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Speaker 1: Already, and this is the Daily This is the Daily.

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Speaker 2: Ohs oh, now it makes sense.

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Speaker 1: Good morning, and welcome to the Daily. OS is Tuesday,

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Speaker 1: the twelfth of November. I'm Sam and I'm a troll.

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Speaker 1: Tomorrow is one week since Americans overwhelmingly elected Donald Trump

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Speaker 1: as the forty seventh President of the United States, sending

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Speaker 1: him back to the White House with party control of Congress,

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Speaker 1: as well as decisive victories in all seven swing states.

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Speaker 1: As the world's government's process what the Trump presidency could

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Speaker 1: mean for them, much of the attention has turned to

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Speaker 1: the impact of Trump's suite of economic reforms. On today's podcast,

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Speaker 1: we're going to look at how changes in the global

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Speaker 1: economy could impact us here in Australia and why crypto

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Speaker 1: and shares have rocketed up on the news of Trump's return.

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Speaker 2: Now, Sam, there's been a lot of conversation about how

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Speaker 2: Trump's economic policies will impact not only Americans but us

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Speaker 2: here in Australia.

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Speaker 1: Wait with pause, first lead. Welcome to the podcast. So

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Speaker 1: good to have you on for the first time. Please continue.

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Speaker 2: So excited to be on my first pod. Let's get

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Speaker 2: into it. So I think we feel like we're meant

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Speaker 2: to know how we change in US economic policies could

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Speaker 2: change the world, but it becomes a lot harder to

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Speaker 2: explain what it actually means. So can you break it

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Speaker 2: down for us?

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Speaker 1: Yeah? Sure, And I think you're one hundred percent right

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Speaker 1: that it's one thing to know that a Trump presidency

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Speaker 1: will make the economy different all around the world. It's

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Speaker 1: another thing to understand why. It can be pretty confusing.

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Speaker 1: And I think the easiest way to have this discussion

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Speaker 1: would be to break it up into three key areas.

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Speaker 1: And I know we love you a little language technique

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Speaker 1: here at TDA, So let's think about it as three t's, Taxes, tariffs,

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Speaker 1: and tech.

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Speaker 2: We do love a little bit of alliteration here at

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Speaker 2: the Daily Ears. So let's start with the first and

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Speaker 2: probably the most familiar to people. Taxes. Now, Trump wants

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Speaker 2: to cut corporate.

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Speaker 1: Taxes, right, Yeah, and we we don't really know too

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Speaker 1: much about exactly how that's going to happen. He just

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Speaker 1: got elected, he's still in the process of appointing key

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Speaker 1: personnel into his office. We don't have firm policies yet,

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Speaker 1: but it is possible that Trump could lower corporate tax

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Speaker 1: rates from twenty one percent, which it is now to

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Speaker 1: fifteen percent. So the current corporate tax rate was actually

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Speaker 1: signed into law by Trump. The last time he was president,

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Speaker 1: he brought it down from thirty percent, and this time around,

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Speaker 1: Trump has what he describes as the America First Agenda,

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Speaker 1: and I'm going to repeat that phrase a lot in

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Speaker 1: this episode. And the idea here is that if Trump

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Speaker 1: lowers tax rates for big corporations in America, they're going

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Speaker 1: to be more tempted to keep their operations in the

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Speaker 1: US because it's going to be cheaper for them than

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Speaker 1: if they move everything overseas. What that means is that

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Speaker 1: more Americans could get jobs and more stuff will have

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Speaker 1: them made in America label on it. Now, you have

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Speaker 1: to remember this corporate tax policy would only apply to

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Speaker 1: companies that quote make their product in America, which is

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Speaker 1: a further entire meant to these corporations to actually do

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Speaker 1: the building on the United States soil. So I want

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Speaker 1: to play this out for a bit of an example

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Speaker 1: with you. Let's pick a random company nothing to do

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Speaker 1: with Donald Trump. Let's say Tesla and Ela Musk. Tesla

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Speaker 1: needs to make computer chips to put in an electric vehicle,

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Speaker 1: and currently they might do that in some way like

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Speaker 1: China or Taiwan, because it's cheaper to do it than

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Speaker 1: it is in the US. But if they don't have

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Speaker 1: to pay as much corporations tax, they might want to

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Speaker 1: move the computer chip production plan to a factory in

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Speaker 1: let's say Texas, which means that they would hire more

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Speaker 1: American workers and they'd keep everything within the US economy.

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Speaker 2: So that's the major appeal for Americans who are worried

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Speaker 2: about the economy, right, that it would bring more jobs

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Speaker 2: back to the US. But what are some of the

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Speaker 2: concerns around.

