‘We are well prepared’: Jim Chalmers says not to panic over Trump victory

Treasurer Jim Chalmers has warned the Australian economy will not be immune from the fallout of a trade war between the United States and China if incoming president Donald Trump follows through on plans to impose sweeping tariffs on imports from America’s biggest economic competitor.

Chalmers, however, has moved to calm fears that a second Trump term will cause catastrophic damage to the national economy, revealing Treasury modelling has shown the president-elect’s promised trade policies would probably have only a mild economic impact on Australia in the short term.

In a blow to senior Albanese government ministers’ efforts to build ties with the incoming Trump administration, the president-elect revealed on Sunday that former secretary of state Mike Pompeo will not be given a role in his second White House term.

Treasurer Jim Chalmers (left) said the government was well prepared for a second Trump term.Credit: AP and Alex Ellinghausen

Foreign Minister Penny Wong and Defence Minister Richard Marles used recent visits to the United States to meet Pompeo, a champion of the AUKUS submarine pact who was widely tipped to be named as Trump’s defence secretary.

Chalmers will use an address on Monday to say that the Albanese government was “well placed and well prepared” for a Trump victory.

“Like any diligent country, Australia was ready for either outcome,” he will tell the Australian Institute of International Affairs.

Chalmers commissioned Treasury modelling on different trade and tariff policy scenarios in the lead-up to the election, including Trump’s promise of an across-the-board 20 per cent tariff on all goods entering the US.

“Treasury’s analysis demonstrated that we should expect a small reduction in our output and additional price pressures, particularly in the short term,” he will say.

“But specific features of our economy – like a flexible exchange rate and independent central bank, would help mitigate against some of this.”

The global impact of Trump’s protectionist trade policies, including his pledge to hit Chinese imports with a 60 per cent tariff, would be more substantial, according to the Treasury modelling.

“The timing of this, and the responses and ramifications that might follow – what economists call second-round effects – are difficult to predict,” Chalmers will say, according to his speech notes.

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

Analysis by accounting firm KPMG has found that if all Trump’s policies were implemented, Australia’s economic growth would be between 0.8 and 1.5 per cent lower than under current settings, a hit of $19 billion to $36 billion.

Former Reserve Bank of Australia board member Warwick McKibbin has also argued the Australian economy would suffer severe collateral damage from Trump’s policies.

Chalmers says he met prominent investor Scott Bessent, who is seen as a top pick to be Trump’s Treasury secretary, during a trip to Washington late last month.

In an increasingly globalised age, Chalmers will say that economic and foreign policy are not only interlinked but have become “almost indistinguishable”.

Trump announced on his Truth Social platform that neither Pompeo nor former United Nations ambassador Nikki Haley, who ran against him in the Republican primaries, would serve in his administration.

“I very much enjoyed and appreciated working with them previously and would like to thank them for their service to our country,” Trump wrote.

Foreign policy analysts have interpreted the announcement as an indication Trump plans to appoint figures from the populist MAGA (Make America Great Again) wing of the Republican Party to key roles rather than neo-conservatives who favour a more interventionist foreign policy.

Former US secretary of state Mike Pompeo, pictured, will not return to work in the Trump administration.Credit: AP

Speaking after Trump’s victory, Wong said: “I was pleased to meet with Mike Pompeo and other senior Republicans when I was last in the United States, and we made it very clear the priority we give to AUKUS, and we’re pleased that it’s shared.”

Former prime minister Scott Morrison is close to Pompeo and has worked with him in his role as a member of the strategic advisory board of defence firm DYNE.

Robert O’Brien, another Morrison business associate and AUKUS supporter, had been floated as a likely secretary of state or national security advisor in a second Trump administration.

However, according to The Financial Times, O’Brien has advised his consultancy clients that he will not join the administration.

Robert Lighthizer, a passionate advocate of tariffs, may return to work for Trump in his previous role as US trade representative.

Michael Fullilove, executive director of the Lowy Institute think tank, said: “Trump’s election presents particular challenges for Australia, given the closeness of the US–Australia alliance and the fact that some of Mr Trump’s impulses run counter to Australians’ instincts.

“There are question marks over US-China relations, trade and AUKUS.”

He added, however, that vice president-elect J.D. Vance had told him that he was a fan of AUKUS at this year’s Munich Security Conference.

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