The potential second term of Donald Trump may pose more economic challenges for Australia compared to his first tenure. However, it’s not all bleak. Trump’s proposed policies could directly impact Australia, especially through indirect channels involving China.
Direct Effects
Trump 2.0 aims to restructure America’s economic borders, deporting illegal immigrants while strengthening borders. To compensate, Trump plans to offer green cards to one million annual graduates from U.S. colleges.
This could lure students away from Australia to the superior U.S. tertiary sector, relieving Australia’s post-COVID rental crisis and mitigating interest rate hikes.
U.S. tax cuts, while marginally beneficial to Australia, may pressure the Australian government to enact similar cuts, as seen during Trump’s first term. These cuts could trigger global borrowing cost increases if inflation remains high, but current trends suggest otherwise.
Indirect Effects
The proposed 60% tariffs on Chinese exports could severely impact the Chinese economy, and by extension, Australia’s mining revenues. China, already grappling with a property bust, relies on increased exports to mitigate economic downturns.
These tariffs could slow Chinese growth further, limiting traditional commodity-intensive stimulus measures. This would weaken the demand for iron ore, already suffering from oversupply and declining demand.
Swings and Roundabouts
On the positive side, Trump’s tariffs and immigration policies could strengthen the U.S. dollar, influencing the Australian dollar to follow suit. Additionally, increased U.S. oil drilling and reduced support for foreign conflicts could lower oil prices, boosting Aussie household purchasing power.
The end of the Biden administration’s LNG export plant moratorium could also pressure global gas prices, benefiting east coast Australian households by alleviating high gas and power bills.
