Former US ambassador Arthur Sinodinos warned it would take “direct and persistent efforts” to achieve an exemption for Australia given Trump has returned to power with renewed determination to wield tariffs as an economic weapon.
Tariffs or not? The dramatic policy announcements from the Trump administration have rocked Wall Street.Credit: AP
Dawes said Australia would also be “indirectly hit” via tariffs on China, its biggest trading partner.
“At the moment, we are looking at what will happen to China,” he said. “We saw Canada and Mexico retaliate. But we haven’t seen that happen [with China] so far. ”
A 10 per cent tariff on Chinese goods took effect after Dawes made those comments, and China swiftly retaliated, saying it would impose tariffs on some products imported from the US including oil and liquefied natural gas. Trump has flagged his administration plans to speak with Beijing “probably over the next 24 hours”, raising the possibility of a potential deal with China as well.
“If we can’t make a deal with China, then the tariffs will be very, very substantial,” he said.
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Twidale expects the Australian dollar to remain under pressure over coming months.
“I don’t think Australia is going to be hit with its own tariffs. The issue for Australia is our close links with China,” he said.
“Our dollar is often traded as a proxy currency for China. And I think we’re going to see it under pressure,” he said, predicting the Aussie dollar will trade under 60 US¢, “and probably quite comfortably for a chunk of this year”.
Betashares chief economist David Bassanese also doubts that Trump will implement direct tariffs on Australia as the country is “a relatively small fry”.
He said it was difficult to predict how Trump’s policy argy-bargy would hurt the Australian economy and currency, and pointed to the bigger risks faced by the US economy.
“Trump said he’d raise tariffs, and then he’s pulled back,” he said. “He’s waving this big stick, and we just don’t know whether he’ll make it land on someone, or just keep wildly waving it around.
“If he does go ahead with tough tariff increases … it actually has a big risk for the US economy because it will probably put up inflation at a time when the Fed is still saying it’s too high. That could possibly rule out US rate cuts further at a time when the equity market’s pretty overvalued.”
Bassanese doesn’t think Trump will proceed with severe tariffs because of those risks to the US economy and financial markets.
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“He doesn’t care about anyone else, but the rest of the US economy and Wall Street will probably cause him to pull his punches,” he said. “This should support the Aussie dollar holding, possibly around current levels, but certainly holding above 60¢.
“But a full-blown trade war and a Chinese devaluation would be the big risk factor for the Aussie dollar.”
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