Speaker 1: Already, and this is the Daily This is the Daily OS. Oh,
Speaker 1: now it makes sense.
Speaker 2: Good morning, and welcome to the Daily OS. It's Monday,
Speaker 2: the fourth of February.
Speaker 1: I'm Billy, I'm emma.
Speaker 2: It's been two weeks since US President Donald Trump became president,
Speaker 2: and there have of course been many headline making moves
Speaker 2: from the forty seventh president already. One that our audience
Speaker 2: has been asking us to explain is his policy on tariffs.
Speaker 2: Over the weekend, Trump signed an executive order to impose
Speaker 2: new tariffs on Mexico, Canada, and China. Trump claimed the tariffs,
Speaker 2: which will come into effect this week, will quote stop
Speaker 2: the flood of illegal aliens and drugs from pouring across
Speaker 2: our borders. So what does that all mean? We are
Speaker 2: here today to answer all of your questions, Billy.
Speaker 1: I think before we get to exactly what's happened, what
Speaker 1: these tariffs mean, and who they are going to impact,
Speaker 1: there are a few terms that we need to wrap
Speaker 1: our heads around some new language. The first is an
Speaker 1: executive order. Trump has been signing many of them in
Speaker 1: the last few weeks, hundreds in fact, But what exactly
Speaker 1: is an executive order? I love it.
Speaker 2: Let's start with the glossary. Yeah, we're going to go
Speaker 2: through the terms before we explain exactly what this story is.
Speaker 2: I mean, you said that he has signed many executive orders.
Speaker 2: To be exact, he has signed more than three hundred
Speaker 2: as of the end of January and we are a
Speaker 2: few days into February.
Speaker 1: Now, wow, so there are hundreds and correct me if
Speaker 1: I'm wrong, Billy, but that is more than most US
Speaker 1: presidents in recent history would have signed in their entire terms.
Speaker 2: Yes, so that gives you an idea of just how
Speaker 2: much Trump is saying that he wants to do in
Speaker 2: his second term as president. In terms of what an
Speaker 2: executive order is, because we don't have it here in Australia,
Speaker 2: it is the president's main power. Now, what's interesting about
Speaker 2: it is that it doesn't require Congress's approval and therefore
Speaker 2: it's kind of considered like an instant law.
Speaker 1: So Congress in the US being like their parliament, that's
Speaker 1: where we've got the two houses of parliament. But in
Speaker 1: the US that is separate to the executive branch, which
Speaker 1: is the White House administration the president exactly.
Speaker 2: So the Senate and the House of Representatives are the
Speaker 2: two houses in the Congress, and like you said, m
Speaker 2: that is completely separate to the executive branch, which is
Speaker 2: what Donald Trump is the head of. So that's kind
Speaker 2: of a basic way of explaining the parliamentary system in
Speaker 2: the US. But again, what's important here is this executive order,
Speaker 2: which is basically just like an instant law. It doesn't
Speaker 2: need to go through the legislative process that most laws
Speaker 2: do need to go through.
Speaker 1: Right, So is there any limit then to the power
Speaker 1: of an executive order?
Speaker 2: So there are essentially two things that could stop an
Speaker 2: executive order from going through. One is Congress and the
Speaker 2: other is the courts. So even though these executive orders
Speaker 2: don't need to go through the Congress, which like we
Speaker 2: said is the Senate and the House of Representatives, Congress
Speaker 2: could still take action to block these orders. So one
Speaker 2: way they could do that, for example, is to deny
Speaker 2: the necessary funding to stop an order from going ahead. However, Trump,
Speaker 2: as we know, is part of the Republican Party, and
Speaker 2: the Republican Party is in control of both the House
Speaker 2: of Representatives and the Senate. So because these are people
Speaker 2: in his own party who are in control of the Congress,
Speaker 2: they likely aren't going to stop his executive orders, And indeed,
Speaker 2: since he has been president, they haven't stopped any of
Speaker 2: his executive orders.
