Speaker 1: Already and this is the daily This is the daily.
Speaker 2: Ohs oh, now it makes sense.
Speaker 3: Good morning and welcome to the Daily OS. It's Thursday,
Speaker 3: the thirteenth of March.
Speaker 1: I'm emma, I'm billy.
Speaker 3: Yesterday, most of us here in Australia woke up to
Speaker 3: the news that US President Donald Trump is going ahead
Speaker 3: with harsh tariffs on all countries who import their goods to.
Speaker 1: The US, with no exceptions.
Speaker 3: It comes after months of uncertainty and efforts by the
Speaker 3: Australian government to negotiate an exemption on Ossie steel and aluminium. However,
Speaker 3: the twenty five percent import tax officially came into effect
Speaker 3: yesterday afternoon, and that came after what was already a
Speaker 3: tumultuous week for the US economy and global markets, after
Speaker 3: Donald Trump refused to rule out.
Speaker 1: The possibility of a US recession.
Speaker 3: Today, today we are going to explain everything you need
Speaker 3: to know about what's going on with the US economy
Speaker 3: and these tariffs.
Speaker 2: This week, okay, and so as you've set up for us,
Speaker 2: it has been a big week for the economy, especially
Speaker 2: for the share market. There were big drops on Wall
Speaker 2: Street in the US and we also felt that here
Speaker 2: in Australia. Do you want to just take us back
Speaker 2: to the weekend when this kind of all started to unravel.
Speaker 2: What happened?
Speaker 3: Yes, So it all started on Sunday night when Donald
Speaker 3: Trump did an interview with Fox News, the US news outlet,
Speaker 3: and that kind of triggered this first wave of volatility
Speaker 3: that we saw this week. He was asked directly by
Speaker 3: a Fox reporter if he's expecting the US to enter
Speaker 3: a recession this year, and here's what he said.
Speaker 1: I hate to predict things like that.
Speaker 2: There is a period of transition because what we're doing
Speaker 2: is very big. Okay, So he refused to rule out
Speaker 2: the possibility of a recession, refuse to kind of speculate
Speaker 2: whether or not there would be one. And obviously a
Speaker 2: lot of people were watching that hoping that he would
Speaker 2: say with certainty that there wouldn't be one. He didn't
Speaker 2: do that. Do I just give us a quick refresher though,
Speaker 2: on what exactly is a recession?
Speaker 3: Yes, So when you hear the term recession, it's referring
Speaker 3: to a period of economic decline, which is usually marked
Speaker 3: by things like reduced consumer spending and job losses. So
Speaker 3: us the customers spending less money, and more unemployed people.
Speaker 3: Most economists do have a clear definition for recession, and
Speaker 3: that includes there being two consecutive three month periods or
Speaker 3: quarters of a country's gross domestic product going backwards. So
Speaker 3: there are a number of key indicators that can tell
Speaker 3: us a recession is around the corner, and those indicators
Speaker 3: are things like market volatility, consumer attitudes, widespread unemployment, and
Speaker 3: increased rates of people not being able to pay back
Speaker 3: there credit card bills or their home loans. So when
Speaker 3: all of those things are bubbling away, that's a pretty
Speaker 3: good indication that we're headed for a recession.
Speaker 1: Okay, so obviously not great.
Speaker 2: Not what anyone wants is their cause for concern that
Speaker 2: there could be a recession in the US.
Speaker 3: So interestingly, most indicators on the US economy actually look
Speaker 3: pretty strong when we consider those kind of key recession indicators.
Speaker 3: So hiring and job creation rates are looking good. Economists
Speaker 3: aren't worried about those things. There are some indicators though,
Speaker 3: that there could be an increase in kind of consumer pessimism.
Speaker 3: So consumer confidence figures have dropped, stock markets have been fluctuating,
Speaker 3: and that could all lead to less spending, and that's
Speaker 3: something that could result in recession, but a number of
Speaker 3: major financial institutions release probability ratings to give us an
Speaker 3: indication on what they're experts and what their analysis says
Speaker 3: about the likelihood of a recession. And we've seen some
Speaker 3: reevaluated predictions out of the US. So, for example, JP
Speaker 3: Morgan now believes a recession is forty percent likely and
Speaker 3: Goldman Sachs puts it at a twenty percent chance for
Speaker 3: the US.