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Speaker 1: It, you're right, So for you know, somebody who's out

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Speaker 1: of work, this is a great opportunity to try and

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Speaker 1: get a manufacturing job, for example, that they might not

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Speaker 1: have available to them right now. But you have to

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Speaker 1: remember that federal governments collect taxes as a way to

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Speaker 1: find as their responsibilities, so they pay for things like

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Speaker 1: infrastructure or welfare payments or even hosting a major event

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Speaker 1: like the twenty twenty eight Olympics in Los Angeles through

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Speaker 1: the tax they collect. And because the US government will,

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Speaker 1: under this potential new Trump policy, collect less money via

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Speaker 1: corporate taxes and a range of a whole other tax cuts,

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Speaker 1: they've got planned. For individuals, they're going to have less

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Speaker 1: money coming into their bank account, and what that means

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Speaker 1: is that if they spend more than they are bringing in,

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Speaker 1: they're going to go into debt. And a debt for

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Speaker 1: a government could be very bad. And some economists have

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Speaker 1: estimated that these tax cuts are going to result in

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Speaker 1: a seven point five trillion with a t US dollars

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Speaker 1: worth of debt over the next ten years.

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Speaker 2: So if lowering taxes will cause the US government to

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Speaker 2: go into as much debt as you say they will,

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Speaker 2: how did Trump respond to that?

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Speaker 1: Well, it was obviously put to him throughout the entire election.

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Speaker 1: You know, he couldn't run away from the point that

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Speaker 1: lower taxes means less money coming into the government. But

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Speaker 1: the big way he says he's going to solve that

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Speaker 1: is the second T and that's tariffs.

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Speaker 2: Okay, I've heard this word a lot. You have to

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Speaker 2: explain what that means.

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Speaker 1: Sure thing, I'll break down tariffs, but first, here's a

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Speaker 1: word from our sponsor. Okay, we're back and a troll.

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Speaker 1: It's actually really simple. It's not a big, scary economic

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Speaker 1: term that people use when they say tariffs. It's basically

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Speaker 1: just a tax placed on imported goods or services, and

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Speaker 1: it can often be categorized by where the good or

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Speaker 1: services coming from, So say a tariff on all imports

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Speaker 1: from Russia, or the type of item it is. So

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Speaker 1: say a tariff on all imported red wine Russia. Is

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Speaker 1: a good example because tariffs in that case and in

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Speaker 1: many other cases, can be applied for political reasons, restricting

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Speaker 1: a country's business as a way of trying to deter

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Speaker 1: its government from doing certain things. So in twenty twenty two,

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Speaker 1: Russia invaded Ukraine, the US applied high tariffs to Russian

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Speaker 1: goods as a way to kind of express their co

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Speaker 1: opposition to that. And so Trump has said he wants

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Speaker 1: to put a sixty percent tariff on goods that come

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Speaker 1: from China. So right now, let's play I know you

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Speaker 1: love a shop. Let's play it out with Urban Outfitters.

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Speaker 1: It costs ten dollars for Urban Outfitters, a US company,

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Speaker 1: to import a T shirt and then they sell it

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Speaker 1: to consumers for twenty dollars and they make their ten

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Speaker 1: dollar profit. Now, under this system with tariffs, if there

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Speaker 1: was a sixty percent tariffs on all goods imported from China,

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Speaker 1: urban Outfitters have to pay ten dollars to import the

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Speaker 1: good because they're paying that to the Chinese manufacturer, and

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Speaker 1: then they have to pay six dollars to the US

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Speaker 1: government when it hits US land. So if they sell

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Speaker 1: it to consumers for twenty dollars, they're only going to

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Speaker 1: make four dollars now because ten dollars from the Chinese

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Speaker 1: importers and six dollars to the government. That's sixteen dollars

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Speaker 1: to get it on the shelf. And so what are

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Speaker 1: they going to do. They're probably going to put the

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Speaker 1: price of the T shirt up to say twenty six dollars,

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Speaker 1: so they can still make the ten dollars profit they

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Speaker 1: want to make.

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Speaker 2: So just to clarify, it's the US companies that will

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Speaker 2: be paying the tariffs, not.

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Speaker 1: The Chinese exactly. And I find that this is often

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Speaker 1: a misconception when we're talking about tariffs. Is its costs

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Speaker 1: that are going to have to be worn by the

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Speaker 1: overseas country or the overseas manufacturing entity. No, it's the

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Speaker 1: American companies. So honestly, think of tariffs as somebody stamping

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Speaker 1: a ticket on your way onto the train. The people

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Speaker 1: at the US Coast Guard or customs authorities are applying

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Speaker 1: the tariff to the US company when it hits the shores.

