Speaker 1: Already and this is the daily This is the Daily
Speaker 1: ohs oh, now it makes sense. Good morning and welcome
Speaker 1: to the Daily OS. It's Tuesday, the eighth of April.
Speaker 1: I'm Billy Fitzimon's.
Speaker 2: I'm Sam Becazowski.
Speaker 1: If you've looked at the news over the past couple
Speaker 1: of days, or if you have shares and you've checked them,
Speaker 1: you would know that there has been a significant fall
Speaker 1: in the stock market. Just yesterday in Australia, more than
Speaker 1: one hundred billion dollars was wiped from the Australian share market.
Speaker 1: It's all because of the tariffs that were imposed by
Speaker 1: US President Donald Trump on all countries, including Australia last week.
Speaker 1: To understand in more detail why this has happened and
Speaker 1: what it means for the average Australian today, I am
Speaker 1: interviewing the chief economist at the Australia Institute, Greg Jericho.
Speaker 2: Billy, this is one of those topics where there is
Speaker 2: so much economic jargon flying around it can be hard
Speaker 2: to keep up and it can be hard to find
Speaker 2: a way into this story.
Speaker 1: Yeah, I feel like this is one of those topics
Speaker 1: where I really should have been paying more attention in
Speaker 1: my year turn commerce class.
Speaker 2: Oh, I definitely missed that, Yeah, and I had to
Speaker 2: catch up. It's taken a long time. We did a
Speaker 2: show on that last week, Zara and I and maybe
Speaker 2: you will throw a link in the show notes. It's
Speaker 2: interesting to listen to that now almost in retrospect, because
Speaker 2: that was kind of almost what we thought was going
Speaker 2: to happen. On Liberation Day, that was the big day
Speaker 2: that Trump announced all the tariffs. He held up that
Speaker 2: big placard with how much countries are going to get
Speaker 2: essentially taxed on all the goods that arrive into the US.
Speaker 2: And it turns out we were pretty much spot on.
Speaker 2: The rest of the world was as well. This was
Speaker 2: a major move.
Speaker 3: Yeah.
Speaker 1: And so just to give you a really quick overview,
Speaker 1: if you're hearing the word tariffs and you're not quite
Speaker 1: sure what it means, it is a tax on import,
Speaker 1: So it means that it's more expensive to import something
Speaker 1: into a country, in this case America. Now, like you
Speaker 1: just said, Sam, last week, Trump announced new tariffs on
Speaker 1: all imports into America and that includes a blanket ten
Speaker 1: percent tax on all Australian goods entering the US. And
Speaker 1: he said he mainly did this because of something called
Speaker 1: a trade deficit.
Speaker 2: And that's another term that comes up a lot. So
Speaker 2: we've got tariffs. Now talk me through a trade deficit.
Speaker 1: Okay, I'm going to explain this using apples. So let's
Speaker 1: say Sam, you and I are both nations, and in
Speaker 1: one year I sent you one hundred apples and you
Speaker 1: sent me seventy apples. That would mean I am in
Speaker 1: a trade deficit of thirty apples because I sent you
Speaker 1: thirty more apples than you sent me.
Speaker 2: Right, So I'm thinking fruit bowls, yes, And I've got
Speaker 2: more apples in my fruit bowl after our trade.
Speaker 1: Relationship because you took more from me, exactly. And so
Speaker 1: President Trump wants to reduce that gap. He wants you
Speaker 1: to buy just as many apples from me as I
Speaker 1: am sending to you. And he argued that a trade
Speaker 1: deficit like this means that countries, he says, are ripping
Speaker 1: off Americans and that America needs to reassert it self
Speaker 1: in the global economy. Now, in terms of who this
Speaker 1: impacts the most, it's actually US consumers because those are
Speaker 1: the ones who absorb the cost of these tariffs, because
Speaker 1: it essentially means that it makes it more expensive for
Speaker 1: them to buy things from other countries. And so Trump's
Speaker 1: big hope here is that Americans don't buy stuff made
Speaker 1: overseas like in Australia because it's now too expensive, and
Speaker 1: instead they'll be more encouraged to buy US made goods.
Speaker 1: And his hope is that by doing this, the US
Speaker 1: economy will grow.
Speaker 2: I heard a really good example over the weekend of
Speaker 2: T shirts. So America only produces three percent of all
Speaker 2: the T shirts that are sold to Americans in a year.
Speaker 2: So ninety seven percent of T shirts bought by an
Speaker 2: American come from overseas. That in Trump's world, he's trying
Speaker 2: to get that to more be one hundred percent. And
Speaker 2: so he's going to make the T shirts that arrive
Speaker 2: from the Philippines or Taiwan, or Sri lank or Cambodi
Speaker 2: or China. He's going to make those T shirts more expensive.