Speaker 2: Right, And there's also all of this added uncertainty with
Speaker 2: the tarifsts that we'll get into. Is that also kind
Speaker 2: of why people are speculating, because with uncertainty comes speculation
Speaker 2: that we don't know obviously what's going to happen.
Speaker 3: Yeah, whenever there is financial uncertainty insecurity about the future,
Speaker 3: when people don't feel confident about the road ahead, that
Speaker 3: can lead to these kind of big drops on stock markets.
Speaker 3: People panic, they might sell their shares. The fluctuations kind
Speaker 3: of add to these conversations around oh dear or something
Speaker 3: bigger around the corner.
Speaker 2: And that's kind of what happened right after this interview
Speaker 2: with Fox right exactly.
Speaker 3: So stock markets pretty much immediately crashed, firstly in the US,
Speaker 3: but then around the world. In including here in Australia.
Speaker 3: So on Tuesday, the ASX plummeted by more than fifty
Speaker 3: billion dollars and that was directly linked to uncertainty over
Speaker 3: the US economy, all from you know, a few words
Speaker 3: said by the president of the world's largest economy. Tech
Speaker 3: stocks saw the biggest drops, and that was in the
Speaker 3: US as well as here on the ASX and Tesla
Speaker 3: stocks interestingly slipped by fifteen percent on Monday, and shares
Speaker 3: in the ev company, the Elon Musk owned company, have
Speaker 3: actually halved in value since December, so pretty consistent downturn
Speaker 3: for a company like Tesla.
Speaker 2: And fun fact, after this terrible drop from Tesla on
Speaker 2: the share market, Trump and Elon Masks stood in front
Speaker 2: of the White House with their Tesla cars trying to
Speaker 2: kind of do this pr stunt to say, you know, look,
Speaker 2: the President is still using Tesla's so so should.
Speaker 1: All of us. Apparently was still going strong.
Speaker 2: They say, okay, So this fluctuation across stock markets is
Speaker 2: one part of the story. But there's this other huge
Speaker 2: policy from the Trump administration that we have flagged, and
Speaker 2: it's one we have been talking about for quite a
Speaker 2: while now. Since Trump became the president, and that is tariffs.
Speaker 2: Do you want to first remind us what that term means?
Speaker 1: What are tariffs? Yes?
Speaker 3: So, put really simply, tariffs are a type of import tax.
Speaker 3: So when foreign made goods are brought into another country,
Speaker 3: they are subject to fees or duties. Those fees or
Speaker 3: duties are known as tariffs. So governments might use tariffs
Speaker 3: as a means to protect local manufacturing. So this is
Speaker 3: because these taxes make imported goods more expensive.
Speaker 1: So rather than absorb the cost of.
Speaker 3: Input fees on foreign goods, consumers might think, oh, I'll
Speaker 3: buy a locally made product because it's cheaper or it
Speaker 3: doesn't have those taxes on it. The flip side of
Speaker 3: that is, generally speaking, customers might not always have the
Speaker 3: option to purchase domestic goods. You know, depending on what
Speaker 3: those goods are, they might not be a local market
Speaker 3: and you know, that means that they will usually end
Speaker 3: up being the hardest hit by tariffs. Customers usually end
Speaker 3: up absorbing them. So specifically, these US tariffs could make
Speaker 3: things more expensive for American consumers. They might not necessarily
Speaker 3: impact Australian exports immediately unless demand for goods ends up
Speaker 3: shifting that is more concerning, but we can get into
Speaker 3: the specifics of that a little bit later.
Speaker 2: Okay, So my understanding is that the thinking behind Trump
Speaker 2: introducing these tariffs is for more things to be made
Speaker 2: in the US. He basically wants everything to be made
Speaker 2: in the US and for customers to only be buying
Speaker 2: things that were made in the US.
Speaker 3: Yes, he said in strong terms that he wants manufacturers
Speaker 3: to bring their manufacturing businesses to US shores to make
Speaker 3: those products there in America. Interestingly, as well, tariffs are
Speaker 3: often used to sanction other countries as a sort of
Speaker 3: political device in trade wars, and we have seen that
Speaker 3: play out with the US and China and heavy tariffs
Speaker 3: that it's imposed on them for different reasons than that
Speaker 3: kind of local manufacturing angle.