Speaker 1: Yeap.
Speaker 2: Now, like I said, there's another way that an executive
Speaker 2: order could be stopped, and that is through the courts.
Speaker 2: So that would be if one of the executive orders
Speaker 2: is deemed unconstitutional. Now, I've actually already seen an example
Speaker 2: of this happening and the court's intervening.
Speaker 1: Billy, when you say the courts in the context of
Speaker 1: halting these executive orders, are we talking about the US
Speaker 1: Supreme Court.
Speaker 2: So it can be the Supreme Court, but it usually
Speaker 2: won't start in the Supreme Court. It will usually start
Speaker 2: in a federal court. And then if the federal court
Speaker 2: makes a decision and then Trump appeals that it will
Speaker 2: then go to the Supreme Court. Okay, Yes, the Supreme
Speaker 2: Court is usually the court that is in charge of
Speaker 2: making sure that the laws in the US are in
Speaker 2: line with the Constitution. But it usually won't stop there.
Speaker 2: But they are the highest court in the land, so
Speaker 2: kind of the buck stops with them.
Speaker 1: So there has already been some intervention at a court
Speaker 1: level to do with an executive order issued by Trump.
Speaker 2: Yes, so Trump issued an executive order to stop some
Speaker 2: children from becoming citizens at birth in the US. So
Speaker 2: this is because under the US Constitution, children born to
Speaker 2: parents who migrated to the country are granted citizenship as
Speaker 2: their birthright. And Trump signed in executive order to stop
Speaker 2: some children from having that birthright citizenship, and that led
Speaker 2: to a number of states immediately taking legal action to
Speaker 2: stop the order from coming into effect, and a federal
Speaker 2: court judge.
Speaker 1: So lower than the Supreme Court.
Speaker 2: Yes, lower than the Supreme Court. So a federal court
Speaker 2: judge in the state of Washington approved the legal request
Speaker 2: to temporarily block Trump's executive order, and so that is
Speaker 2: a TBC. We're still waiting to see what the final
Speaker 2: outcome of that will be.
Speaker 1: Okay, and so then that executive order, which has been
Speaker 1: temporarily blocked, that could end up going to the Supreme
Speaker 1: Court for final decision on Okay, I've got it. Thank
Speaker 1: you so much for explaining, Billy, just feed on the
Speaker 1: glossary for that one. My next question for Philly's definition's
Speaker 1: glossary for today might be a bit of an obvious one,
Speaker 1: but I think a lot of people are wondering, so
Speaker 1: I'll ask the silly questions, what is a tariff actually though.
Speaker 2: There are absolutely no silly questions, as you know at
Speaker 2: the daily OS. And this takes me right back to
Speaker 2: year ten geography. I remember very specifically learning about tariffs
Speaker 2: in geography. To put it very simply, it is a
Speaker 2: tax on imports. So when goods are brought into another
Speaker 2: country from overseas, they are typically subject to fees or
Speaker 2: duties that are known as tariffs, and that means that
Speaker 2: the taxes imposed on those goods make it more expensive. Now,
Speaker 2: the taxes are usually absorbed by the consumer, so usually
Speaker 2: it means that we as consumers will be paying more
Speaker 2: for overseas goods. It doesn't necessarily have to be absorbed
Speaker 2: by the consumer, it's up to every individual business, but
Speaker 2: typically it usually is. So this would mean that if
Speaker 2: Trump is imposing tariffs overseas, it would mean the foreign
Speaker 2: made goods bought by US citizens is more expensive than
Speaker 2: if they are buying a good that is made in
Speaker 2: the US. Okay, but I think I've jumped the gun,
Speaker 2: so we'll get into more of them. The general purpose
Speaker 2: is to encourage citizens to buy local products instead of
Speaker 2: products from overseas, because rather than absorb the cost of
Speaker 2: these import fees on foreign goods, consumers may be more
Speaker 2: encouraged to purchase domestic goods, which will be cheaper.
