S1: From the newsrooms of the Sydney Morning Herald and The Age.
S1: This is the morning edition. I'm Samantha Salinger Morris. It's Wednesday,
S1: March 12th. So it's happened. Donald Trump has slapped a
S1: massive tariff on our aluminium and steel exports to the
S1: United States. This after our government has spent weeks trying
S1: to forestall this event. So how will it impact our economy? Today,
S1: international and political editor Peter Hartcher on what message the
S1: American president is sending to Australia and whether this decision
S1: added to Trump's other erratic moves made in his first
S1: 53 days in office, might just lead our country and
S1: others down a road to a nervous breakdown. So, Peter,
S1: just hours before recording, our North American correspondent Michael Koziol
S1: broke the news that Donald Trump will in fact be
S1: slapping a heavy tariff on Australian steel and aluminium. So
S1: tell us what we've heard.
S2: The Donald Trump has decided to withdraw all exemptions for
S2: countries that have, until now, enjoyed exemptions on tariffs on
S2: their steel and aluminium exports to the US. Australia is
S2: one of the dozens of countries those countries included Brazil, Argentina,
S2: South Korea, all of the EU countries, Japan. They're now
S2: losing those exemptions and we're one of them. You wouldn't
S2: know that from the Australian coverage, which seems to suggest
S2: that we are a lonely victim here. But we are
S2: in fact now part of the universal Trump mistreatment of
S2: all countries. But most importantly, it's the mistreatment of his
S2: own people, because these tariffs simply push up the cost
S2: of goods, imported goods in the US.
S1: So tell us then, why has Donald Trump actually introduced
S1: tariffs on these industries?
S2: Well, the impulse and the politics of it are one thing,
S2: and the economics and the practicalities are another. Donald Trump
S2: has a broadly 19th century mercantilist mindset. He's a man
S2: from another time. He believes that the power of a
S2: country is measured by its territorial area, hence making claims
S2: to annex all of Canada, making claims, and reserving the
S2: use of force to annex all of Greenland from another
S2: NATO ally, Denmark. He's a man who believes that country's
S2: prosperity is measured according to their trade balances. Whereas, of course,
S2: since the 1930s, the last great disastrous global encounter with tariffs,
S2: which contributed to throwing the world into the Great Depression,
S2: ever since then we have learned that, in fact, the
S2: best possible trade is the freest possible because it keeps
S2: the costs to ultimate consumers lowest, the cost of productions lowest.
S2: But the US has persuaded itself in recent decades. The decades,
S2: the American public has persuaded itself, and American policymakers and
S2: politicians have allowed it to happen. That trade has been
S2: unfair and punitive for American workers and manufacturing jobs in particular.
S2: And it is true that global trade did strip out
S2: a lot of manufacturing from the US, but also from
S2: other high cost countries like Australia, and relocated mostly to China,
S2: and that now is in a process of dispersing yet
S2: again to lower cost producers. India, Vietnam, Thailand, for example. Now,
S2: why is it that the US is the only one
S2: of these developed countries that lost a lot of manufacturing
S2: to lower cost countries, the only one with this sort
S2: of recidivist recourse to punitive tariffs. The main reason I'd
S2: suggest is that the US being the most right wing
S2: of any developed country on Earth, perhaps, except possible exception
S2: of Israel, doesn't believe, not seriously in any serious way
S2: in Redistribution to support the middle and lower classes. So
S2: the result is that because of failure of domestic politics
S2: in the US and the failure of redistribution and the
S2: failure to look after middle class and lower, lower income
S2: people in the US, that they have all blamed global
S2: free trade. So when Trump said, we've been terribly exploited
S2: and we're going to retaliate with tariffs. Americans cheered because
S2: they'd been led into this strawman argument that it's all
S2: the fault of global trade. Rather than look inwardly and say,
S2: we need to take better care of our own citizens,
S2: that's the essence of this. So Trump says not everything
S2: Trump says and does, of course, is wrong. He says
S2: that the US has been taken advantage of by all
S2: countries everywhere for a very long time, and there's a
S2: lot of truth in that. But the recourse to tariff
S2: policy is stupid because, as Jim Chalmers, Anthony Albanese and
S2: others have been saying today, it is an act of
S2: economic self-harm. It means American consumers will pay more for
S2: their imported goods. And this I would point out, Samantha,
S2: is the still the early phase of Trump's tariff unleashing.
S1: Well, that's a bit of a warning there. But let's
S1: turn to Australia and our steel and aluminium industry. How
S1: big is it and how much do we actually export
S1: to the US?
S2: In practical terms, it's negligible. This is a marginal question
S2: for Australia in terms of total Australian exports. These steel
S2: and aluminium exports make to the US make up 0.2%
S2: of exports. That's one fifth of 1% of our exports.