Speaker 2: And so what else you just mentioned China? I know
Speaker 2: there were also ones on Canada and Mexico. What else
Speaker 2: has happened in the lead up to this week before
Speaker 2: we get into what actually has happened this week.
Speaker 3: Yes, So since Trump was elected in November, he was
Speaker 3: inaugurated in January, and even before then, he has been
Speaker 3: promising sweeping import tariffs aimed at, like we've said, bolstering
Speaker 3: US manufacturing also aimed at strengthening the US border. This
Speaker 3: was a policy area that he was really focused on
Speaker 3: in his first term as president, so it's not a
Speaker 3: particularly shocking policy area for Trump to be so heavily
Speaker 3: invested in. But in the first few weeks off his
Speaker 3: current term, Trump did announce a number of tariffs which
Speaker 3: included goods imported from Mexico and Canada, and that had
Speaker 3: to do with managing the US borders. We heard a
Speaker 3: lot of commentary at the time about illegal drug importations,
Speaker 3: illegal immigration. But then Trump also announced tariffs against China.
Speaker 3: The Mexico Canada tariffs, there was a lot of stop start,
Speaker 3: back and forth. There were pauses, negotiations about you know
Speaker 3: how they would end up working, but they did recently
Speaker 3: come into effect. And then last month Trump announced that
Speaker 3: the US would impose twenty five percent tariffs on imported
Speaker 3: steel and aluminium. That would be on all countries that
Speaker 3: import those products to the US and that includes Australia.
Speaker 3: Now since then, Australia has been really focused on avoiding
Speaker 3: that specific tariff.
Speaker 2: And steel and aluminium in Australia is really important. It's
Speaker 2: one of our biggest exports. Do you want to just
Speaker 2: explain more kind of the importance of steel and aluminium
Speaker 2: to Australia, because it's not something that we learn about,
Speaker 2: really yeah, no, and as you study it.
Speaker 3: Unless you study it, unless you work in the field
Speaker 3: of steel and aluminium, or aluminum.
Speaker 1: As America would call it.
Speaker 3: Australia does export hundreds of millions of dollars of steel
Speaker 3: and aluminium.
Speaker 1: To the US every year.
Speaker 3: Steel is used in things like you know, car manufacturing,
Speaker 3: heavy industries, construction, and aluminium is used also in car
Speaker 3: manufacturing as well as in household items pots, pans, foil,
Speaker 3: so they're kind of very versatile exports. According to government data,
Speaker 3: the US was the world's second largest steel importer in
Speaker 3: twenty twenty three, and its aluminium imports have actually increased
Speaker 3: by twenty five percent since twenty fifteen. Now, last year,
Speaker 3: the US imported around four hundred million US dollars of
Speaker 3: Australian steel and around two hundred and seventy million dollars
Speaker 3: of Australian aluminium. That might sound like a lot of money,
Speaker 3: but actually in the broader context of the US, Australia
Speaker 3: isn't a major exporter of aluminium to America Compared to
Speaker 3: other trading partners. So, for example, in the year of February,
Speaker 3: the US imported three million tons of aluminium from Canada
Speaker 3: and three hundred and fifty thousand tons from the UAE.
Speaker 3: Australia exported ninety thousand tons during that time, So overall
Speaker 3: about ten percent of our steel and aluminium goes to America.
Speaker 3: So it's not nothing, but there are other markets and
Speaker 3: other ways to kind of diversify our exports of those goods.
Speaker 2: Okay, So Trump announced these tariffs. Then Anthony Albanesi, Australia's
Speaker 2: Prime minister, has a call with Trump to try to
Speaker 2: see if Australia specifically can get an exemption. Albanzi was
Speaker 2: quite positive about that call. But what has happened since
Speaker 2: that has meant that there will now be these tariffs
Speaker 2: and there will be no exemption.
Speaker 3: Yes, So you might remember that phone call, and President
Speaker 3: Trump had spoken to US media said that he thought
Speaker 3: Albanzi was a very nice man, that the exemption for
Speaker 3: Australia was under consideration. Also at that time, Trump told
Speaker 3: reporters in the White House that Australia was one of
Speaker 3: the only countries where the US has a trade surplus.
