Having stunned the world with perhaps the most illiterate economic speech of the century – understanding that he has still got nearly 4 years to go and enough time to do even worse – Trump announced a range of International tariffs and then jetted off to Florida to attend a golf dinner. This is modern-day equivalent of Marie Antoinette’s ” let them eat cake ” moment – but that is an unfair comparison actually because she never actually said those words.
The direct impact on Australia of the tariffs is manageable from an economic perspective, what’s more concerning is the much more dramatic impact on our Asian neighbours to the north. This will almost inevitably, and understandably, push them closer to China. That deepens our strategic issues, particularly given that our major defence partner has no apparent regard for upholding Treaties and is now demonstrably unreliable and untrustworthy.
This is potentially a crisis in the making, but it remains to be seen whether the political class can adequately communicate that to Australian populace and gain a remit for some very significant structural changes – including more defence spending, a pruning of social services spending and going hard on measures to increase productivity. At the present time, to use a metaphor, we are nowhere near “game fit” for a more hostile world.
Meanwhile, United States as payment for its collective stupidity is going to find that being a debtor nation without capital inflows and relatively low interest rates as a consequence of a “voluntary recession” is not a healthy mix. A world with significantly less regard for the US is also going to hurt the US badly in the medium to long term – US firms, patents, copyrights and double tax agreements, which have all benefited from “outsized” US leverage, are all now at risk.
