Australia will not be immune from increasing international trade tensions following the election of Donald Trump as United States President, according to Australian Treasurer Jim Chalmers.
He said financial markets had responded dramatically to the victory of Trump, who is expected to lift U.S. tariffs on China and other countries, with shares surging and bond prices falling, but Australia’s relationship with the U.S. was strong and enduring.
“Of course, we expect the incoming U.S. administration to bring a different suite of policies. And we are confident in our ability to navigate that change, as partners,” Chalmers said in a speech to the Australian Institute of International Affairs.
“Nobody should underestimate our ability to make it work. We are well placed and well prepared.”
He said Australia was ready for either outcome in the election and he had commissioned Treasury modelling on different trade and tariff policy scenarios.
The analysis demonstrated Australia should expect a small reduction in output and additional price pressures, particularly in the short term, but a flexible exchange rate and independent central bank would help mitigate against some of this.
“Globally – the impact was much more substantial,” Chalmers told his audience.
“The timing of this, and the responses and ramifications that might follow – what economists call second-round effects – are difficult to predict.
“But we wouldn’t be immune from escalating trade tensions that might ensue.”
Chalmers said although nobody would win from a trade war, Australia had more at stake than most because traded goods and services represented about half of its economy, compared with a quarter for the U.S. and less than one third for the Euro Area.
“As the PM (Prime Minister) pointed out, we need a global economy which is open and where everyone plays by the rules,” he said.
China accounts for almost 25% of Australia’s trade, but only 10% for the U.S.