Speaker 3: Now what that means is Australia buys more American goods
Speaker 3: than the US buys from Australia. Trump signed a series
Speaker 3: of executive orders last month following that call. He did
Speaker 3: say no countries would be exempt, but he was asked
Speaker 3: directly about Australia and said he was giving it great consideration. However,
Speaker 3: as we know, that has since fallen through and at
Speaker 3: the time a senior trade advisor to Trump his name
Speaker 3: is Pete Navarro, he had accused Australia of quote killing
Speaker 3: the American aluminium market. Navarro was actually a key figure
Speaker 3: in Trump's similar tariffs in twenty eighteen, and those are
Speaker 3: the ones that former PM Malcolm Turnbull actually successfully negotiated
Speaker 3: to avoid. But in short, it appears this time that
Speaker 3: Australia's efforts to secure an exemption now have seemingly failed.
Speaker 3: So the White House confirmed on Tuesday that the tariffs
Speaker 3: would be going ahead without exception. We heard from White
Speaker 3: House spokeswoman Caroline Leave. She told the ABC that Trump
Speaker 3: considered the request and considered against it. To use her words,
Speaker 3: Peter Navarro, who worked with Trump and Turnbull in twenty eighteen,
Speaker 3: he said that every country that was exempt from the
Speaker 3: tariffs last time abused those exemptions. So speaking to the ABC,
Speaker 3: Navarro said, the lesson from the first Trump tariffs has
Speaker 3: been quote is that exemptions to anybody a counterproductive. They
Speaker 3: don't work for the American people. When we were kind
Speaker 3: enough as a country to make those gestures to our friends,
Speaker 3: he said, they bit the hand that fed them, and
Speaker 3: that's not going to happen again.
Speaker 2: Okay, those are pretty definitive words. We do know though that,
Speaker 2: you know, when we look at Mexico and Canada and
Speaker 2: the tariffs that were meant to be introduced there, they
Speaker 2: were briefly stopped. Like you said, there was that stop start,
Speaker 2: So we do know that there is a possibility that
Speaker 2: Trump could change his mind.
Speaker 1: But let's just.
Speaker 2: Say that these tariffs are here to stay. How would
Speaker 2: it meaningfully impact Australia and what would the economic fallout be?
Speaker 3: Yeah, I think it's important to note that the initial
Speaker 3: impact on local manufacturing would be minor, So all the
Speaker 3: experts are telling us that the effect straightaway is going
Speaker 3: to be pretty negligible. But as we discussed at the
Speaker 3: start of the episode, tariffs are more likely going to
Speaker 3: impact consumers on the other end, Uncertainty then kind of
Speaker 3: comes from how other markets will react. So there are
Speaker 3: sweeping tariffs on so many countries as we've discussed, and
Speaker 3: bigger exporters like China might resort to a trade tactic
Speaker 3: known as dumping. Now, this is when a product gets
Speaker 3: exported to a foreign market at a lower price than
Speaker 3: it costs domestically. So, for example, if an Aussie steel
Speaker 3: manufacturer sells their stell to the US for less than
Speaker 3: they charge Australian customers, part of this dumping also means
Speaker 3: decreased demand in a market. So if demand for steel
Speaker 3: in the US drops, some foreign businesses might flood other
Speaker 3: markets like Australia with excess stock. That can lead to
Speaker 3: more competition and that can have negative effects on local businesses.
Speaker 3: The federal government actually has an Anti Dumping Commission aimed
Speaker 3: at protecting local manufacturers, so there are some regulatory measures
Speaker 3: in place.
Speaker 1: But the other.
Speaker 3: Significant concern here is the potential for a global trade war.
Speaker 3: The University of Sydney School of Economics put this better
Speaker 3: than I could.
Speaker 1: They posted an interesting explainer.
Speaker 3: On this whole issue, which said a trade war quote
Speaker 3: could disrupt supply chains and weaken manufacturing activity across East
Speaker 3: and Southeast Asia. Given that Japan, Korea and China are
Speaker 3: key export destinations for Australia, such disruptions could have significant
Speaker 3: economic consequences. We've also spoken previously to economist Greg Jericho
Speaker 3: and he's explained to The Daily I was before that
Speaker 3: if the Chinese economy is doing poorly, then the Australian
Speaker 3: economy generally follows suits. So unfortunately, we're in this kind
Speaker 3: of place global or in this unique kind of Asia
Speaker 3: Pacific region, in this position unfortunately where if other big
Speaker 3: key players like China, Japan, etc. Are hit or impacted,
Speaker 3: then you know, we tend to also experience negative fallouts
Speaker 3: in our own economy.
