A financial sector economist has predicted the tariff policy of the incoming Trump administration will not affect Australia directly, but may have an impact via trade deals with other countries targeted by this future United States government strategy.
“Who loses out of this [proposed imposition of tariffs]? Who trades with the US? Well, Australia doesn’t trade much with the US and so we will not be directly affected by tariffs imposed by the US,” Challenger chief economist Dr Johnathan Kearns noted during a recent industry briefing.
“It’s also likely that we would be a low target for the US because we actually import more from the US than we export [to it] and President Trump thinks that selling more is better.”
To this end, Challenger, Macrobond and IMF data indicates Australian exports to the US account for approximately less than 1 per cent of that nation’s gross domestic product (GDP) with regard to G20 countries.
However, Kearns acknowledged the Australian economy may feel the flow-on effects from the tariffs the Trump administration may impose on other countries.
“[Having said that], we will be hit indirectly because 7 per cent of our GDP comes from trade with China. [That puts us] on top of the list of [G20 countries] that trade with China,” he explained.
The Challenger. Macrobond and IMF data shows exports from China make up around 3 per cent of US GDP.
Kearns took the opportunity to illustrate the extent to which this will impact the domestic economy.
“There have been some estimates that if full tariffs are imposed by the US on China, China’s growth could be 2 per cent slower,” he said.
“So that flows through to Australia with lower commodity prices, which means lower government revenue and [the like].
“So there are certainly things to watch on this front for the Australian economy.”
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