Treasurer Jim Chalmers has cautioned that Australia will feel the impact of trade tensions arising from Donald Trump’s election as US president, warning of potential economic challenges.
In a speech set to be delivered at the Australian Institute of International Affairs today, Chalmers will outline Treasury’s findings on Trump’s proposed trade policies, which include significant tariffs on Chinese imports and levies on other foreign goods.
Treasury modelling indicates a “small reduction” in Australia’s output and heightened price pressures in the short term. However, Australia’s flexible exchange rate and independent central bank will help mitigate some of these impacts. “We wouldn’t be immune from escalating trade tensions that might ensue,” he is expected to say, while adding that the government is “well-placed and well-prepared” for the potential challenges.
Trump’s campaign pledge to impose tariffs — as high as 60% on Chinese goods — has sparked concerns among economists. AMP’s chief economist Shane Oliver noted that such measures could shave up to 1.5% off Australia’s economic growth.
While Chalmers will acknowledge the risks of an “uncertain world” with economic vulnerabilities, he praises Australia’s diplomatic efforts, crediting Ambassador Kevin Rudd’s work in Washington, DC, for fostering important connections. Chalmers met with Scott Bessent, a potential US Treasury Secretary pick, to discuss policies including tariffs and monetary strategy.
Despite the potential difficulties, Chalmers has confidence in Australia’s ability to manage the economic ripple effects. “Nobody should underestimate our ability to make it work,” he will state, reiterating the strong and enduring nature of the US-Australia alliance.