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Speaker 1: And Trump's Democratic rival Kamala Harris, she and other critics

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Speaker 1: of Trump's economic policies, they tried to make this point

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Speaker 1: that the cost of tariffs are going to be worn

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Speaker 1: by US families because that T shirt got more expensive,

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Speaker 1: not by the Chinese companies they're targeted at. But it's

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Speaker 1: not quite that simple. It does still impact those companies

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Speaker 1: in a kind of a less direct way. So I'll

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Speaker 1: give you a local example. China applied high tariffs on

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Speaker 1: the range of Australian goods during tensions around COVID in

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Speaker 1: the former Morrison government, and that made it difficult for

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Speaker 1: Australian wine makers to sell their wines into China because

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Speaker 1: the price of their product was so much higher for

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Speaker 1: your average customer in mainland China. And so what Trump

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Speaker 1: is hoping for here is that a company like Urban

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Speaker 1: Outfitters are not going to be as keen to get

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Speaker 1: their T shirts from China because it cost them sixteen

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Speaker 1: dollars including a tariff, and they might elect to make

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Speaker 1: the T shirts in the US for thirteen dollars, so

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Speaker 1: still more than they would have previously from China, but

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Speaker 1: still not as much as the tariff, and they don't

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Speaker 1: have to pay a tariff. And that's again this made

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Speaker 1: in America idea.

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Speaker 2: So can you explain to us what that means for

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Speaker 2: us here in Australia.

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Speaker 1: Well, let's say that Chinese T shirt making company was

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Speaker 1: about to build a factory or they were about to

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Speaker 1: buy a new T shirt making machine because they were

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Speaker 1: excited about the idea of expanding their business of exporting

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Speaker 1: T shirts to the US. Now they're a little bit

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Speaker 1: wreseried about that, and they're a little bit worried about

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Speaker 1: keeping urban outfitters happy because of this new tariff that

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Speaker 1: urban outfitters are going to have to pay on T

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Speaker 1: shirts when they arrive. So the Chinese company might hold

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Speaker 1: off on building the factory, it might hold off on

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Speaker 1: upgrading the machine, and they cancel an order of steel

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Speaker 1: or extra coal or natural gas or petrol that they

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Speaker 1: were going to use to power their factories. Now, where's

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Speaker 1: the steel or coal or gas or petrol going to

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Speaker 1: come from? It could come from, In fact, it's likely

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Speaker 1: to come from Australia.

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Speaker 2: And all those things you just mentioned are pretty big exports.

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Speaker 1: For US, right, Well, it's a major part of our

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Speaker 1: export puzzle. So iron ore steel accounts for twenty point

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Speaker 1: three percent of our entire export load. And the idea

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Speaker 1: here is that if there's less demand for the big

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Speaker 1: ticket items so steel, gas coal, that we export to

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Speaker 1: places like China, our economy is going to shrink. Our

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Speaker 1: government's going to collect less tax because those companies that

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Speaker 1: paid their corporations tax the Australian government are going to

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Speaker 1: be making less stuff. And suddenly we're feeling the pinch

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Speaker 1: of all of this. And in fact, the OECD, this

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Speaker 1: big global economic body, they said that tariffs on China

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Speaker 1: could drop Australia's GDP by one point two percent and

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Speaker 1: it would make us the second hardest hit economy in

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Speaker 1: the world in that scenario, and that's really going to hurt.

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Speaker 2: Elch Okay, Sam, I've been hearing a lot about this

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Speaker 2: term called a trade war, and from what I understand,

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Speaker 2: it's not a boots on the ground type of force.

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Speaker 2: So what are they referring to, Well.

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Speaker 1: It's just what we've been talking about. It's the way

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Speaker 1: that economists describe the use of tariffs by Trump to

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Speaker 1: try and keep jobs in the US. But also simultaneously

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Speaker 1: harm the Chinese economy. I think that's an important point

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Speaker 1: because he sees China as a threat to America's standing

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Speaker 1: as the most powerful country in the world.

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Speaker 2: Well, that was a lot of information, but I think

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Speaker 2: the one thing that's important to remember is that it's

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Speaker 2: still early days and Trump hasn't even made it into

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Speaker 2: the White House yet officially, so it will be something

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Speaker 2: to keep an eye on. And just before we wrap

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Speaker 2: up the final t technology, tell us all about it.

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Speaker 1: Well, this is the one that's kind of a little

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Speaker 1: bit more upbeat to those of us who might have

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Speaker 1: crypto or shares, because that big last tee of technology

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Speaker 1: is a really good thing for those who have money

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Speaker 1: in the market. It's been a pretty good week for

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Speaker 1: them since Trump was elected. So take Bitcoin for example,

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Speaker 1: that's hit a new record high and is now up

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Speaker 1: eighty percent in twenty twenty four. And there's a pretty

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Speaker 1: simple reason for this. The tech industry and the crypto

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Speaker 1: industry and a lot of major publicly listed companies. They

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Speaker 1: all believe Trump is going to be a president that

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Speaker 1: implements policies that are favorable to them. So Trump himself

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Speaker 1: has financial stakes in a number of crypto assets. He's

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Speaker 1: got people around him like Elon Musk who also have

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Speaker 1: large financial interests in that space. In fact, in August,

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Speaker 1: Trump said crypto could define the future and he wants

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Speaker 1: it mined, minted, and made in the USA. And again

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Speaker 1: we see this pattern emerging. He's even suggested that the

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Speaker 1: US government buys a bunch of bitcoin for a backup

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Speaker 1: fund in case of a major global conflict. So obviously,

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Speaker 1: if the US government does that, bitcoin is only going

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Speaker 1: to keep going up and up.