Speaker 1: And that is exactly why he introduced these tariffs. Now,
Speaker 1: if you're listening to this and you're a bit lost,
Speaker 1: don't worry. I think the one thing that I want
Speaker 1: to point out before we dive into this chat with
Speaker 1: Greg Jericho is I think the word that you need
Speaker 1: to keep in mind is uncertainty. Even if you don't
Speaker 1: feel like you're fully grappling with the economics of it all,
Speaker 1: because it is really complicated. The core thing to remember
Speaker 1: is that the events of the past few weeks have
Speaker 1: led to investors feeling uncertain because they can't predict what
Speaker 1: is going to happen next. No one knows what Trump
Speaker 1: is going to do next, and whenever there is uncertainty,
Speaker 1: we usually always see crashes like this in the stock market.
Speaker 1: Even if you think about the pandemic, which you'll hear
Speaker 1: Greg Jericho mention, that's another time when there was so
Speaker 1: much uncertainty and that also led to a stock market crash.
Speaker 2: I always find it helpful to remember that the economy
Speaker 2: is actually based on psychology. It's based on how people
Speaker 2: are feeling. And when there's a bit of fear and
Speaker 2: a bit of panic and a bit of uncertainty, that's
Speaker 2: when you see major moves in the market. So let's
Speaker 2: hear that chat now with Greg Jericho.
Speaker 1: Greg Jericho, thank you so much for joining the Daily OS.
Speaker 3: Norah's Billy great to be here.
Speaker 1: So we are seeing another significant fall in the stock
Speaker 1: market at the moment. Before we get to that, though,
Speaker 1: can you take me through what US President Donald Trump
Speaker 1: announced last week.
Speaker 4: Oh god, how to say it without breaking into sad laughter,
Speaker 4: because what he announced was basically tariff's on every single
Speaker 4: nation on earth. Initially with the story was he was
Speaker 4: going to do this thing called reciprocal tariffs, which is
Speaker 4: pretty straightforward. If you've got a ten percent tariff on
Speaker 4: our stuff, we'll put a ten percent tariff on your stuff.
Speaker 3: But he didn't do that at all. What he did was.
Speaker 4: He worked out what was the trade deficit that America
Speaker 4: had with every country, and so if let's say Vietnam
Speaker 4: exported ninety percent more stuff to America than it bought
Speaker 4: from America, then he said, oh, you've got a ninety
Speaker 4: percent tariff on us, so we'll have that and we'll
Speaker 4: put a forty five percent tariff on you. And it
Speaker 4: made no sense because a lot of these nations are poor,
Speaker 4: they're small, a lot smaller than America, so of course
Speaker 4: they're going to sell more stuff to America than they're
Speaker 4: going to buy from it. And places like Australia, where
Speaker 4: we actually do buy more stuff from America than we
Speaker 4: sell to it, he couldn't do that, so he just
Speaker 4: put a flat ten percent tariff on nations like Australia.
Speaker 3: So that's pretty much what he did.
Speaker 4: And really what that means though, he decided to make
Speaker 4: everything that America imports from anywhere more expensive for Americans
Speaker 4: to buy, and that really has sent everything into a
Speaker 4: bit of a meltdown.
Speaker 1: And so he's made it more expensive for Americans to
Speaker 1: buy products from Australia. But for those of us in Australia,
Speaker 1: what's the tangible impact on us? Or is it more
Speaker 1: businesses in Australia that are impacted than the average consumer.
Speaker 4: Yeah, Australian consumers really shouldn't be affected at all. If
Speaker 4: you go into a shop and someone says, oh, we've
Speaker 4: had to raise prices because of the tariffs, call bullshit
Speaker 4: on them straight away. Because tariffs are paid by the
Speaker 4: country that levies them. So America put all these tariffs
Speaker 4: on other nations who pays the people importing them. So
Speaker 4: if an American wants to buy some bee from Australia,
Speaker 4: suddenly it's going to cost well, potentially ten percent more
Speaker 4: than it did a week ago. It does not affect
Speaker 4: our consumers. The cost of things in Woolli's calls doesn't
Speaker 4: affect all. It does affect businesses. Obviously, if you're a
Speaker 4: business that is selling stuff to America, well, now it's
Speaker 4: going to cost the American importer tempercent more to buy
Speaker 4: that stuff from you, so they might buy a bit less.
Speaker 4: So we don't even really know what the impact on
Speaker 4: owning business.
Speaker 3: Is going to be.
Speaker 4: I think, really we shouldn't be overreacting. It's not going
Speaker 4: to affect them too much.
Speaker 3: Will have an.
