Economic effects of a Trump presidency on the US and Australia

ABC NEWS (Australia)

A Trump presidency will have economic effects on the US and also Australia, explains Steven Hamilton, Assistant Professor of Economics at George Washington University.

Transcript

00:00Behind the scenes, there will be nervousness in the Albanese government about what this

00:06means on a few fronts.

00:08What it means on trade, in particular, with Trump's promise to introduce tariffs of 10

00:13or 20 per cent on all countries and up to 60 per cent on China.

00:17That could spark a trade war.

00:20And also what it means, of course, for Australian exporters directly.

00:23There's the concern about what this means on climate change as well, with Donald Trump

00:27planning to pull out of the Paris Agreement.

00:28How's that going to get out of the Pacific?

00:30Such a contested area in our region, so there's some degree of concern about that.

00:36Then, of course, there's AUKUS, and will Donald Trump honour the AUKUS deal on nuclear submarines

00:41as well?

00:42The other concern will be, this is another example of an incumbent government, or a backlash

00:46against an incumbent government over inflation.

00:49It's all about the economy.

00:50And that brings me to Steve Hamilton here in Washington, with George Washington University.

00:54Steve Hamilton, good to see you.

00:56You watch all sorts of numbers very closely, and I want to get your thoughts on the economy

01:00and trade and so on.

01:02What are you making of the voting numbers that we're seeing, the count tonight?

01:07It seems like Trump has done particularly well in those suburbs.

01:12The areas where Kamala really needed to carry the suburbs, as Joe Biden did, they're falling

01:18away.

01:19To see Trump do so well in Virginia, which is just 10 minutes from here, is really shocking.

01:25You can't point to anything other than the economy.

01:28This is the economy?

01:29This is cost of living?

01:30It's the economy, stupid.

01:31Immigration, maybe?

01:33Not in these areas.

01:34I really think the shocking thing is that the US has really handled the post-pandemic

01:40period probably better than any country.

01:42Inflation is back down to 3%.

01:43I was going to ask you, how would you describe the American economy right now?

01:47It's the strongest economy in the world.

01:49So we've got really strong productivity growth, very strong wage growth.

01:54Inflation's come back down, interest rates are coming back down.

01:57Employment's pretty good.

01:59They've pulled off the miracle, but I think the economy in the last two years is this

02:04albatross around Kamala's death.

02:07People are still getting a cup of coffee and it's costing a hell of a lot more than it

02:10did pre-COVID.

02:11It hasn't come down.

02:12It might have stopped going up, but they're noticing that price difference.

02:16That improvement hasn't happened early enough before the election for people to really feel

02:21it.

02:22OK.

02:23Here's the next question.

02:24If Donald Trump wins, will things get better or worse?

02:28Well, to be blunt, they'll get worse.

02:32Which you can't put a 10 to 20% tax on almost everything and expect inflation to go down.

02:38But they don't.

02:39I mean, his supporters, I sat with one of them at a Trump rally and had this conversation

02:42and she said, look, these tariffs are going to mean income taxes come down.

02:45He'll be able to cut all our taxes.

02:47No.

02:48So the tariff revenue, if you put a 100% tariff on everything, you collect an infinite

02:54infinitesimally small amount of revenue relative to what you could cut out of income taxes.

02:59It's like an order of magnitude out.

03:00So I think the tariffs are going to harm U.S. consumers.

03:04They're going to raise prices.

03:06They're going to have flow on effects for other countries.

03:09We're already seeing in the last hour the Australian dollar has fallen.

03:12You were showing me this just before we came here.

03:14So what's happening with our dollar and global currencies?

03:16Yeah.

03:17So the dollar's fallen by almost one and a half cents against the U.S. dollar.

03:21So the dollar's markets are anticipating a Trump win and a tariff war going on.

03:25Yeah.

03:26So as soon as the tariffs get put in, the U.S. dollar shoots up to kind of counteract

03:29some of its effects.

03:31So that has flow on effects for lots of other countries, right?

03:33Any country that trades with the U.S.

03:35So Australia would have this falling dollar, right?

03:39Which is, you know, it makes things more expensive in Australia, you know, and that's not helpful

03:43for Australia.

03:45It's also going to have flow on effects to Australia through China, right?

03:48If you put a 60 percent tariff on all Chinese goods, China's going to produce a lot fewer

03:52goods.

03:53They're going to want a lot less iron ore.

03:54So this is going to hurt us in terms of pushing up inflation in Australia.

03:59And it's going to make our exports to China more difficult.

04:02Yes.

04:03Which is a double whammy, right?

04:04Yeah, a double whammy.

04:05That really harms our national income through those China effects, but it also increases

04:10the inflation problem.

04:11So yeah, not good.

04:13Is there anything good out of a Trump win, Steve?

04:15If you're really rich, he's going to cut your taxes.

04:20So, you know, there's this big tax cut package that came through in 2017, which gave big

04:25tax relief to American families, high income earners and companies.

04:30And that's all on the table to be renewed next year.

04:34And we think that they are going to push in the direction of trying to renew some of these

04:36tax cuts.

04:38And Trump has said he wants to go further in cutting those company taxes.

04:41So one more question.

04:42I guess this comes back to a political question.

04:43We've seen incumbent government in the UK smashed over inflation happening here.

04:48It looks like at the moment on the figures, what's the lesson here for the Albanese government

04:52when it comes to cost of living and the need to show the electorate that it has it under

04:56control?

04:57Well, yesterday, the governor of the Reserve Bank said, we don't want you to spend a whole

05:01lot of money before the next election.

05:05And I think that this election outcome gives them a big signal that they need to spend

05:09a lot of money before the next election to try and win it, which doesn't mean good things

05:14for inflation.

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