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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 3: Good morning and welcome to the Daily OS. It's Thursday,

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Speaker 3: the thirteenth of March.

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Speaker 1: I'm emma, I'm billy.

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Speaker 3: Yesterday, most of us here in Australia woke up to

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Speaker 3: the news that US President Donald Trump is going ahead

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Speaker 3: with harsh tariffs on all countries who import their goods to.

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Speaker 1: The US, with no exceptions.

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Speaker 3: It comes after months of uncertainty and efforts by the

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Speaker 3: Australian government to negotiate an exemption on Ossie steel and aluminium. However,

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Speaker 3: the twenty five percent import tax officially came into effect

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Speaker 3: yesterday afternoon, and that came after what was already a

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Speaker 3: tumultuous week for the US economy and global markets, after

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Speaker 3: Donald Trump refused to rule out.

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Speaker 1: The possibility of a US recession.

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Speaker 3: Today, today we are going to explain everything you need

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Speaker 3: to know about what's going on with the US economy

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Speaker 3: and these tariffs.

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Speaker 2: This week, okay, and so as you've set up for us,

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Speaker 2: it has been a big week for the economy, especially

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Speaker 2: for the share market. There were big drops on Wall

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Speaker 2: Street in the US and we also felt that here

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Speaker 2: in Australia. Do you want to just take us back

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Speaker 2: to the weekend when this kind of all started to unravel.

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Speaker 2: What happened?

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Speaker 3: Yes, So it all started on Sunday night when Donald

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Speaker 3: Trump did an interview with Fox News, the US news outlet,

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Speaker 3: and that kind of triggered this first wave of volatility

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Speaker 3: that we saw this week. He was asked directly by

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Speaker 3: a Fox reporter if he's expecting the US to enter

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Speaker 3: a recession this year, and here's what he said.

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Speaker 1: I hate to predict things like that.

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Speaker 2: There is a period of transition because what we're doing

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Speaker 2: is very big. Okay, So he refused to rule out

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Speaker 2: the possibility of a recession, refuse to kind of speculate

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Speaker 2: whether or not there would be one. And obviously a

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Speaker 2: lot of people were watching that hoping that he would

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Speaker 2: say with certainty that there wouldn't be one. He didn't

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Speaker 2: do that. Do I just give us a quick refresher though,

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Speaker 2: on what exactly is a recession?

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Speaker 3: Yes, So when you hear the term recession, it's referring

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Speaker 3: to a period of economic decline, which is usually marked

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Speaker 3: by things like reduced consumer spending and job losses. So

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Speaker 3: us the customers spending less money, and more unemployed people.

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Speaker 3: Most economists do have a clear definition for recession, and

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Speaker 3: that includes there being two consecutive three month periods or

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Speaker 3: quarters of a country's gross domestic product going backwards. So

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Speaker 3: there are a number of key indicators that can tell

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Speaker 3: us a recession is around the corner, and those indicators

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Speaker 3: are things like market volatility, consumer attitudes, widespread unemployment, and

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Speaker 3: increased rates of people not being able to pay back

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Speaker 3: there credit card bills or their home loans. So when

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Speaker 3: all of those things are bubbling away, that's a pretty

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Speaker 3: good indication that we're headed for a recession.

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Speaker 1: Okay, so obviously not great.

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Speaker 2: Not what anyone wants is their cause for concern that

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Speaker 2: there could be a recession in the US.

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Speaker 3: So interestingly, most indicators on the US economy actually look

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Speaker 3: pretty strong when we consider those kind of key recession indicators.

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Speaker 3: So hiring and job creation rates are looking good. Economists

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Speaker 3: aren't worried about those things. There are some indicators though,

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Speaker 3: that there could be an increase in kind of consumer pessimism.

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Speaker 3: So consumer confidence figures have dropped, stock markets have been fluctuating,

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Speaker 3: and that could all lead to less spending, and that's

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Speaker 3: something that could result in recession, but a number of

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Speaker 3: major financial institutions release probability ratings to give us an

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Speaker 3: indication on what they're experts and what their analysis says

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Speaker 3: about the likelihood of a recession. And we've seen some

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Speaker 3: reevaluated predictions out of the US. So, for example, JP

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Speaker 3: Morgan now believes a recession is forty percent likely and

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Speaker 3: Goldman Sachs puts it at a twenty percent chance for

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Speaker 3: the US.

