‘Seismic’: Treasurer reveals impact of Trump’s trade war

Treasurer Jim Chalmers has issued a dire warning over how Donald Trump’s new trade war will hit Australia’s economy.

Treasurer Jim Chalmers says Donald Trump’s new trade war will harm Australia’s economy far more than any direct tariffs.

His comments came ahead of his pre-budget speech in Brisbane on Tuesday, where he will outline how the spillover effects of trade tariffs will have “consequences” for Australia.

“The direct impacts are concerning but manageable. It’s the broader indirect impacts that come from this serious escalation of trade tensions around the world, which is much more concerning to us,’’ Dr Chalmers told ABC radio on Tuesday morning.

Treasurer Jim Chalmers says Australia won’t fight Trump’s unfair tariffs through retaliation. Picture: NewsWire / Glenn Campbell

“This is a new world of uncertainty and the pace of change in the world when it comes to rewriting the rules economic engagement has quickened since the new administration took office in the US.

“And so some of these developments, they’re not surprising, but they are seismic.

“And for Australia, we have a lot at stake as a trading country. And so what we need to do is, first of all, understand the impacts, direct and indirect impacts are far more concerning, and our strategy in the budget and in our economic plan is not to go for retaliation, but to go for resilience, to make our economy more resilient at a time of very serious global economic uncertainty.”

US President Donald Trump imposed 25 per cent tariffs on steel and aluminium imports to the US last week. Picture: Brendan Smialowski / AFP

The flow on effects of a global trade war will deliver a hit to Australia’s economy up to four times bigger than the direct effects of US tariffs, as businesses and farmers call for a “calm” approach to ongoing talks with the Trump administration.

The severe impact of an escalating tit-for-tat trade dispute modelled by Treasury officials has strengthened the case for Australia not retaliating with its own tariffs even if US President Donald Trump follows through on his threat to impose broader import taxes from next month.

“In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices,” Dr Chalmers will say in his pre-budget speech in Brisbane.

He will reveal Treasury has estimated the 25 per cent tariff on steel and aluminium imports will deliver a GDP hit of less than 0.02 per cent by 2030, but adding the indirect impacts this rises to 0.1 per cent.

Business Council of Australia chief Bran Black says a ‘calm’ approach to tariff talks is best. Picture: NewsWire / Martin Ollman

Dr Chalmers will say Australia’s response to Mr Trump’s “disappointing, unnecessary, senseless and wrong” tariffs will not include retaliation.

“Our response to this will not be a race to the bottom on tariffs,” he will say.

“Because more and higher tariffs would harm, not help.”

Labor and the Coalition will likely be in the middle of the federal election when Mr Trump announces a fresh round of reciprocal and agricultural import taxes, due April 2 at the earliest.

Business Council of Australia chief Bran Black said the next two weeks of lobbying were critical, insisting Australia has “strong arguments” for why it should be excluded from further tariffs.

Mr Black told News Corp there were two main categories of concern, firstly exports that could be specifically targeted like lamb and beef – worth some $5 billion a year – and secondly any US retaliation to “non-tariff barriers” like the GST and Pharmaceutical Benefits Scheme.

He said the government had done a “good job” making Australia’s case against tariffs so far despite failing to secure an exemption on steel and aluminium taxes.

“It’s important that Australia continue to adopt the calm, measured and logical approach to trying to deal with this issue that we have taken so far,” he said.

National Farmers Federation President David Jochinke said the sector was taking the tariff threat “extremely seriously” and reaching out to the Trump administration through as many avenues as possible.

NFF president David Jochinke says the industry is taking the threat of agriculture tariffs very seriously. Picture: Supplied

Mr Jochinke said work was also underway to engage with producers and buyers in the US who will still need imported red meat to keep up with demand.

“Even if they do put a tariff on imported beef into the US, they’ve got to find it from somewhere, and we want to be the preferred supplier,” he said.

Mr Jochinke said the election timing was a “challenge” for Australia to respond to any April tariff announcements.

“We have to just make sure that there is a very clear argument that either side of politics can pick up and run with as far as the importance of trade, our value to the US, the fact we have a long history of being a reliable supplier,” he said.

“These are the key (reasons) … why the Trump administration should view us differently to other nations.

Originally published as ‘Seismic’: Treasurer reveals impact of Trump’s trade war