Speaker 1: Okay, So tariffs could question for example, then be used
Speaker 1: by governments maybe to boost local manufacturing. Exactly. If you
Speaker 1: put these tariffs on importing foreign made goods, they could
Speaker 1: become more expensive for customers. So customers might say, hey,
Speaker 1: actually would rather buy something that was made here in
Speaker 1: this country that I'm in because it's cheaper, exactly.
Speaker 2: And that is the primary purpose of tariffs.
Speaker 1: But there is another purpose of tariffs that we are
Speaker 1: going to get to a bit later that has a
Speaker 1: little bit more to do with diplomacy or political tensions.
Speaker 1: So what has been announced in terms of tariffs and
Speaker 1: this Trump administration that we are now talking about today.
Speaker 2: So over the weekend on Saturday, President Trump signed an
Speaker 2: executive order to impose new tariffs on three countries. They
Speaker 2: are Mexico, Canada, and China. Now, Trump said he will
Speaker 2: impose a ten percent tariff on China and then a
Speaker 2: twenty five percent tariff on Mexico and Canada. And those,
Speaker 2: for contexts, are the US's three largest trading partners. So
Speaker 2: that's pretty huge. It's a massive announcement.
Speaker 1: Yeah, and a twenty five percent increase on these taxes
Speaker 1: applied to goods coming into the US from Canada and Mexico.
Speaker 1: I think it's also interesting to point out that just geographically,
Speaker 1: you know, to go back to year ten giography with Billy,
Speaker 1: that they are on the map. You know, countries that
Speaker 1: you can drive to from the US. We've got North
Speaker 1: and Central America. They share borders.
Speaker 2: They share borders with the US, so they are neighbors.
Speaker 1: Which traditionally can mean that the tariffs are lower, that
Speaker 1: there are less barriers to importing.
Speaker 2: But not anymore. No one wants to get into a
Speaker 2: fight with their neighbors, but apparently Donald Trump does with
Speaker 2: Canada and Mexico.
Speaker 1: So to be really clear, then all of the goods
Speaker 1: coming from Mexico and Canada into the US will now
Speaker 1: be subject to those tariffs, and the same for goods
Speaker 1: from China.
Speaker 2: Yes, pretty much all goods. There is one exception on
Speaker 2: energy products coming from Canada. They will be subject to
Speaker 2: a lower tariff of ten percent, But for all other
Speaker 2: goods coming from Canada, Mexico and China there will be
Speaker 2: this increased tariff. To give you an example of how
Speaker 2: this will impact people, in the US and also people
Speaker 2: in those three countries. I'm just going to use this
Speaker 2: one very small example, but most of the avocados in
Speaker 2: the US are imported from Mexico, so something like avocados
Speaker 2: will now become much more expensive in the US. We
Speaker 2: said before that the primary goal of these tariffs is
Speaker 2: to encourage more local production, but the US can't actually
Speaker 2: doesn't have enough farms to produce all of the avocados
Speaker 2: that citizens consume there. So it's not as simple as
Speaker 2: saying that we should just make everything in the US,
Speaker 2: because of course there are limitations and how much you
Speaker 2: can do that.
Speaker 1: You said that that was a small example, Billy, but
Speaker 1: I think for anyone who cares about avocados, yes, that
Speaker 1: would be a significant one. Yeah.
Speaker 2: And another thing is the price of cars will likely
Speaker 2: go up because Mexico is all so the largest autoparts
Speaker 2: exporder in the US.
Speaker 1: And also the manufacturing of automobiles in the US is
Speaker 1: an industry that died a long time ago. So like
Speaker 1: the avocado farms, I suppose that infrastructure isn't automatically in
Speaker 1: place to replace it. So what has Trump said in
Speaker 1: terms of why he's introduced these tariffs has he sort
Speaker 1: of addressed these concerns.