Speaker 1: Yeah.
Speaker 2: It's a real example of the globalized world that we
Speaker 2: live in and the impact of globalization on economy. Exactly,
Speaker 2: something happens to one country, it literally impacts all countries.
Speaker 2: How has the Australian federal government responded to this news?
Speaker 3: So we heard from Prime Minister Anthony Albanezi yesterday. He
Speaker 3: did a press conference and addressed this decision by Trump.
Speaker 3: He had very clear disappointment over that decision and here
Speaker 3: is a bit of what he said.
Speaker 4: Such a decision by the Trump administration is entirely unjustified.
Speaker 4: Australia will continue working hard for a different outcome and
Speaker 4: discussions with the Trump administration. Ongoing grafts and escalating trade
Speaker 4: tensions are a form of economic self harm. They are
Speaker 4: paid by the consumers. This is why Australia will not
Speaker 4: be imposing reciprocal tariffs on the United States. Such a
Speaker 4: course of action would only push up prices for Australian
Speaker 4: consumers and increase inflation.
Speaker 3: So from Albanese's words yesterday, we're expecting the government to
Speaker 3: continue to put forward that very strong case for an exemption.
Speaker 3: As Albanezi said, he also noted, quote we will continue
Speaker 3: to point out that the United States interests are not
Speaker 3: served by today's decision, and in an interview with Sky,
Speaker 3: Foreign Minister Penny Wong said the tariffs were quote not
Speaker 3: the way to treat a friend and partner. So the
Speaker 3: word from the Australian government really leaning into the kind
Speaker 3: of alliance and the decades long friendship between the two
Speaker 3: nations and what about the coalition So Billy, of course,
Speaker 3: there is an election coming up. We are heading to
Speaker 3: the polls sooner or later, and we're probably going to
Speaker 3: hear a lot more about this over the coming weeks
Speaker 3: from the Coalition, the Opposition has criticized Albanzi quite strongly
Speaker 3: for how he's handled this tariff debacle and these negotiations.
Speaker 3: They've kind of suggested that he didn't do enough, didn't
Speaker 3: work hard enough with Trump, that he should have actually
Speaker 3: flown to the White House for an in person.
Speaker 1: Discussion or negotiation.
Speaker 3: The Coalition has also called into question Kevin Rudd. Now
Speaker 3: he is Australia's ambassador to the US. You might remember
Speaker 3: there was a bit of politicking around whether or not
Speaker 3: he was the right person for the job after some
Speaker 3: old comments that he made that were very critical of
Speaker 3: Trump emerged. Trump had sort of hit back at that
Speaker 3: before he was elected, said that Kevin Rudd was nasty,
Speaker 3: and the Coalition now we're kind of asking, well, is
Speaker 3: Kevin Rudd the right person to be representing Australia in
Speaker 3: these discussions? He's our man on the ground. Is he
Speaker 3: equipped to deal with the Trump administration? But Anthony Alberizi
Speaker 3: backed in Rudd yesterday. During that address, the PM described
Speaker 3: him as a quote very effective ambassador.
Speaker 2: Such a complex topic. I think we got through a
Speaker 2: lot today, a very effective podcast.
Speaker 3: Well, thank you for listening, if you're still awake, I
Speaker 3: really appreciate it. Of course.
Speaker 2: No, there's nothing that excites us small than economics a mare,
Speaker 2: and thank you so much for listening to this episode
Speaker 2: of The Daily os. We'll be back again this afternoon
Speaker 2: with your evening headlines. Until then, have a great day.
Speaker 2: My name is Lily Madden and I'm a proud Arunda
Speaker 2: Bungelung Chalcuttin woman from Gadighl Country. The Daily oz acknowledges
Speaker 2: that this podcast is recorded on the lands of the
Speaker 2: Gadighl people and pays respect to all Aboriginal and Torres
Speaker 2: Strait Island and nations.
Speaker 1: We pay our respects to the first peoples of these countries,
Speaker 1: both past and present.