‘Real break’: How the US election could impact Australia’s economy
As Americans decide who the next President will be in the US election, there are economic ramifications for Australia, China and the wider world.
Australia National University professor Wesley Widmaier Jr said the economic policies of Democratic candidate Kamala Harris and Republican candidate Donald Trump differ greatly.
A second Trump administration would include a push to install broad-based tariffs on a range of US imports that would have economic consequences in Australia and globally, he said.
Trump has promised to implement tariffs between 10 and 20 per cent on all imported goods, and additionally tariffs of more than 60 per cent on goods from China.
During the first Trump administration a trade war broke out between Washington and Beijing over tariffs that ended with a deal that looked very different from the White House’s initial claims.
So it’s worth keeping in mind that any election commitment is subject to change and negotiation.
Different commitments
Nevertheless, Widmaier said Trump’s policy is “real break with the entire western order going back to 1945”.
“Trump’s election would be a negative for Australia, which depends on a vibrant international trading system,” he said.
“Our exports are to a significant degree a function of demand in other countries, and when trade goes down, demand goes down.”
A Harris administration, meanwhile, would be closer to the status quo on trade, Widmaier Jr said, though she has already sought to extend some tariffs and protections in high-tech industries.
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“Biden has kept the Trump tariffs in place and has expanded them,” he said.
“They call it a high fence around a small yard, where you’ve got potentially strategic goods, it’s a geo-economic approach.”
Implications of Trump tariff plan
University of Sydney United States Studies Centre research associate Georgia Edmonstone explained that Trump’s tariff policy could have a wide range of implications for Australia.
“There could be an impact on Australian exporters who sell into the US potentially,” Edmonstone said.
“In his previous administration Trump also placed a small amount of tariffs on nearly all imports of steel and aluminium and on a significant number of products from China.
“What happened last time, a lot of the evidence shows, is that a lot of the increase in prices resulting from the tariffs fell on US consumers, rather than the exporters.”
Crucially, during the first Trump White House, Australia was one of few countries that managed to secure an exemption from Trump’s steel tariffs.
Edmonstone explained that if Trump pursued a similar policy during a second term, Canberra would likely seek relief again.
Potential opportunities
Tariffs on China, meanwhile, could weaken the economy of Australia’s largest trading partner.
But Edmonstone said that could also potentially open up opportunities for Australian businesses.
“China is our largest market, so when the Chinese economy is doing well, it’s usually better for Australia,” Edmonstone said.
“But the other thing is that it’s probably likely that if the US places tariffs on China, China will retaliate with tariffs on the US.
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“That could open up new opportunities for Australian exporters to capture some of the US market share.”
Pressure from Washington
A Harris administration would likely continue expanding tax incentives for American renewable energy industries, whereas Trump has promised to double down on fossil fuels.
The Biden Administration’s Inflation Reduction Act directed billions of dollars to subsidising renewable projects but has not had widespread direct implications for the Australian economy.
After its passage, the Albanese government did move to use tax incentives to subsidise development in renewable energy, which is something that Australia has done in the past.
More broadly, whether Trump or Harris win the presidency, it’s clear Canberra will face ongoing pressure from Washington to pursue a protectionist line on Chinese exports and investment.
And that includes key parts of the renewable energy supply chain in which Australia has an interest.
Experts have previously said the US is trying to rope allies into a set of trade policies that seek to isolate China’s electric vehicles and renewable energy industries through trade tariffs.
University of Sydney professor James Laurenceson has said the US is increasingly expecting its allies to fall in line with its trade policies towards China.
“In the US there is now bipartisan political consensus that China is an economic adversary.”
Technology factor
Interestingly, however, Canberra has resisted any pressure from Washington to adopt tariffs on Chinese goods such as electric vehicles and has even criticised such policies.
Laurenceson argues there are “several factors” supporting an assessment that Australia shouldn’t be anxious about the degree of pressure from Washington under Harris or Trump.
“Washington’s coercive instincts towards allies are strongest around cutting off China’s access to advanced technology,” he said.
“This means countries like Japan, South Korea, Germany and the Netherlands have, and will continue to, feel the heat.
“In contrast, Australia is a net technology importer, so it will mostly be able to fly under the radar.”
Edmonstone said Australia doesn’t have the same incentive to block Chinese electric vehicles as the US and other countries in Europe.
“We don’t have a car industry, so it doesn’t make as much sense,” Edmonstone said.
– TND