Speaker 2: At a very top line level. Trump says it's because
Speaker 2: of two reasons. The first one is he says that
Speaker 2: these countries are allowing too many undocumented immigrants into the US.
Speaker 2: And the second is because he claims that they are
Speaker 2: also allowing too many illegal drugs to enter the US.
Speaker 1: Which speaks to the shared borders that we spoke about earlier.
Speaker 2: Exactly so with the undocumented immigrants, he said that it
Speaker 2: is not confined to just Mexico. These undocumented immigrants come
Speaker 2: into the US, but it's also he says, happening in Canada,
Speaker 2: and that there are a rising number of Chinese nationals
Speaker 2: two and he says, quote people on the terror watch
Speaker 2: list who are coming into the US from those countries.
Speaker 2: And then on the illegal drug side, he says that
Speaker 2: the Mexican government is in an alliance with Mexican drug
Speaker 2: trafficking organizations, and he says Canada too has allowed quote
Speaker 2: a growing presence of Mexican cartels operating fentanyl labs that
Speaker 2: has increased the number of drugs going into the US.
Speaker 1: Now fentanyl, we're talking about synthetic opioids, the sort of
Speaker 1: painkiller crisis that has become a huge problem across North America.
Speaker 1: If people haven't heard that term fentanyl. What about China?
Speaker 1: Obviously China is an outlier here geographically.
Speaker 2: Yeah, exactly what he says about China is that Chinese
Speaker 2: officials quote, have failed to take the actions necessary to
Speaker 2: stem the flow of pre chemicals to known criminal cartels
Speaker 2: and shut down money laundering by transnational criminal organizations. Now,
Speaker 2: it's interesting about all of this. Again, before I said
Speaker 2: that the primary use of tariffs is to promote domestic production,
Speaker 2: but here, obviously none of the reasonings that he is
Speaker 2: giving is because of that. He is basically using it
Speaker 2: as a bargaining chip to make these three countries do
Speaker 2: things that aligned with his policies, and he's saying that
Speaker 2: if you don't do this, then these severe penalties will
Speaker 2: be placed on imports coming from your country. And he
Speaker 2: has said that these tariffs will be in place until
Speaker 2: the crisis is alleviated. So he's not saying that these
Speaker 2: are forever. We don't know how long they will be.
Speaker 2: But again, he's using it as a bargaining chip to say,
Speaker 2: until you do what I want you to do, these
Speaker 2: tariffs will remain in place.
Speaker 1: So it's an example of how tariffs can be used
Speaker 1: for more political interests or for these kind of political conversations.
Speaker 1: I think in Australia, a recent example of that is
Speaker 1: during COVID, the diplomatic relationship between Australia and China became
Speaker 1: a little bit more tense concerns over China's handling of COVID,
Speaker 1: and the Australian government was essentially punished by the Chinese
Speaker 1: government for some of the comments it had made in
Speaker 1: the form of high tariffs from Australian goods being imported
Speaker 1: over to China. Things have since eased, so I suppose
Speaker 1: that is a bit of an example closer to home
Speaker 1: about how these kind of tensions can ignite and eventually
Speaker 1: be resolved. But very different circumstances in the US and
Speaker 1: big claims from US President Donald Trump about the illegal immigrants,
Speaker 1: the drug trafficking, the drug cartels and money laundering, etc.
Speaker 1: What has been the response from the governments of these countries.
Speaker 2: To put it very simply, they're not happy. I'll go
Speaker 2: to Canada first because they have made the most concrete
Speaker 2: or most specific announcement about how they will retaliate. So
Speaker 2: they have announced that starting from today Tuesday, they are
Speaker 2: imposing tarifs on thirty billion dollars worth of goods imported
Speaker 2: from the US, on things like orange juice, peanut butter, wine, coffee, footwear, cosmetics,
Speaker 2: and other similar things. So they're not saying everything. They're
Speaker 2: not saying all goods, but they have released a list
Speaker 2: of goods that it will impact.
