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