Trumps’s huge tariff hikes/new tax on all goods will damage Australia’s economy.

Republican candidate for US President Donald Trump wants to increase every tariff on goods imported to the US by 10 percentage points or more he “says (could be anything even 1000% if I want”), including where there is at present no tariff. And he wants at least a 60% tariff on imports from China. The institute has modelled both, with and without retaliatory tariffs from China and the rest of the world.

It finds, unsurprisingly, that extra tariffs push up the price of US imports and the prices of US-produced goods that compete with imports. Many are used as inputs in manufacturing, which means US manufacturing suffers (which is probably not what Trump had in mind).

Fewer imports mean less demand for foreign exchange within the US, which means a higher US dollar which makes US exports less competitive. The US economy is weaker as a result, although China’s is weaker still and Australia’s is weakened as much as the US given its role in providing resources to China.

Donald Trump a threat to Australia’s economy.

An article by Kehoe Economics editor discusses former Reserve Bank board member Warwick McKibbin 51-page research paper on the subject.

“Australia’s economy would be damaged in the long term if Donald Trump wins the United States election in November and implements tariff hikes on Chinese exports, new world-first research suggests.

Trump has promised to impose 60 per cent tariffs on imports from China, cut immigration, and threatened to erode the independence of the US Federal Reserve”.

Donald Trump could do long-term harm to Australia’s prosperity. AP

This research paper and detailed economic modelling led by McKibbin delves into the implications of these policies.

“US tariffs on China are bad for Australia,” Professor McKibbin said.

The research found that because Australia exports large amounts of mining, energy and agricultural goods to China, it would be hurt by big US tariffs on Australia’s largest trading partner that would cause investment capital to flow out of the Asian nation.

“Countries like Australia that rely on the Chinese economy through exports of final goods such as agriculture and via production networks, especially mining and energy inputs into Chinese production, also experience capital outflows to the US-centric countries,” the paper notes.

Joe Hockey, Australia’s former federal treasurer and ambassador to the US, said on Thursday: “It is singularly the worst election campaign in living memory for anyone that cares about economics.”

He warned big deficit spending to fund tax cuts would be bad for the US dollar. “You’ll see the US dollar drop, most particularly under Trump because there’s no handbrake,” Mr Hockey said in an address to the National Press Club in Canberra.

“Donald Trump’s policy platform is absurd in its largesse, and I’ve said it to Trump: ‘You can’t keep spending’. He ran massive deficits, massive.

What impact will a Trump Presidency have on Australia’s job market?

China accounts for 29% of Australian exports and is Australia’s largest trading partner.

• US accounts for 6.8% of Australian exports and is our third largest trading partner.

• World input-output tables suggest that 70% of Chinese metal manufacturing value added results from domestic demand and 29% ultimately is due to foreign demand. Roughly 5% is directly or indirectly due to US demand, e.g. for imported manufactures that embody manufactured metal components.

• Little direct impact from lower Chinese steel exports to US (US accounts for 2% of Chinese steel exports).

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