1 00:00:00,320 --> 00:00:04,400 Speaker 1: Jersey and Amanda gem Nation. Well, just a couple of 2 00:00:04,400 --> 00:00:08,000 Speaker 1: weeks into President Trump's new regime, he's roffling feathers on 3 00:00:08,000 --> 00:00:11,320 Speaker 1: a global scale, signing off on sweeping tariffs on goods 4 00:00:11,320 --> 00:00:14,720 Speaker 1: from Mexico, Canada, and China, kicking off a trade war. 5 00:00:15,160 --> 00:00:18,840 Speaker 1: Canadian outgoing Canadian Prime Minister Justin Trudeau has also in 6 00:00:18,880 --> 00:00:20,160 Speaker 1: response come out swinging. 7 00:00:20,360 --> 00:00:24,040 Speaker 2: Canada will be responding to the US trade action with 8 00:00:24,160 --> 00:00:28,080 Speaker 2: twenty five percent tariffs against one hundred and fifty five 9 00:00:28,360 --> 00:00:34,840 Speaker 2: billion dollars worth of American goods. This will include immediate 10 00:00:34,920 --> 00:00:38,960 Speaker 2: tariffs on thirty billion dollars worth of goods as of Tuesday, 11 00:00:39,720 --> 00:00:43,040 Speaker 2: followed by further tariffs on one hundred and twenty five 12 00:00:43,320 --> 00:00:47,440 Speaker 2: billion dollars worth of American products in twenty one day's time, 13 00:00:47,840 --> 00:00:51,559 Speaker 2: to allow Canadian companies and supply chains to seek to 14 00:00:51,600 --> 00:00:52,640 Speaker 2: find alternatives. 15 00:00:53,479 --> 00:00:57,160 Speaker 1: Yikes, who well to explain exactly what's going on, it 16 00:00:57,200 --> 00:01:00,480 Speaker 1: is a complicated topic. We're joined by economist doct Christian Baylis. 17 00:01:00,640 --> 00:01:03,920 Speaker 1: Good morning, Christian, Hi there, how are you going? Not 18 00:01:04,000 --> 00:01:06,160 Speaker 1: too bad? Before we get to what it actually means, 19 00:01:06,280 --> 00:01:09,200 Speaker 1: why is President Trump doing this? He claims he wants 20 00:01:09,280 --> 00:01:13,280 Speaker 1: to stop the infiltration of fentanyl across the borders. But 21 00:01:13,319 --> 00:01:15,720 Speaker 1: that's a very thin veneer for what's actually going on. 22 00:01:15,760 --> 00:01:16,520 Speaker 1: What's he doing? 23 00:01:17,760 --> 00:01:19,480 Speaker 3: Oh look, I think it is. I think there's some 24 00:01:19,640 --> 00:01:22,520 Speaker 3: underlying subcurrents that are going on here, clearly as we 25 00:01:22,720 --> 00:01:26,120 Speaker 3: refer to Canada. I think his distaste and his dislike 26 00:01:26,240 --> 00:01:30,360 Speaker 3: for Trudeau is definitely a big reason. I think he 27 00:01:30,400 --> 00:01:32,200 Speaker 3: wants to put the end to his political term and 28 00:01:32,240 --> 00:01:34,400 Speaker 3: I think he knows by bringing down the economic pressure 29 00:01:34,400 --> 00:01:37,800 Speaker 3: onto that particular economy, that will shake things up as 30 00:01:37,800 --> 00:01:42,200 Speaker 3: they run into the elections later on. And I think 31 00:01:42,280 --> 00:01:44,280 Speaker 3: really what you're starting to see and really the big 32 00:01:44,360 --> 00:01:47,560 Speaker 3: theories is that this is turning into a trade war. 33 00:01:47,600 --> 00:01:50,160 Speaker 3: And obviously Trudeau has come out with his own form 34 00:01:50,200 --> 00:01:53,160 Speaker 3: of tariffs, firing right back at Trump with one hundred 35 00:01:53,160 --> 00:01:56,000 Speaker 3: odd billion of tariffs across the board. And I think 36 00:01:56,000 --> 00:01:58,560 Speaker 3: this is where people start to wonder and start to think, 37 00:01:58,600 --> 00:02:00,920 Speaker 3: which can be dangerous that we do start to go 38 00:02:00,960 --> 00:02:05,600 Speaker 3: down this trade war route. Mexico, the southern border obviously 39 00:02:05,640 --> 00:02:10,799 Speaker 3: that is more relevant from a fentanyl and drug import perspective. 40 00:02:11,080 --> 00:02:13,240 Speaker 3: And then you've got China, which is just really trying 41 00:02:13,280 --> 00:02:16,520 Speaker 3: to address the imbalance in the trade side of things. 