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Speaker 2: Right, And there's also all of this added uncertainty with

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Speaker 2: the tarifsts that we'll get into. Is that also kind

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Speaker 2: of why people are speculating, because with uncertainty comes speculation

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Speaker 2: that we don't know obviously what's going to happen.

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Speaker 3: Yeah, whenever there is financial uncertainty insecurity about the future,

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Speaker 3: when people don't feel confident about the road ahead, that

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Speaker 3: can lead to these kind of big drops on stock markets.

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Speaker 3: People panic, they might sell their shares. The fluctuations kind

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Speaker 3: of add to these conversations around oh dear or something

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Speaker 3: bigger around the corner.

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Speaker 2: And that's kind of what happened right after this interview

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Speaker 2: with Fox right exactly.

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Speaker 3: So stock markets pretty much immediately crashed, firstly in the US,

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Speaker 3: but then around the world. In including here in Australia.

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Speaker 3: So on Tuesday, the ASX plummeted by more than fifty

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Speaker 3: billion dollars and that was directly linked to uncertainty over

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Speaker 3: the US economy, all from you know, a few words

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Speaker 3: said by the president of the world's largest economy. Tech

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Speaker 3: stocks saw the biggest drops, and that was in the

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Speaker 3: US as well as here on the ASX and Tesla

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Speaker 3: stocks interestingly slipped by fifteen percent on Monday, and shares

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Speaker 3: in the ev company, the Elon Musk owned company, have

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Speaker 3: actually halved in value since December, so pretty consistent downturn

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Speaker 3: for a company like Tesla.

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Speaker 2: And fun fact, after this terrible drop from Tesla on

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Speaker 2: the share market, Trump and Elon Masks stood in front

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Speaker 2: of the White House with their Tesla cars trying to

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Speaker 2: kind of do this pr stunt to say, you know, look,

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Speaker 2: the President is still using Tesla's so so should.

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Speaker 1: All of us. Apparently was still going strong.

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Speaker 2: They say, okay, So this fluctuation across stock markets is

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Speaker 2: one part of the story. But there's this other huge

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Speaker 2: policy from the Trump administration that we have flagged, and

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Speaker 2: it's one we have been talking about for quite a

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Speaker 2: while now. Since Trump became the president, and that is tariffs.

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Speaker 2: Do you want to first remind us what that term means?

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Speaker 1: What are tariffs? Yes?

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Speaker 3: So, put really simply, tariffs are a type of import tax.

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Speaker 3: So when foreign made goods are brought into another country,

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Speaker 3: they are subject to fees or duties. Those fees or

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Speaker 3: duties are known as tariffs. So governments might use tariffs

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Speaker 3: as a means to protect local manufacturing. So this is

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Speaker 3: because these taxes make imported goods more expensive.

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Speaker 1: So rather than absorb the cost of.

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Speaker 3: Input fees on foreign goods, consumers might think, oh, I'll

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Speaker 3: buy a locally made product because it's cheaper or it

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Speaker 3: doesn't have those taxes on it. The flip side of

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Speaker 3: that is, generally speaking, customers might not always have the

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Speaker 3: option to purchase domestic goods. You know, depending on what

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Speaker 3: those goods are, they might not be a local market

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Speaker 3: and you know, that means that they will usually end

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Speaker 3: up being the hardest hit by tariffs. Customers usually end

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Speaker 3: up absorbing them. So specifically, these US tariffs could make

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Speaker 3: things more expensive for American consumers. They might not necessarily

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Speaker 3: impact Australian exports immediately unless demand for goods ends up

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Speaker 3: shifting that is more concerning, but we can get into

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Speaker 3: the specifics of that a little bit later.

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Speaker 2: Okay, So my understanding is that the thinking behind Trump

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Speaker 2: introducing these tariffs is for more things to be made

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Speaker 2: in the US. He basically wants everything to be made

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Speaker 2: in the US and for customers to only be buying

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Speaker 2: things that were made in the US.

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Speaker 3: Yes, he said in strong terms that he wants manufacturers

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Speaker 3: to bring their manufacturing businesses to US shores to make

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Speaker 3: those products there in America. Interestingly, as well, tariffs are

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Speaker 3: often used to sanction other countries as a sort of

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Speaker 3: political device in trade wars, and we have seen that

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Speaker 3: play out with the US and China and heavy tariffs

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Speaker 3: that it's imposed on them for different reasons than that

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Speaker 3: kind of local manufacturing angle.

