Treasurer Jim Chalmers has warned Australia will feel the impact of trade tensions resulting from the election of Donald Trump as US president, warning of potential economic challenges.
In a speech to be delivered today at the Australian Institute of International Affairs, 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 models point to a “small reduction” in Australian output and increased price pressures in the near term. However, Australia’s flexible exchange rate and independent central bank will help mitigate some of these impacts. “We would not be immune to the escalation of trade tensions that could result,” he is expected to say, adding that the government is “well positioned and well prepared” for potential challenges.
Trump’s campaign promise to impose tariffs – up to 60% on Chinese goods – has raised concerns among economists. AMP chief economist Shane Oliver noted that such measures could shave up to 1.5% off Australia’s economic growth.
While acknowledging the risks of an “uncertain world” with economic vulnerabilities, Chalmers 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 U.S. Treasury Secretary pick, to discuss policies including tariffs and monetary strategy.
Despite the potential challenges, Chalmers is confident in Australia’s ability to manage the knock-on effects on the economy. “No one should underestimate our ability to make things work,” he will say, reiterating the strong and enduring nature of the US-Australia alliance.