officials awake.

There’s the direct uncertainty of what Trump’s tariff plans might do to Australian exports such as beef and medicines and whether the US will demand changes to the Pharmaceutical Benefits Scheme.

Treasurer Jim Chalmers will note the uncertainty facing the economy, in part due to Donald Trump’s tariffs.Credit: Alex Ellinghausen

That’s enough to worry a treasurer and a prime minister.

But liberation day creates a broader uncertainty. A tariff war that slows China’s economy – which accounts for about a third of all Australian exports – or hits the European Union, Japan or South Korea is a global issue.

Albanese is poised to call an election in the days after the budget. Trump’s tariff plan could drop soon after the prime minister has visited the governor-general.

Australians won’t be on their lonesome in deciding their next government under the shadow of Trump.

Canadian Prime Minister Mark Carney launched his election campaign on Sunday; voters there will go to the polls on April 28. Carney described Trump’s tariffs and the president’s musing about turning Canada into America’s 51st state as “the most significant crisis of our lifetime”.

We already have evidence of what April 2 could mean.

Steel prices in the United States have soared by almost a third since Trump announced his first round of tariffs in February. Those higher prices have been great for American steelmakers and overseas ones, such as Australia’s Bluescope, that have a large production presence in the US.

But that price spike is feeding into everything that uses steel (and aluminium). The carmaker, the washing machine manufacturer, the home builder – all are now paying more in a development that ensures inflation will rise.

That’s why last week, the Federal Reserve downgraded its forecasts for American economic growth this year while upgrading its expectations for inflation.

That’s just from steel and aluminium. Now magnify that on just about any item going into the US.

Peter Costello had to pull together a budget while dealing with the east Asian financial crisis. Wayne Swan had to contend with the global financial crisis. Josh Frydenberg cobbled together a budget in the depths of the COVID-19 pandemic.

But a pre-election budget to be released before the world sees Trump’s latest assault on the global economy? That’s a new level of uncertainty.

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