Tariff turmoil enters the federal election contest

The federal election contest has been thrown a curve ball by Donald Trump’s dramatic tariff escalation and the stockmarket turmoil that has followed. Anthony Albanese was moderate and considered in his initial response to the inclusion of Australia in Mr Trump’s tariff wall. Trade Minister Don Farrell said he was “still talking” with counterparts in the US and “hopeful we might be able to come to another arrangement”. Peter Dutton promised to travel to the US within 60 days of the election if he won, and to meet Mr Trump to negotiate a deal. He ­attacked the Prime Minister for not getting “a phone call or a meeting with the President”.

Personal contact is essential but the Opposition Leader must be careful how he prosecutes the tariff issue or risk being cast as a party to Mr Trump’s erratic behaviour. As Dennis Shanahan has written, the safest ground for Mr Dutton is to maintain a focus on what he will do about petrol prices and cost of living. Mr Albanese already has framed a new campaign strategy for Labor to highlight “uncertain” and “perilous” times to build on the advantage of incumbency. The potency of this strategy is likely to increase if volatility persists in financial markets as other nations begin to push back against the Trump tariffs. Unless he is persuaded to change course, Mr Trump is signalling the end of globalisation and a return to industry protection. This will have big implications for currency values, inflation and global growth. A meltdown in financial markets could force central banks to begin a dramatic series of cuts to official interest rates, as has happened in the past.

Financial market turmoil threatens to take the focus away from Mr Dutton’s strengths of immigration, law and order, and high energy costs. Throughout this week Mr Dutton has been under pressure to find a way to cut through on what should be the Coalition’s strongest suit of economic management. He has been unwilling to set out a clear plan for tax reform or how to restore productivity to the economy and push back against the punitive industrial relations changes rushed through by Labor.

Another global financial crisis will make reforms in these areas more urgent but make the job of selling them more difficult. First Mr Dutton must convince voters that he has a better plan than Labor to manage the economy. This should not be difficult given the Albanese government’s record of high spending, big borrowing and lack of interest in bringing the budget back into structural balance. On tariffs, however, the truth undoubtedly is that no side of politics would have been able to dissuade Mr Trump from his April 2 plans and approach. It is important that Australia maintain dialogue with the Trump administration and argue for open and fair trading arrangements. But it is still possible that there will be further surprises on biosecurity and pharmaceuticals. Overall, the US is not a big consumer of Australian products and the biggest impact on our economy from Mr Trump’s trade interventions will be as a result of what reciprocal actions are taken by other countries, principally China.

The Albanese government has highlighted rare earths and minerals as a bargaining chip that Mr Trump will understand. The US and Australia already have agreements to explore and jointly develop our reserves of these commodities to provide an alternative to supplies from China. Rare earths and minerals are essential to the technology world of tomorrow. But the experience with producing them is that it is a costly and difficult business in which China rigs the market to make competition uneconomic. At first blush, quasi-nationalising the domestic industry by building government stockpiles purely to do deals with Mr Trump does not make sense.