Speaker 4: Impact mainly because Americans are are all going to be
Speaker 4: a lot poorer because everything's a lot more expensive. Their
Speaker 4: incomes haven't gone up, so they have to cut back
Speaker 4: on how much they can buy.
Speaker 1: Okay, But the way that it has potentially impacted the
Speaker 1: average Australian consumer is if you have shares and we
Speaker 1: have seen a crash. Can I use that word crash
Speaker 1: or is that a technical term that there has to
Speaker 1: be a certain amount of full before you can use
Speaker 1: that word.
Speaker 4: Oh yeah, I mean I don't know if it's been
Speaker 4: a crash yet. It has just been a big plunge
Speaker 4: I think is the nice way of putting it. But
Speaker 4: I mean, you know, the value of our stock is
Speaker 4: change is full and ten sent in the last week
Speaker 4: since Donald Trump had his moment of madness. Crashes are
Speaker 4: more sort of ten to fifteen percent in a day.
Speaker 4: When you start seeing that, that's when you start thinking crash.
Speaker 1: And so why specifically has it had? Like what's the
Speaker 1: relationship between tariffs and a fall in the stock market?
Speaker 4: Yeah, really, what the investors are worrying about, they're looking
Speaker 4: at what's happening with China as much as anything. Is
Speaker 4: that one, he's put a pretty big tariff on China.
Speaker 4: China has retaliated with a big tariff against America. So
Speaker 4: that's going to make everything more expensive in both America
Speaker 4: and China. So both of their economies are kind of
Speaker 4: going to slow down because they're going to be spending less,
Speaker 4: they're going to be producing less. And if China's economy
Speaker 4: is weaker America's economy is weaker, then there is this
Speaker 4: belief that, oh, Australian mining companies especially are going to
Speaker 4: be worse off. And when that happens, Irvan's like, well,
Speaker 4: I don't want to hold these shares anymore because they're
Speaker 4: going to be worth less, so let's get out of them.
Speaker 4: So that's really what we're seeing everyone kind of freaking
Speaker 4: out thinking, oh, we're in for tough times. Maybe I
Speaker 4: should put my money elsewhere.
Speaker 1: And in the context of how bad is this one?
Speaker 3: Oh, look, it's significant.
Speaker 4: It's not quite as bad as we saw during the
Speaker 4: GFC or even during the first sort of minutes of
Speaker 4: the pandemic, but this is pretty pretty significant. It really
Speaker 4: has kind of wiped out all of the gains of
Speaker 4: the past year or so.
Speaker 3: You know. It's not a case of we're in.
Speaker 4: Great depression territory or things like that, but it's one
Speaker 4: that is certainly going to be remembered. And what is
Speaker 4: more concerning is it seems to be ongoing. You know,
Speaker 4: we had a bit of a fall on Thursday and
Speaker 4: then on Friday, and there was no calming over the weekend.
Speaker 4: It's this ongoing impact of everyone thinking, I don't know
Speaker 4: if Trump has any clue what he's doing, and he
Speaker 4: seems to think he's doing a good thing, which means
Speaker 4: maybe he's not going to reverse it. So that's what
Speaker 4: everyone's scared about. And the worry is that it's just
Speaker 4: going to keep getting worse and worse, and that that
Speaker 4: is certainly a big worry.
Speaker 1: Is this all in the hands Trump? Like, is he
Speaker 1: the only one that can kind of turn this around?
Speaker 3: Pretty much.
Speaker 4: I mean, all of this has happened because of Trump,
Speaker 4: and we know America it's easily the biggest economy in
Speaker 4: the world, China behind it, and so he's the one
Speaker 4: who can pretty much stop all this occurring. If Trump
Speaker 4: decides to keep these tariffs in place, well, then Americans
Speaker 4: are going to be paying a lot more for everything,
Speaker 4: and that means they're going to be buying a lot
Speaker 4: less of stuff. And when you're buying less of stuff,
Speaker 4: then you're producing less around the world. You're employing fewer
Speaker 4: people to produce that, and that has accumulative effect and
Speaker 4: suddenly you're in a recession.
Speaker 1: Do you think there's a chance Trump will reverse his
Speaker 1: tariffs because he doesn't want to go into a recession, right.
Speaker 3: Yeah, Well you'd hope.
Speaker 4: So I think what you're saying is everyone's hope that
Speaker 4: he will pretend that he hasn't backed down, but actually
Speaker 4: back down and he'll declare victory. But the worry is
Speaker 4: he's continuing to go with this line that, oh this,
Speaker 4: you know, there needs to be some strong medicine to
Speaker 4: fix this, and so there will be some pain in
Speaker 4: the short term, but then it's all going to come
Speaker 4: roaring back, and it ain't going to come roaring back
Speaker 4: because the problem is Trump sees a deficit, a trade deficit,
Speaker 4: as America losing, and it's not. It's just Americans getting
Speaker 4: cheaper stuff or getting good quality stuff. I hope that
Speaker 4: he does do his usual thing of back down when
Speaker 4: he's made an error, but make it sound like he's won,
Speaker 4: and all his mega supporters will go, yeah, look at him.
