This week US President Trump confirmed all Australian steel and aluminium exports to the United States will be subject to a 25% tariff.
Incoming NAB Chief Economist Sally Auld spoke to Fran Kelly on ABC Radio National alongside ANU Economics Professor Warwick McKibbin, about what a tariff war means for Australia’s trading power, the strength of Australia’s manufacturing and her view on the global economy moving forward.
Below is Dr Auld’s commentary on key topics, listen to the full discussion on The Radio National Hour.
Australia will be able to navigate tariffs from a position of strength
“At a micro level when we think about manufacturers of those products who export aluminium and steel into the US from Australia, this is not a good outcome for them.
“But I think if we zoom out a bit and take a bigger perspective and try and think about what if anything it means for the overall macro economy, I think the answer is probably not very much.
“The reason for that is that the dollar amount that we actually export in aluminium and steel to the US is actually very, very small. If you work on 2023 numbers it’s not even $1 billion and it is a really tiny part of our overall export basket. So, if there is less demand for those products from US importers or US customers, that’s not a great thing for the local firms here in Australia but it’s something that the broader economy will be able to navigate without too much drama at all.”
A global trade war and shift in global economic order
Dr Auld spoke about the reality of “phase two” of the tariff changes, where countries were now retaliating.
“What’s happened subsequently (since US President Trump was elected) is that yes, tariffs have been increased on Chinese imports but the breadth and the magnitude of tariff increases elsewhere – Canada, Mexico, Europe, UK even Australia – is far more significant and much bigger than expected.
“There is no doubt we are very much on the path to a global trade war. We are well into what I would argue is a really significant regime change, both economically and politically, globally.
“We’re transitioning from a world that most of us grew up in, which was dominated by the notion of free trade, free movement of capital and labour and goods across borders. That’s all being walked back, probably far more quickly than anyone anticipated.”
Critical minerals and rethinking our trade relationships longer term
With Australia one of the few countries with critical minerals, used for manufacturing technology chips used in defence, Dr Auld said Australia had a strong hand to play if needed.
“That is probably the one card that we might be able to play but I think we should think carefully about when might be the best time might be to play that card.”
“I think the government is doing pretty much as much as it can do which is argue the case for Australia not to be hit with tariffs and doing that through diplomatic channels. But the more medium longer-term strategy has to be shoring up trade relationships with other willing partners. We have a lot of what the world wants and what the world needs, so I don’t worry there will be a shortage for people for us to trade with.”
Listen to the full discussion on The Radio National Hour with incoming NAB Chief Economist Sally Auld and Professor Warwick McKibbin, Professor of Public Policy and Economics and Director Centre for Applied Macroeconomic Analysis at ANU.