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Speaker 2: And so what else you just mentioned China? I know

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Speaker 2: there were also ones on Canada and Mexico. What else

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Speaker 2: has happened in the lead up to this week before

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Speaker 2: we get into what actually has happened this week.

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Speaker 3: Yes, So since Trump was elected in November, he was

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Speaker 3: inaugurated in January, and even before then, he has been

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Speaker 3: promising sweeping import tariffs aimed at, like we've said, bolstering

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Speaker 3: US manufacturing also aimed at strengthening the US border. This

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Speaker 3: was a policy area that he was really focused on

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Speaker 3: in his first term as president, so it's not a

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Speaker 3: particularly shocking policy area for Trump to be so heavily

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Speaker 3: invested in. But in the first few weeks off his

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Speaker 3: current term, Trump did announce a number of tariffs which

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Speaker 3: included goods imported from Mexico and Canada, and that had

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Speaker 3: to do with managing the US borders. We heard a

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Speaker 3: lot of commentary at the time about illegal drug importations,

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Speaker 3: illegal immigration. But then Trump also announced tariffs against China.

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Speaker 3: The Mexico Canada tariffs, there was a lot of stop start,

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Speaker 3: back and forth. There were pauses, negotiations about you know

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Speaker 3: how they would end up working, but they did recently

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Speaker 3: come into effect. And then last month Trump announced that

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Speaker 3: the US would impose twenty five percent tariffs on imported

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Speaker 3: steel and aluminium. That would be on all countries that

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Speaker 3: import those products to the US and that includes Australia.

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Speaker 3: Now since then, Australia has been really focused on avoiding

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Speaker 3: that specific tariff.

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Speaker 2: And steel and aluminium in Australia is really important. It's

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Speaker 2: one of our biggest exports. Do you want to just

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Speaker 2: explain more kind of the importance of steel and aluminium

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Speaker 2: to Australia, because it's not something that we learn about,

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Speaker 2: really yeah, no, and as you study it.

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Speaker 3: Unless you study it, unless you work in the field

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Speaker 3: of steel and aluminium, or aluminum.

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Speaker 1: As America would call it.

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Speaker 3: Australia does export hundreds of millions of dollars of steel

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Speaker 3: and aluminium.

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Speaker 1: To the US every year.

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Speaker 3: Steel is used in things like you know, car manufacturing,

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Speaker 3: heavy industries, construction, and aluminium is used also in car

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Speaker 3: manufacturing as well as in household items pots, pans, foil,

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Speaker 3: so they're kind of very versatile exports. According to government data,

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Speaker 3: the US was the world's second largest steel importer in

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Speaker 3: twenty twenty three, and its aluminium imports have actually increased

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Speaker 3: by twenty five percent since twenty fifteen. Now, last year,

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Speaker 3: the US imported around four hundred million US dollars of

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Speaker 3: Australian steel and around two hundred and seventy million dollars

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Speaker 3: of Australian aluminium. That might sound like a lot of money,

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Speaker 3: but actually in the broader context of the US, Australia

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Speaker 3: isn't a major exporter of aluminium to America Compared to

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Speaker 3: other trading partners. So, for example, in the year of February,

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Speaker 3: the US imported three million tons of aluminium from Canada

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Speaker 3: and three hundred and fifty thousand tons from the UAE.

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Speaker 3: Australia exported ninety thousand tons during that time, So overall

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Speaker 3: about ten percent of our steel and aluminium goes to America.

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Speaker 3: So it's not nothing, but there are other markets and

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Speaker 3: other ways to kind of diversify our exports of those goods.

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Speaker 2: Okay, So Trump announced these tariffs. Then Anthony Albanesi, Australia's

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Speaker 2: Prime minister, has a call with Trump to try to

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Speaker 2: see if Australia specifically can get an exemption. Albanzi was

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Speaker 2: quite positive about that call. But what has happened since

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Speaker 2: that has meant that there will now be these tariffs

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Speaker 2: and there will be no exemption.

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Speaker 3: Yes, So you might remember that phone call, and President

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Speaker 3: Trump had spoken to US media said that he thought

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Speaker 3: Albanzi was a very nice man, that the exemption for

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Speaker 3: Australia was under consideration. Also at that time, Trump told

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Speaker 3: reporters in the White House that Australia was one of

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Speaker 3: the only countries where the US has a trade surplus.

