What does Trump 2.0 mean for Australia? We asked 40 economists
By Graham Cooke
Donald Trump’s 2024 presidential campaign was arguably the most unconventional in US history.
Across 117 rallies in 97 cities, Trump vowed to impose trade tariffs of up to 60 per cent on imports, introduce deep tax cuts, significantly boost military spending, gut the civil service, deport millions of immigrants and expand oil drilling in the Arctic.
As he prepares to return to the White House, how might these policies affect the Australian economy? To examine this, we surveyed 40 leading economists who took part in Finder’s Reserve Bank of Australia cash rate survey, seeking their predictions on how Trump’s return could reshape Australia’s economic landscape.
Their insights point to risks of a global trade war, opportunities in commodities and a heavy dose of unpredictability.
Tariffs, trade wars and their impact
The possibility of renewed trade tensions between the US and China has sparked concern among economists, especially since the steepest tariffs – up to 60 per cent – target Chinese imports (ironically including items such as the Trump bibles). Australia, as a key trading partner of China, could feel the ripple effects.
As it remains unclear how much of his rhetoric is mere bluster, Australia could find itself relying on its reputation as the lucky country.
Stella Huangfu from the University of Sydney said such tensions could disrupt global trade, reducing demand for Australian exports such as iron ore and coal and potentially hurting the economy.
However, she said rising US-China tensions might prompt China to find alternative suppliers, potentially boosting Australia’s commodity exports. Economists were divided on how these tensions might influence Australian inflation.
The deflationary camp
AMP chief economist Shane Oliver agreed with Huangfu that a global trade war could reduce demand for Australian exports. But he suggested this could lower inflation locally.
Kyle Rodda of Capital.com shared this view, saying Trump’s tariffs were likely to be deflationary. He said: “The greater risk is to future growth, which could weaken due to the impact of tariffs on the already vulnerable Chinese economy.”
Sean Langcake of Oxford Economics believed Trump’s second term would bring greater uncertainty but with minimal effects on Australia. “Tariffs will raise inflation in the economies that impose them, but we don’t think this will include Australia,” he said.
The inflationary camp
Mala Raghavan of the University of Tasmania, while saying it was difficult to predict the global economic outlook, said: “Global supply chains will experience substantial disruptions, considerably affecting the global value chain. All these could lead to inflationary pressure.”
Nicholas Frappell of ABC Refinery said Australia was unlikely to be directly targeted by Trump’s tariffs. But he said: “If significant tariffs are placed on China, Australia’s largest trading partner, Australia could be hurt by an overall slowdown in trade and possibly import inflation via a weaker AUD/USD.”
Property expert Michael Yardney echoed these thoughts: many Australian goods could rise in price, especially since commodities such as oil and gas are priced in US dollars.
A stronger US dollar, he said, could make imports more expensive, increasing inflationary pressures.
Politics
Agreeing that a trade war could heighten global volatility, Oliver said Elon Musk and Vivek Ramaswamy’s Department of Government Efficiency would be likely to create pressure in Australia to cut taxes and reverse the trend towards bigger government.
However, Trump may not deliver on all his promises. In 2016, Salena Zito of The Atlantic said Trump should be taken “seriously, but not literally”, a sentiment echoed by many commentators since.
Nicholas Gruen of Lateral Economics said Trump might not adhere to his campaign playbook. “If he does, the impact will be substantial but not monumental,” he said. “However, I expect he’ll trim his sails as advice arrives on how harmful going all the way could be.”
The bigger picture: positive, negative, or neutral?
Economists remain divided on whether a second Trump term would benefit or harm Australia. While 40 per cent believed the impact would be negative due to trade disruptions and inflationary risks, 23 per cent considered it neutral, citing limited direct trade ties with the US.
Meanwhile, 17 per cent identified potential benefits, such as increased commodity exports, and 20 per cent remained uncertain.
Although most economists cited uncertainty and volatility, Tim Reardon of the Housing Industry Association highlighted potential upsides, saying US-China trade tensions could create new export opportunities for Australia, particularly in agriculture.
A second Trump presidency could bring turbulence to the global economic order and Australia is likely to face challenges and opportunities. While direct trade ties with the US are limited, broader implications of Trump’s policies, particularly regarding China, could weigh heavily on key sectors such as commodities and exports.
The diversity of expert opinions highlights the uncertainty surrounding Trump’s impact on the Australian economy. As economist and former Labor MP Craig Emerson said: “Who knows? Donald Trump doesn’t know, and he won’t care.”
While it remains unclear how much of his rhetoric is mere bluster, Australia could find itself relying on its reputation as the lucky country. After all, as Trump once said, “everything in life is luck.”
Graham Cooke is the head of consumer research at Finder.
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