BREAKING NEWS PETER VAN ONSELEN: The good, bad and VERY ugly consequences for Australia in Trumps Liberation Day tariffs
Donald Trump’s tariffs announcement is wild.
Donald Trump’s tariffs announcement is wild. We all knew it was coming, the date put in people’s calendars well in advance, the rough details somewhat known beforehand.
But it never seemed real until it was formally announced. Now it is, delivered alongside some bizarre logic underpinning the decision making to slug nations all around the world with new trade tariffs ranging from 10-49 percent.
In this context, to be glass half full just for a moment, Australia didn’t do too badly. A 10 percent tariff is at the lowest end of Trump’s new protectionism, but it will still cripple if not destroy the sectors it impacts.
Aussie beef exports to the US are now in the deepest of perils. Their capacity to compete with a 10 percent tariff soon to be applied is questionable.
Here is what Trump had to say just a short time ago on the ‘Australia bans’:
‘They’re wonderful people, and wonderful everything — but they ban American beef, he said. They wont take any of our beef.
They dont want it because they dont want it to affect their farmers and you know, I dont blame them but were doing the same thing right now starting at midnight tonight.’
His pitch is all about reciprocity….payback for what other nations do.
President Donald Trump wields a placard displaying his reciprocal tariffs on Thursday morning Australian time
The President fronted the media brandishing a placard displaying what he claims are the tariffs charged on US goods entering other countries, listing them one by one alongside his reciprocal new tariffs.
The President claims they are more than reasonable because they come in at about half of what he claims other nations are penalising US exports.
The problem with this logic is what Trump and his administration uses to count as the trade barriers of other nations.
On his charts he cites ‘currency manipulation’, which is a rather subjectively defined category allowing Trump to pop in almost any number he wants to. Thereby allowing him to pop in any new tariff at half of that figure alongside it.
We are living in bizarro world. Speaking of which, apparently Anthony Albanese had dinner last night with Aussie golfer Greg Norman, to workshop how best to deal with Trump’s impending move.
Seriously? That’s the Albo strategy? Chat to a bloke who has played a few rounds with the President to get his searing insights into how to get us out of this mess. What a joke. I hope they at least ate a prime cut of Aussie beef while discussing how to solve the world’s problems.
The suggestion coming out of Team Trump is that because Australia has a Goods and Services Tax (GST) of 10 percent it’s only fair that the US impose 10 percent tariffs on Aussie exports.
But the GST applies to all goods, or at least consistently to imported and domestically produced goods. It’s not a feature of protectionism akin to tariffs. It doesn’t tax imports more.
We are living in bizarro world, writes Daily Mail Australia Political Editor Peter van Onselen
As Steve Hamilton, Assistant Professor of Economics at George Washington University in Washington DC, tells Daily Mail Australia: ‘To suggest the GST is a trade barrier exposes this exercise for the empty pretence it is’.
On one of his charts Trump lists a bunch of Pacific Islands many Americans probably couldn’t even name that are going to be hit by his new tariffs. Amongst them is Norfolk Island, which will incur a 29 percent tariffs on its exports to the US.
It’s not even a country, it’s part of Australia! More importantly whatever Norfolk Island exports to the US would be a literal drop in the Pacific Ocean relative to other global exports.
READ MORE: Wall Street stocks drop like a stone
Futures tracking the Nasdaq - the technology heavy index - fell by as much as 3.3 percent as Trump spoke in the White House Rose Garden
So bizarre.
Trump’s purpose is for these tariffs to comply with his pledge to make America great again. A muscular move aimed at appearing tough and ready to do what’s necessary to revive home grown American industries, especially in the key swing states that delivered Trump his victory last year.
Let’s defer to Professor Hamilton one more time on how that’s likely to play out:
‘It is about making America great again by lifting up the drawbridge to the rest of the world. But all it will really do is make America poor again by raising the prices paid by American consumers and lowering the wages earnt by American workers. This is the end of American greatness.’
‘The emperor has no clothes.’
These tariffs aren’t about reciprocity as claimed. They won’t raise revenue for the US as touted. And so far as a global economic strategy goes they will be disastrous for the US economy and much of the rest of the world.
Put simply, they are a pig ignorant backwards step after decades of trade liberalisation. And it is a Republican President doing it.
While much of the world will view this through the prism of the economic consequences that will now hit hard because of Trump’s bold and foolhardy move, here in Australia there are immediate political ramifications to also consider.
Will this help or hurt Peter Dutton’s election campaign? He’s considered to be more likely to get better access to Trump than Albo, but Labor seeks to paint him as Trump-like and therefore dangerous.
Will the sheer craziness of this move by Trump therefore make Dutton appear less electable, and feed into Labor’s scare campaign?
On the other side, Albo is widely seen as being a weak and ineffectual PM, according to the polls. Will that be exposed and exacerbated by any failure to prevent this, or get it overturned? That will certainly be the line of attack the Coalition will push on the campaign trail, even though as already mentioned Australia did better than most countries in what is an overall bad situation.
The new tariffs will almost certainly cause the RBA to cut rates, given the destabilising impact they will have on our economy. But that at its earliest won’t happen until next month after election day, on the first Tuesday of May. So there isn’t any political gain in that timing.
The broader point politically is that it is now more obvious than ever that we live in uncertain economic times. Does that favour the incumbents, like it usually does? Or does it favour the Coalition because they are seen as the better economic managers according to the polls?
Either way, Trump has just made everyone’s lives harder: his citizens lives, Australians, indeed anyone at the mercy of the global trading system.
Which is pretty much everyone on the planet.