Speaker 1: And some pretty sort of staple essential items that they're
Speaker 1: saying to US importers, hey, this is going to cost
Speaker 1: you more to bring it into our country now.
Speaker 2: Yeah. They said explicitly in their announcement that this will
Speaker 2: make these products less desirable for Canadian consumers to purchase,
Speaker 2: and they said that this should send a message to
Speaker 2: US businesses and the US government on the need to
Speaker 2: reverse the imposition of tariffs for the benefit of both
Speaker 2: Canadians and Americans. Now, Mexico has also responded. Their government
Speaker 2: has said that they don't want confrontation and that they
Speaker 2: would have rather deal with this through negotiation and discussion.
Speaker 2: But they say now they've been left with no other
Speaker 2: choice and that they will introduce tariffs. We don't know
Speaker 2: the exact rate of the tariffs that they are saying
Speaker 2: they will introduce or what goods will be impacted, at
Speaker 2: least at the time of recording, but they have said
Speaker 2: that tariffs will be introduced. In terms of China, they've
Speaker 2: taken a little bit of a different approach. Their Commerce
Speaker 2: ministry has promised a legal case at the World Trade
Speaker 2: Organization WOW, and also they've said that there will be
Speaker 2: corresponding countermeasures. So we don't know too many further details,
Speaker 2: but it looks like they're going down the legal route,
Speaker 2: and Canada and Mexico are going down the retalitory route.
Speaker 1: Okay, So we're seeing kind of in real time this
Speaker 1: response play out. Trump had touted these tariffs for a
Speaker 1: long time, particularly heavy time Paris for China. He'd spoken
Speaker 1: about them a lot during the run up to the
Speaker 1: election last year. But I suppose the conversation has now
Speaker 1: turned in the other direction that as much as it
Speaker 1: will become more expensive for other countries to import US goods,
Speaker 1: it will also become more expensive for US manufacturers to
Speaker 1: take their goods to sell to other countries. So given
Speaker 1: that kind of knock on effect, do we know if
Speaker 1: this could impact Australia.
Speaker 2: So Trump hasn't explicitly said that there will be any
Speaker 2: new tariffs announced for Australia, so that could be seen
Speaker 2: as a promising sign for US here in Australia, but
Speaker 2: all the experts, of course say that we never know
Speaker 2: what's going to happen, what Donald Trump is thinking.
Speaker 1: Foreign Minister Penny Wong was actually in Washington, DC just
Speaker 1: last week and released a statement sort of describing the
Speaker 1: strength of Australia's relationship with the US, and in part
Speaker 1: of how strong our relationship is, she specifically called out
Speaker 1: the trade relationship between the two countries. So you could
Speaker 1: argue maybe there that the Foreign Minister was trying to
Speaker 1: kind of soften or speak up the relationship between the
Speaker 1: alliance between Australia and the US to avoid being caught
Speaker 1: up in this.
Speaker 2: Yeah, the Australian government, in everything I've seen, every time
Speaker 2: they've spoken about US and Australia's relationship after Donald Trump
Speaker 2: was elected, they've really been at pains to emphasize the
Speaker 2: relationship between the US and Australia has never been stronger, etc.
Speaker 1: Etc.
Speaker 2: And trade is also strong and that we won't be impacted.
Speaker 2: I guess time will tell, but in the more immediate future,
Speaker 2: I would say the most tangible impact it has had
Speaker 2: already is on the share market. So the Australian Stock
Speaker 2: Exchange went down yesterday and also the Aussie dollar dropped
Speaker 2: to sixty one US since yesterday. And I might throw
Speaker 2: to you because you actually recently did a deep dive
Speaker 2: into why the Aussie dollar is dropping.
