While investment markets have noted heightened risks of tariffs and trade tensions with an incoming Trump administration, professionals suggest it could have been more of a “campaign talking point”, with US–Australia relations potentially faring better than expected under the new president.
Speaking at the 2024 ASFA Conference in Sydney this week, Thomas Nides, vice chairman, strategy and client relations at Blackstone and former deputy secretary of state, assuaged concerns that President-elect Donald Trump will be able to “just dictate what he wants”.
While the Republicans maintain a majority in the White House and the Senate, they hold a slim majority in the house “by two or three votes”, meaning passage of Trump’s economic overhaul “isn’t going to be as simple as everyone thinks”, he said.
Nides also pointed out Trump had exited office with around $350 billion of tariffs in place on Chinese goods, which continue to exist under the Biden administration.
“So the question is, how much more will President Trump do? How much is real, how much are words? I don’t think we know,” he said.
According to the investment executive, the President-elect is “way more clever” than assumed and is likely acutely aware of economic challenges that could emerge from increased tariffs.
“I do think that President Trump is way more clever than those of us on the other political side give him credit for. He’s hypersensitive to middle-class America and he’ll understand the impact it has. But ultimately, the proof’s in the pudding. Execution of this stuff is way more difficult,” he said.
Also speaking at the 2024 ASFA Conference, Willis Sparks, director of global macro at political risk consultancy Eurasia Group, remarked that tariffs on China are likely to persist, albeit at a decreased level than the 60 per cent previously mentioned during Trump’s campaign.
“I wouldn’t worry too much about the 60 per cent, I think that was a campaign talking point, but there are going to be tariffs on China again,” he said.
In particular, he suggested markets could face two starkly different scenarios in terms of China’s future role in the global economy, given its weakening position and sluggish economic growth in recent years.
“The first one is full trade war. What if the United States, the Trump administration, just says, ‘We’re going to break these guys while we have the chance. They’re economically weak right now, we’re going to further isolate them’,” Sparks said.
Alternatively, a US–China deal could be brokered by none other than Elon Musk, who has emerged a prominent member of Trump’s administration, according to Sparks.
“Elon Musk obviously has big financial interests in China. Tesla is competing for market share in China, he’s got all kinds of artificial intelligence projects,” he said.
“It should not surprise us if, after a few months, maybe up to a year of Donald Trump sounding like he’s waging war on China, that there’s some big breakthrough deal that’s actually good for the global economy, good for China, and good for the United States.”
Ultimately, “enough cooler heads” are likely to prevail to curb 60 per cent tariffs on China, he said.
Reflecting on the outlook for a US–Australia relationship under the new president, Sparks remarked that Australia holds a “great advantage” compared to many of its global peers.
“Donald Trump, to the best of my knowledge, has never mentioned AUKUS publicly ever. If you believe that AUKUS serves the Australian national interest, then Donald Trump’s lack of interest in AUKUS is a good thing,” he said.
In contrast, Trump has a tendency to approach allies with “outrageous” statements and “exorbitant demands”, Sparks explained, in order to get a deal on his terms.
“I don’t assume Australia is immune from that, but again, the US runs a trade surplus with Australia, so from the standpoint of dealing with Donald Trump, that’s a great advantage,” he said.
“I honestly think that, in terms of the most disruptive policies, Trump is likely to focus on Europe, on NATO, and on Mexico and Canada and a renegotiation of the North American Free Trade Agreement.”
Last week, Treasurer Jim Chalmers revealed Treasury’s scenario analysis of the US election suggested Australia could fare well under Donald Trump’s policies in the short term, although he raised concerns about the long-term impact.
Prior to this, Treasury secretary Steven Kennedy confirmed that Treasury modelling highlighted major ripple effects for Australia in the event of a Trump win, particularly if US trade tariffs were to rise sharply.
Speaking at a Senate budget estimates hearing, Kennedy said: “In broad terms, the imposition of trade restrictions such as tariffs typically lead to lower growth and higher inflation.”
“The implications for Australia are more about growth because of the implication for China, of course, and their demand for our goods,” he added at the time.