S2: And the company most affected, BlueScope steel, which also has
S2: major manufacturing plant in the US, so it can simply
S2: crank up its production behind the tariff wall in the
S2: US and its production from Australia can be diverted to
S2: other countries. Has said it doesn't expect any major effect.
S2: The investment banking broking analysts have all said they don't
S2: expect any major effect on any Australian company, so it
S2: really is a trivial matter. Even the companies that are
S2: the targets of this have said it won't affect them materially.
S2: This is a political for Australia in the direct sense,
S2: direct relationship with the US. This is a political and
S2: social event, not a serious economic event. There is a
S2: serious economic consequence for Australia, but it's not direct. It's
S2: not because of what the US is doing to our
S2: aluminium and steel exports, the economic consequence that Australia could suffer.
S2: Presuming that this continues and continues to escalate, which is
S2: exactly what's unfolding, comes from the global blowback from this.
S2: So he's put these tariffs on everybody, including China, which
S2: is the biggest producer of most of the imports that
S2: most countries buy. And this is this is raising the
S2: cost of global trade. This is putting a tax on
S2: trade everywhere which reduces incomes everywhere. This will be a
S2: global consequence and a global slowdown in trade, which could
S2: produce an inflation uptick because the prices of imports to everybody,
S2: everywhere will go up. Therefore, central banks will have to
S2: respond again by raising interest rates. We thought we'd ended
S2: that cycle. But if this continues, rates around the world
S2: will enter a new tightening cycle and rates will go
S2: up again. Growth will slow and the world will enter
S2: a recession. If this continues, that's how Australia will be affected,
S2: not by what the US has done to us. What
S2: the US has done to us is a political signal
S2: that we are no longer special, that we have no
S2: special privileges and shouldn't expect any.
S1: We'll be right back. Well, let's get into the political
S1: calculations there, because we know that there's been an enormous
S1: amount of work done behind the scenes by the Australian
S1: government to try and dodge these tariffs. So are you
S1: surprised in any way that Trump has actually gone ahead
S1: with them?
S2: Well not really. He's got to demonstrate that he's tough.
S2: You know he's tough and tough on everybody. And he's
S2: said he would be reluctant to give any exemptions. And
S2: his primary argument in terms of tariffs was that other
S2: countries have been running trade surpluses against the US, which
S2: has been in a trade deficit with those individual countries.
S2: That hasn't been true in Australia's case. One of the
S2: few countries on earth was actually the other way around.
S2: We ran the deficit and they ran the surplus. But
S2: by a sheer stroke of fortune, that changed on Tuesday.
S2: Just this week, on Tuesday, for the first time in decades,
S2: Australia reported a trade surplus with the US, and the
S2: US ran a deficit, and that was because of a
S2: surge in Australian gold exports to the US. Now get this.
S2: How's this? How's this for an inadvertent like.
S1: You couldn't write.
S2: It. You couldn't. Why did why did Australian gold export
S2: surge thousands of percentage points over the previous year's sales?
S2: Because there's a rush on gold in the US and
S2: buyers can't get enough of it. So Australian gold miners
S2: have been shipping massive quantities. Now, why is there a
S2: rush on gold in the US? Because of investor uncertainty.
S2: Because of Donald Trump. So Trump himself is the cause
S2: of Americans rushing to get gold because they don't trust
S2: the economic consequences of what's about to happen. That, in turn,
S2: has has stimulated Australian gold exports. That in turn has created,
S2: for the first time in decades, an Australian trade surplus
S2: with the US, which then gives Trump license to say,
S2: oh look, we caught the Aussies too, and therefore put
S2: tariffs on us.
S1: Sorry, I have to pause because it's so crazy. And
S1: it does make me want to ask you just about
S1: your response to something that Thomas Friedman wrote in the
S1: New York Times. He said, our markets are going to
S1: have a nervous breakdown from uncertainty. Our allies will have
S1: a nervous breakdown, and we're going to give the rest
S1: of the world a nervous breakdown. Do you think that's
S1: what this is showing we're on the way to or
S1: is that just hyperbole?
S2: I think Donald Trump's already courtesy of the American voter,
S2: has set the world into the early phase of a
S2: nervous breakdown. And you feel that, especially if you live
S2: in Europe. The Ukrainians, of course, are the are the
S2: primary victims so far. But the Europeans have been living
S2: in a state of suspended belief. I suppose they didn't
S2: think that Trump was seriously about to walk away from NATO.
S2: That Trump was seriously about to abandon allies. And yet
S2: we've now seen it. It's irrefutably true in the case
S2: of Ukraine. By the way, there is one country, I
S2: should add. I should correct myself. There's one country that's
S2: been exempted from a new wave of American tariffs on
S2: their steel and aluminium. Do you know what it is
S2: that country is Russia now? It's for a fair enough reason,
S2: which is that since the invasion of Ukraine, the Biden
S2: administration has put a 200% tariff on Russian steel and aluminium.
