Treasurer Jim Chalmers has shared more details from Treasury modelling he commissioned before the US election, warning Australia has "more at stake than most" from a trade war.
The analysis of different trade and tariff policy scenarios under president-elect Donald Trump predicted a "small reduction" in Australia's economic growth and an increase in prices in the short term, the treasurer said last night.
"Globally, we would expect the impact to be much more substantial," he told the Australian Institute of International Affairs.
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"The timing of this and the responses and the ramifications that might follow – what economists call the second round effects – are difficult to predict, but we wouldn't be immune, as Australians, from escalating trade tensions that might ensue."
Trump romped to power last week on a platform promising, amongst other things, a much more isolated approach to trade, sparking fears of trade wars with Europe and China.
He promised a 10 or 20 per cent tariff on all goods imported into the US and a 60 per cent tariff on Chinese goods.
Any turbulence in China would have a particularly large effect on Australia given about a quarter of exports head to the Asian superpower.
Chalmers said an increase in trade restrictions was not limited to the US, saying barriers had doubled since 2019.
That's a challenger for a country like Australia, with half its economy dependent on trade, compared to a quarter for the US and a bit more than a third for the Eurozone, the treasurer said.
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"Nobody wins from a trade war, but we have more at stake than most," he said.
"As the PM pointed out, we need a global economy which is open and where everyone plays by the rules. The world is already too volatile and too vulnerable.
"The pace of disruption and dislocation around us is already considerable."
Chalmers' speech expanded on comments he made earlier in the day expressing confidence Trump's second term would not have disastrous consequences in Australia.
"We are confident that we can navigate that volatility and vulnerability together. In a world of churn and change, I like Australia's chances," Chalmers said at Greenbank RSL in Queensland.
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"Obviously, a new administration in the United States brings a new suite of policies. We are confident that we can navigate that change as partners."
Chalmers last night argued in favour of combating the challenges with diplomacy, choosing to "derisk" – diversification of a sort – trade with countries such as China rather than "decouple" – cut relations.
He backed Australia's ambassador to the United States, Kevin Rudd, who came under fire last week for deleting old social media posts criticising Trump, praising his work shortly before the election to set up meetings with they key economic advisers to Trump and Democrats candidate Kamala Harris.
Australians generally are wary of a second Trump presidency, with 40 per cent of people surveyed in the Sydney Morning Herald's Resolve political monitor believing his election win could have consequences for the nation.
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