Speaker 1: Yeah, what did you find? So we started looking into
Speaker 1: this because the Aussie dollar had dropped significantly and at
Speaker 1: the surface level it's sort of, you know, bad news
Speaker 1: for Australians who are planning to travel to America for
Speaker 1: a holiday. Maybe. But we spoke to some experts and
Speaker 1: we figured out this link between sort of tariffs they're
Speaker 1: changing dollar fluctuating currencies and the Chinese economy, which actually
Speaker 1: has a lot to do with it. And of course
Speaker 1: we're talking about China having tariffs imposed on it by
Speaker 1: the US. The Chinese economy has been struggling more broadly,
Speaker 1: so aside from concerns about tariffs, and this is down
Speaker 1: to many factors. But there's been falling house prices, high
Speaker 1: youth unemployment, so China's currency actually dropped to a sixteen
Speaker 1: month low this year earlier in January, and demand for
Speaker 1: Australian exports to China has declined as a result. So
Speaker 1: one of Australia's highest earning exports is iron ore. It's
Speaker 1: worth over one hundred billion dollars a year. But the
Speaker 1: Chinese economy is not doing well, so the demand for
Speaker 1: iron ore, or how much iron ore it can afford
Speaker 1: from Australia has dropped. And experts say the Australian dollar
Speaker 1: is really viewed by investors as an indicator of how
Speaker 1: well China is doing, because generally we know that if
Speaker 1: the Chinese economy is strong, the Australian economy is also
Speaker 1: probably doing pretty well. Now, how this kind of circles
Speaker 1: back around into Trump's tariffs is that they present an
Speaker 1: added level of uncertainty for the Chinese economy, which is
Speaker 1: already hurting, and you know, by the metric of what
Speaker 1: we've just talked about, Australia as a result could hurt
Speaker 1: economically even more. And this all comes at a time
Speaker 1: when America's economy in comparison, is relatively stable, so no
Speaker 1: one knows what's happening next. But Australia really could get
Speaker 1: caught up in economic uncertainty if things become more unstable
Speaker 1: for China because of these US China trade tensions.
Speaker 2: I am no expert on the sheaf market, but I
Speaker 2: feel like the one thing I do know is that
Speaker 2: uncertainty or extreme uncertainty is never a good thing for
Speaker 2: the share market. Soone knows what's going to happen next.
Speaker 2: That's when there does seem to be these sudden downturns
Speaker 2: or downturns over time. But I don't know. Like I said,
Speaker 2: I'm not an expert on specifically share market.
Speaker 1: Well, I think you're more of an expert than you think, Billy.
Speaker 1: And certainly the volatility of these kind of international diplomatic
Speaker 1: relationships when we have global leaders taking big swings in
Speaker 1: terms of tariffs, that has to lead to that uncertainty,
Speaker 1: but we will keep a close eye on it as always.
Speaker 2: Thank you so much for listening and thanks for joining
Speaker 2: us em.
Speaker 1: Thank you so much, Billy.
Speaker 3: That was a great explainer, thanks to your ten geography
Speaker 3: lessons very much did me. Well, just quickly before you
Speaker 3: go today, if you want to help TDA grow, it
Speaker 3: would mean the world to us. If you support our
Speaker 3: podcast by hitting follow or subscribe wherever you listen or
Speaker 3: if you're watching over on YouTube.
Speaker 1: If you're feeling extra generous, you could leave us at
Speaker 1: cheeky review on Apple. It really helps us get up
Speaker 1: the charts and grow the podcast. It helps our discoverability
Speaker 1: so more people can find us and listen to the podcast.
Speaker 1: Thanks again for listening to today's episode. We will be
Speaker 1: back again this afternoon with some headlines, but until then,
Speaker 1: have a great day.
Speaker 2: My name is Lily Maddon and I'm a proud Arunda
Speaker 2: Bungelung Caalcutin woman from Gadighl country. The Daily oz acknowledges
Speaker 2: that this podcast is recorded on the lands of the
Speaker 2: Gadighl people and pays respect to all Aboriginal and Torres
Speaker 2: Strait Island and nations. We pay our respects to the
Speaker 2: first peoples of these countries, both past and present.