S2: So it's already at a huge disadvantage, effectively priced out
S2: of the US market, which.
S1: Is an interesting point because, Peter, you've stated that on
S1: numerous occasions that Trump has a transactional relationship with America's allies. Now, obviously,
S1: who America's allies are keeps changing, as per your reference,
S1: just there to Russia. So does this change things at
S1: all in a practical way for us, these most recent tariffs.
S2: If these tariffs mean anything for Australia, they should teach
S2: us first that Trump is Because, I mean, I think
S2: we have already absorbed this lesson economically destructive. But the
S2: second lesson I think is, is really a helpful one.
S2: I think this is a salutary lesson for Australia because
S2: we've been thinking that we are very special and we
S2: will always be protected by America because remember, you know,
S2: we have been freeloading on them for defense purposes for decades.
S2: Any illusion we might have now that we are in
S2: any way special should be gone, should be completely exploded
S2: by this development and wake us up. That we need
S2: to be self-reliant in every sense, every rational sense. And
S2: I don't mean by putting tariffs up. In fact, the
S2: rational Australian response would be to cut our own tariffs
S2: and Australia is in the happy position. I noticed that
S2: a lot of countries, the sheer politics, public resentment against
S2: the US has forced countries to to impose reciprocal tariffs
S2: on the US, which then Donald Trump responds to with
S2: what he calls reciprocal tariffs and keeps escalating. Where does
S2: that madness stop? Australia has remained sane, and because there
S2: is not that intense resentment across the ocean between Australia
S2: and the US, the politics will allow Albanese to say
S2: we're not imposing retaliatory tariffs and Dutton will stand with him.
S2: We will keep the cost of our imports down, which
S2: is a good thing for the Australian consumer. But the
S2: really rational response would be for Australia to cut its
S2: remaining tariffs completely, because we are one of the freest
S2: trading countries in the world. But it really should show
S2: us that in terms of defence, our reliance on the
S2: US for intelligence, vital intelligence flows, plus security guarantees or
S2: at least imagined security guarantees are completely unreliable, that the
S2: US can change its definition of allies and interests overnight.
S2: And we need to be prepared, and we are not.
S1: But I did want to ask you, you know, is
S1: it possible for this decision, these latest tariffs that Trump
S1: has imposed to be reversed? I mean, because obviously we've
S1: seen him do this with other nations. He's slapped it
S1: on Canada and then taken it off. And there's this seesawing.
S1: So might we see that here?
S2: Yes, absolutely. Last time around, when he put tariffs on
S2: Australian aluminium and steel, he removed them after seven months.
S2: And it is possible that he will see the inflationary consequences,
S2: the destructive consequences, the stock market consequences and step back
S2: from this madness. He might decide that they're all just
S2: negotiating positions to see if he can shake down trading
S2: partners for favours, much as he's used American support, military
S2: support for Ukraine to shake down the Ukrainians at their
S2: most vulnerable moment, to try and loot some of their
S2: rare earths and critical minerals, he might take a similar
S2: negotiating stance. It's entirely possible that the tariffs will be
S2: scaled back or removed.
S1: And so I guess just to wrap up, Peter, you know,
S1: Albanese has studiously avoided personal criticism of Trump. You know,
S1: until now, I think it's safe to say even some
S1: of his more bizarre ideas like, you know, turning Gaza
S1: into the Riviera of the Middle East. Do you think
S1: this changes things in terms of how he might actually
S1: communicate with Trump?
S2: No. And he and his government have continued to say
S2: today that they will proceed in relations with other countries
S2: and allies in a mature and respectful way. So they're
S2: not going to retaliate either economically or rhetorically. They're going
S2: to behave themselves and and be nice. The real logic
S2: there is that they fear provoking Trump, getting yet more
S2: punitive attention by being sticking out like a lightning rod.
S2: So they won't say anything overtly critical, and they'll behave
S2: themselves like like nice people. The there is an appetite
S2: in the electorate for, especially among the Australian left, to
S2: punch Trump in the nose to stand up to him.
S2: But Albanese won't, simply because he thinks that it would
S2: harm the national interest if he were to provoke Trump further.
S1: That's a good point, Peter.
S2: Any time.
S1: That's why we have you here. So thank you as always.
S2: Always a pleasure, Samantha.
S1: For your time. Today's episode of The Morning Edition was
S1: produced by myself, Tammy Mills, and Josh towers. Our head
S1: of audio is Tom McKendrick. The Morning Edition is a
S1: production of The Age and The Sydney Morning Herald. To
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S1: day's most important news, analysis and insights in your inbox
S1: every day. Links are in the show. Notes. I'm Samantha Selinger. Morris.
S1: This is the morning edition. Thanks for listening.