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Speaker 2: Well, so basically the ones with portfolios are throwing parties

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Speaker 2: right now. But how sustainable is this growth?

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Speaker 1: Well, this is the big question for those with portfolios,

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Speaker 1: but also people who study economies all around the world

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Speaker 1: is Yeah, there's been this big kind of you'd almost

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Speaker 1: call it a sugar hit since Donald Trump won the election.

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Speaker 1: Will it continue? We don't know, And we aren't in

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Speaker 1: the habit of giving out financial advice here at TDA.

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Speaker 1: We have no idea what the future has in store.

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Speaker 1: But you do have to remember that just as quickly

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Speaker 1: as the financial markets like crypto or the stock market

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Speaker 1: can go up as they have in the last week,

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Speaker 1: they can also come down just as fast and as

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Speaker 1: we've chatted through today. The way that financial markets move

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Speaker 1: is extremely complex. It's not just based on one vote

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Speaker 1: in one election. They can be responsive to anything from

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Speaker 1: tariffs to global conflicts, things like a global pandemic which

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Speaker 1: can't be predicted, and everything in between. So really the

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Speaker 1: only advice I can give you with certainty is to

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Speaker 1: strap yourself in.

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Speaker 2: So I can understand why all of this would mean

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Speaker 2: major changes for those in the US, But how does

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Speaker 2: that impact us here?

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Speaker 1: Well, I want to try and kind of bring all

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Speaker 1: the three t's together. So we had taxes, tariffs, and technology.

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Speaker 1: If we bring all that together, if the combination of

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Speaker 1: corporate and individual tax cuts happen, if there are tariffs implemented,

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Speaker 1: if we do keep seeing a boom in technology, it's

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Speaker 1: going to likely drive up the prices of everyday items

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Speaker 1: in the US. And the idea here is that the

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Speaker 1: more money that Americans have in their pockets because their

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Speaker 1: tax rates are lower, the more money that they have

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Speaker 1: to spend on goods and services. And that's demand. And

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Speaker 1: when demand increases, the supply so how many of those

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Speaker 1: goods and services there are available is constrained, and that

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Speaker 1: means business can put up prices on what they offer.

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Speaker 1: That means prices could rise, and that's where we start

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Speaker 1: to see that big word inflation start creeping in. Now.

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Speaker 1: Over the last couple of years, we've seen the impacts

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Speaker 1: of inflation all around the world and here at home.

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Speaker 1: We've also seen how governments and central banks kind of

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Speaker 1: respond to control it, and that's basically controlling interest rates,

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Speaker 1: so putting up interest rates to try and slow the

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Speaker 1: rate of inflation. I think a really helpful example is

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Speaker 1: to look at the global financial crisis in two thousand

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Speaker 1: and seven two thousand and eight. Now that was a

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Speaker 1: US housing issue organically, but that ended up affecting every

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Speaker 1: major economy all around the world. And I'd probably say

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Speaker 1: that in the fifteen years since then, our economy in

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Speaker 1: our world has probably gotten more globalized and more unified

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Speaker 1: in this way, especially economically, so we're really going to

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Speaker 1: feel the ripples of whichever way the US economy moves.

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Speaker 2: Wow. Thank you so much for lending us your brain today, Sam,

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Speaker 2: and thank you for joining us on the Daily OS.

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Speaker 2: If you enjoyed this podcast, we'd love if you could

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Speaker 2: give us a rating on Spotify. Well Apple, your rating

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Speaker 2: really helped us climb the charts last week, and while

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Speaker 2: you're added Senda to a friend, We'll be back in

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Speaker 2: the evening with some of the headlines for you to

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Speaker 2: listen to on your way home. But until then, have

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Speaker 2: a great day. My name is Lily Maddon and I'm

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Speaker 2: a proud Arunda Bungelung Caalcuttin woman from Gadighl Country. The

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Speaker 2: Daily oz acknowledges that this podcast is recorded on the

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Speaker 2: lands of the Gadighl people and pays respect to all

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Speaker 2: Aboriginal and Torres s right island and nations. We pay

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Speaker 2: our respects to the first peoples of these countries, both

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Speaker 2: past and present,