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Speaker 3: Now what that means is Australia buys more American goods

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Speaker 3: than the US buys from Australia. Trump signed a series

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Speaker 3: of executive orders last month following that call. He did

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Speaker 3: say no countries would be exempt, but he was asked

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Speaker 3: directly about Australia and said he was giving it great consideration. However,

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Speaker 3: as we know, that has since fallen through and at

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Speaker 3: the time a senior trade advisor to Trump his name

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Speaker 3: is Pete Navarro, he had accused Australia of quote killing

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Speaker 3: the American aluminium market. Navarro was actually a key figure

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Speaker 3: in Trump's similar tariffs in twenty eighteen, and those are

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Speaker 3: the ones that former PM Malcolm Turnbull actually successfully negotiated

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Speaker 3: to avoid. But in short, it appears this time that

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Speaker 3: Australia's efforts to secure an exemption now have seemingly failed.

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Speaker 3: So the White House confirmed on Tuesday that the tariffs

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Speaker 3: would be going ahead without exception. We heard from White

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Speaker 3: House spokeswoman Caroline Leave. She told the ABC that Trump

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Speaker 3: considered the request and considered against it. To use her words,

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Speaker 3: Peter Navarro, who worked with Trump and Turnbull in twenty eighteen,

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Speaker 3: he said that every country that was exempt from the

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Speaker 3: tariffs last time abused those exemptions. So speaking to the ABC,

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Speaker 3: Navarro said, the lesson from the first Trump tariffs has

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Speaker 3: been quote is that exemptions to anybody a counterproductive. They

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Speaker 3: don't work for the American people. When we were kind

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Speaker 3: enough as a country to make those gestures to our friends,

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Speaker 3: he said, they bit the hand that fed them, and

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Speaker 3: that's not going to happen again.

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Speaker 2: Okay, those are pretty definitive words. We do know though that,

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Speaker 2: you know, when we look at Mexico and Canada and

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Speaker 2: the tariffs that were meant to be introduced there, they

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Speaker 2: were briefly stopped. Like you said, there was that stop start,

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Speaker 2: So we do know that there is a possibility that

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Speaker 2: Trump could change his mind.

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Speaker 1: But let's just.

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Speaker 2: Say that these tariffs are here to stay. How would

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Speaker 2: it meaningfully impact Australia and what would the economic fallout be?

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Speaker 3: Yeah, I think it's important to note that the initial

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Speaker 3: impact on local manufacturing would be minor, So all the

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Speaker 3: experts are telling us that the effect straightaway is going

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Speaker 3: to be pretty negligible. But as we discussed at the

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Speaker 3: start of the episode, tariffs are more likely going to

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Speaker 3: impact consumers on the other end, Uncertainty then kind of

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Speaker 3: comes from how other markets will react. So there are

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Speaker 3: sweeping tariffs on so many countries as we've discussed, and

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Speaker 3: bigger exporters like China might resort to a trade tactic

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Speaker 3: known as dumping. Now, this is when a product gets

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Speaker 3: exported to a foreign market at a lower price than

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Speaker 3: it costs domestically. So, for example, if an Aussie steel

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Speaker 3: manufacturer sells their stell to the US for less than

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Speaker 3: they charge Australian customers, part of this dumping also means

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Speaker 3: decreased demand in a market. So if demand for steel

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Speaker 3: in the US drops, some foreign businesses might flood other

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Speaker 3: markets like Australia with excess stock. That can lead to

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Speaker 3: more competition and that can have negative effects on local businesses.

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Speaker 3: The federal government actually has an Anti Dumping Commission aimed

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Speaker 3: at protecting local manufacturers, so there are some regulatory measures

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Speaker 3: in place.

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Speaker 1: But the other.

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Speaker 3: Significant concern here is the potential for a global trade war.

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Speaker 3: The University of Sydney School of Economics put this better

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Speaker 3: than I could.

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Speaker 1: They posted an interesting explainer.

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Speaker 3: On this whole issue, which said a trade war quote

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Speaker 3: could disrupt supply chains and weaken manufacturing activity across East

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Speaker 3: and Southeast Asia. Given that Japan, Korea and China are

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Speaker 3: key export destinations for Australia, such disruptions could have significant

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Speaker 3: economic consequences. We've also spoken previously to economist Greg Jericho

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Speaker 3: and he's explained to The Daily I was before that

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Speaker 3: if the Chinese economy is doing poorly, then the Australian

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Speaker 3: economy generally follows suits. So unfortunately, we're in this kind

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Speaker 3: of place global or in this unique kind of Asia

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Speaker 3: Pacific region, in this position unfortunately where if other big

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Speaker 3: key players like China, Japan, etc. Are hit or impacted,

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Speaker 3: then you know, we tend to also experience negative fallouts

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Speaker 3: in our own economy.

