The utterly unwarranted 10 per cent across-the-board tariffs which Donald Trump has slapped on Australian exports to the US is the least of the pain we will feel from Trump’s “Liberation Day” trade war.
Australia’s economy, businesses, jobs and opportunity will ultimately be hit far harder by the broad global pain Trump has inflicted on our major trading partners and on the global trading system. Add to that the genuine risk that the fallout could trigger a market rout and even usher in a global recession, and it’s not an exaggeration to say we have witnessed one of the darkest days in world trade in our lifetime.
Trump chose to levy far higher tariffs than many economists were expecting, including 34 per cent for China, 26 per cent for India and 24 per cent for Japan, as well as a 10 per cent across-the-board tariff on all US imports for countries such as Australia.
Trump chose not to exempt Australia, even though we are not even remotely a bad trading partner with the US, given Australia is one of the few countries with a trade surplus with America and a free-trade agreement.
It was further evidence, if any was needed, that Trump pays little or no heed to the notion of alliances, loyalty or friendship with his tariff policy – just ask Canada – or even with his approach to global security – just ask Ukraine President Volodymyr Zelensky.
Trump’s “Liberation Day” tariffs fundamentally change America’s relationship with the world. It will hurt Australia’s relationship with our closest ally and will reinforce the voices of those calling for a recalibration of the foreign, security and economic relationship with Trump’s Washington.
Trump may only be president for the next four years, but the protectionist wall he has built for friends and foes will lead to similar walls being built around the globe – a bleak outcome for a middle power such as Australia, which relies on free markets for its trading prosperity.
Trust in international affairs takes years to build, and when broken like this cannot be rebuilt overnight when broken. So Trump’s tariff wall and his approach to global affairs will damage the so-called rules-based order well beyond the term of his presidency.
Trump’s tariffs are a cruel trick wrought upon the most vulnerable Americans who do not understand that they will hurt them more than anyone because they will pay higher prices for goods imported into the US. It will lead to inflation from a president who was elected on a promise to reduce prices.
Trump has concealed this ugly truth from ordinary American workers by packaging it up with the pretty bow of nationalism, saying it will lead to American jobs and factories “roaring back”.
Nothing is final with Trump, and he has made it clear he is open to negotiations over these tariff levels – a sign that he will leverage them for other outcomes.
Yet these new tariffs on many countries are so large, it is hard to see Trump walking away from them entirely.
The ultimate check for Trump on these tariffs in the short term will be global markets. No modern president has attached more importance to Wall Street than Trump, who frequently boasted about its strength during his first presidential term. The market has been battered so far during his presidency, largely over his tariff policy and also by the general chaos of his administration.
If Wall Street continues to plunge in the months ahead, you can expect Trump to take moves to temper the extent of these Liberation Day tariffs.
But there is no sugar coating what Trump has done to the world trading system. He has targeted America’s friends and foes with massive punitive tariffs on the false premise that they will make America great again.
It is voodoo economics, which will hurt all Australians, and Trump has sadly appointed himself as the witchdoctor-in-chief.
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