Speaker 4: He got all these great deals done, and everyone who
Speaker 4: actually knows anything will just go, yeah, that was just
Speaker 4: a three months of idiocy that we just endured where
Speaker 4: everyone lost money. But Trump is making it sound like
Speaker 4: it was a win. That's the hope. The problem is
Speaker 4: he's also got some advisors who told him to do
Speaker 4: all this. I worry that he'll keep persisting with that,
Speaker 4: and if he does, the longer this goes on, the
Speaker 4: worst it is for Americas, and as a result, the
Speaker 4: greater the risk that we're going to get caught up
Speaker 4: in all this terrible wash.
Speaker 1: Your expert opinion as an economist is obviously that this
Speaker 1: is a horrible thing. Apart from Trump, Are there any
Speaker 1: economists saying that this is a good thing.
Speaker 4: No, there's no economists out there who are saying this
Speaker 4: is a great thing unless you're someone who's trying to
Speaker 4: curry favor with Trump or or appeal to his type
Speaker 4: of supporters. Everyone else is gone and going this is
Speaker 4: just a bit of idiocy that has just made everything
Speaker 4: more expensive for Americans for no benefit whatsoever.
Speaker 1: Final question, are we heading for a recession?
Speaker 3: Oh?
Speaker 4: Look, I never like predicting those type of things, because
Speaker 4: there are things that can be done. The Reserve Bank
Speaker 4: can cut interest rates, and that seems very likely to
Speaker 4: happen now in May.
Speaker 1: And probably he just explained that why would this result
Speaker 1: in a further interest rate cut?
Speaker 4: Yeah, I mean basically, we've all been worried about inflation,
Speaker 4: and so the Reserve Bank has raised interest rates to
Speaker 4: try and slow the economy to get fewer people employed. Really,
Speaker 4: I mean when the Reserve Bank raises interest rates, it
Speaker 4: means it wants more people to lose jobs, essentially because
Speaker 4: people have got less money to spend in the shops.
Speaker 4: And if you've got less money to spend in the shops,
Speaker 4: then the shop owners going, yeah, I don't think you
Speaker 4: need an extra shift, and actually I'm going to have
Speaker 4: to cut back your shifts completely. But if things look
Speaker 4: like they're slowing down, then the Reserve Bank does the opposite.
Speaker 4: It cuts rates. People feel like, oh, I've got more
Speaker 4: money to spend. Businesses small businesses like, oh it's cheaper
Speaker 4: for me to borrow, so they can borrow. That kind
Speaker 4: of helps keep people employed, helps keep money moving around,
Speaker 4: helps keep the economy going, and so the Reserve Bank
Speaker 4: will definitely look to do that. Certainly we don't need
Speaker 4: to go into recession. But you know, if China slows down,
Speaker 4: if America really goes into recession, if Europe also struggles
Speaker 4: because they're putting tariffs on as well, it's kind of
Speaker 4: hard to avoid everything happening bad in the world happening
Speaker 4: here as well. I mean, we saw fifteen years ago
Speaker 4: during the global Financial crisis, everywhere else in the world
Speaker 4: had the Great Recession. Here in Australia we didn't go
Speaker 4: into recession due to government policies, due to the Reserve
Speaker 4: Bank cutting rates. So you know, it's not a certainty,
Speaker 4: but all the risks are now on the downside. All
Speaker 4: the real concerns are about just how slow things might get.
Speaker 1: Not the rosiest of pictures, but thank you so much
Speaker 1: for explaining it to us.
Speaker 4: Greg Jericho Noah is Billy always good to chat.
Speaker 2: A fascinating chat as always from the Australia Institute's Greg
Speaker 2: Jericho Billy, thank you for facilitating that for us this morning.
Speaker 2: That's all we've got time for on today's episode of
Speaker 2: The Daily Oz. I'm sure there are a lot of
Speaker 2: questions that have come from that podcast. You can always
Speaker 2: jump over to our Instagram and dm us questions that
Speaker 2: you want us to explain, particularly around the global economy.
Speaker 2: We're going to be back in the afternoon with your headlines.
Speaker 2: Until then, have a great date. My name is Lily
Speaker 2: Maddon and I'm a proud Arunda Bungelung Kalkadin woman from
Speaker 2: Gadighl Country.
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Speaker 1: our respects to the first peoples of these countries, both
Speaker 1: past and present.