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Speaker 1: Yeah.

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Speaker 2: It's a real example of the globalized world that we

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Speaker 2: live in and the impact of globalization on economy. Exactly,

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Speaker 2: something happens to one country, it literally impacts all countries.

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Speaker 2: How has the Australian federal government responded to this news?

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Speaker 3: So we heard from Prime Minister Anthony Albanezi yesterday. He

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Speaker 3: did a press conference and addressed this decision by Trump.

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Speaker 3: He had very clear disappointment over that decision and here

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Speaker 3: is a bit of what he said.

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Speaker 4: Such a decision by the Trump administration is entirely unjustified.

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Speaker 4: Australia will continue working hard for a different outcome and

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Speaker 4: discussions with the Trump administration. Ongoing grafts and escalating trade

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Speaker 4: tensions are a form of economic self harm. They are

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Speaker 4: paid by the consumers. This is why Australia will not

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Speaker 4: be imposing reciprocal tariffs on the United States. Such a

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Speaker 4: course of action would only push up prices for Australian

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Speaker 4: consumers and increase inflation.

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Speaker 3: So from Albanese's words yesterday, we're expecting the government to

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Speaker 3: continue to put forward that very strong case for an exemption.

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Speaker 3: As Albanezi said, he also noted, quote we will continue

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Speaker 3: to point out that the United States interests are not

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Speaker 3: served by today's decision, and in an interview with Sky,

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Speaker 3: Foreign Minister Penny Wong said the tariffs were quote not

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Speaker 3: the way to treat a friend and partner. So the

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Speaker 3: word from the Australian government really leaning into the kind

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Speaker 3: of alliance and the decades long friendship between the two

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Speaker 3: nations and what about the coalition So Billy, of course,

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Speaker 3: there is an election coming up. We are heading to

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Speaker 3: the polls sooner or later, and we're probably going to

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Speaker 3: hear a lot more about this over the coming weeks

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Speaker 3: from the Coalition, the Opposition has criticized Albanzi quite strongly

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Speaker 3: for how he's handled this tariff debacle and these negotiations.

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Speaker 3: They've kind of suggested that he didn't do enough, didn't

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Speaker 3: work hard enough with Trump, that he should have actually

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Speaker 3: flown to the White House for an in person.

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Speaker 1: Discussion or negotiation.

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Speaker 3: The Coalition has also called into question Kevin Rudd. Now

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Speaker 3: he is Australia's ambassador to the US. You might remember

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Speaker 3: there was a bit of politicking around whether or not

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Speaker 3: he was the right person for the job after some

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Speaker 3: old comments that he made that were very critical of

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Speaker 3: Trump emerged. Trump had sort of hit back at that

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Speaker 3: before he was elected, said that Kevin Rudd was nasty,

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Speaker 3: and the Coalition now we're kind of asking, well, is

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Speaker 3: Kevin Rudd the right person to be representing Australia in

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Speaker 3: these discussions? He's our man on the ground. Is he

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Speaker 3: equipped to deal with the Trump administration? But Anthony Alberizi

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Speaker 3: backed in Rudd yesterday. During that address, the PM described

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Speaker 3: him as a quote very effective ambassador.

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Speaker 2: Such a complex topic. I think we got through a

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Speaker 2: lot today, a very effective podcast.

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Speaker 3: Well, thank you for listening, if you're still awake, I

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Speaker 3: really appreciate it. Of course.

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Speaker 2: No, there's nothing that excites us small than economics a mare,

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Speaker 2: and thank you so much for listening to this episode

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Speaker 2: of The Daily os. We'll be back again this afternoon

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Speaker 2: with your evening headlines. Until then, have a great day.

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Speaker 2: My name is Lily Madden and I'm a proud Arunda

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Speaker 2: Bungelung Chalcuttin woman from Gadighl Country. The Daily oz acknowledges

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Speaker 2: that this podcast is recorded on the lands of the

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Speaker 2: Gadighl people and pays respect to all Aboriginal and Torres

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Speaker 2: Strait Island and nations.

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Speaker 1: We pay our respects to the first peoples of these countries,

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Speaker 1: both past and present.