42 00:02:16,560 --> 00:02:18,800 Speaker 3: So I think that's what he's ultimately trying to do. 43 00:02:18,919 --> 00:02:20,919 Speaker 3: But if we get to the ideology of Trump, which 44 00:02:21,000 --> 00:02:24,920 Speaker 3: is probably a more complex type of narrative, what we 45 00:02:25,080 --> 00:02:27,600 Speaker 3: really start to see is Trump wants to shift the 46 00:02:27,639 --> 00:02:31,040 Speaker 3: tax burden onto foreigners and wants to lessen the tax 47 00:02:31,080 --> 00:02:34,799 Speaker 3: burden on American patriots. And so that's really his way 48 00:02:34,840 --> 00:02:37,079 Speaker 3: of thinking. Now it's a little bit distorted the way 49 00:02:37,080 --> 00:02:39,920 Speaker 3: he thinks about it, as is everything with Trump. He 50 00:02:39,960 --> 00:02:43,120 Speaker 3: wants to try and make foreigners pay for basically that 51 00:02:43,800 --> 00:02:46,720 Speaker 3: consumer engine that American has, and that is really the 52 00:02:46,800 --> 00:02:49,480 Speaker 3: strength of the American economy that they can use as 53 00:02:49,480 --> 00:02:53,800 Speaker 3: a negotiating stick, is that American consumer basically drives world growth. 54 00:02:55,080 --> 00:02:57,240 Speaker 3: And really what he sees is he sees that the 55 00:02:57,280 --> 00:02:59,720 Speaker 3: Americans have been taken as lackeys for the last twenty 56 00:02:59,760 --> 00:03:03,080 Speaker 3: third to odd years and he wants to address that. 57 00:03:03,560 --> 00:03:07,600 Speaker 1: Won't try to go up for Americans, though Christian it. 58 00:03:07,520 --> 00:03:10,959 Speaker 3: Will, but he sees that as a one off occurrence, 59 00:03:11,200 --> 00:03:14,880 Speaker 3: and in fairness, that is what actually occurs. And if 60 00:03:14,919 --> 00:03:16,640 Speaker 3: you think back to here in Australia when we had 61 00:03:16,639 --> 00:03:19,680 Speaker 3: the GST, it's a one off pick up in the 62 00:03:19,720 --> 00:03:24,000 Speaker 3: price level. But then after that, the economic logic is 63 00:03:24,040 --> 00:03:27,000 Speaker 3: that you don't keep growing at the same rate. But 64 00:03:27,800 --> 00:03:31,120 Speaker 3: the issue there is is what if everyone starts to 65 00:03:31,200 --> 00:03:33,880 Speaker 3: retaliate with their own trade tariffs, And that is the 66 00:03:33,919 --> 00:03:38,040 Speaker 3: second order consequences that I think Trump is not really 67 00:03:38,080 --> 00:03:41,800 Speaker 3: factoring in and allowing for. And that's really the big risk, 68 00:03:41,840 --> 00:03:45,080 Speaker 3: and that's where you're going to see markets thretting, currencies dropping, 69 00:03:45,560 --> 00:03:47,560 Speaker 3: you know, everyone sort of you know, getting a little 70 00:03:47,600 --> 00:03:49,960 Speaker 3: bit scared and all those sorts of things. Is what 71 00:03:50,120 --> 00:03:52,760 Speaker 3: actually happens to here. How do people retaliate? The Mexicans 72 00:03:52,760 --> 00:03:55,560 Speaker 3: have been pretty quiet, the Chinese have said they're going 73 00:03:55,560 --> 00:03:57,880 Speaker 3: to go to the World Trade Organization and dispute it. 74 00:03:58,360 --> 00:04:01,320 Speaker 3: You've got the Democrats saying they're going to try to 75 00:04:01,360 --> 00:04:03,360 Speaker 3: put this through the courts and in junk Trump on 76 00:04:03,440 --> 00:04:06,520 Speaker 3: doing it because Trump is using a special type of 77 00:04:06,520 --> 00:04:09,160 Speaker 3: economic privilege that he has, which is called the International 78 00:04:09,600 --> 00:04:15,240 Speaker 3: Emergency Economic Protection Act, which is basically using emergency executive 79 00:04:15,360 --> 00:04:18,000 Speaker 3: powers of the president to basically implement these without going 80 00:04:18,000 --> 00:04:20,160 Speaker 3: through Congress. That's a little bit cheeky, obviously, but he's 81 00:04:20,200 --> 00:04:25,680 Speaker 3: doing it to circumnavigate the political system, so it just 82 00:04:25,800 --> 00:04:27,880 Speaker 3: runs the risk of getting ugly. These things are never 83 00:04:28,080 --> 00:04:29,760 Speaker 3: just as simple as what you'd like them to be. 84 00:04:29,800 --> 00:04:31,320 Speaker 3: You just put up prices and there's a little bit 85 00:04:31,320 --> 00:04:33,719 Speaker 3: of inflation for one year, and I think that is 86 00:04:33,760 --> 00:04:36,280 Speaker 3: the underestimation of the Trump, the Trump side of things. 87 00:04:36,480 --> 00:04:38,280 Speaker 1: And what about Australia, Christian. 88 00:04:39,120 --> 00:04:40,839 Speaker 3: Well, I think this is what happens is, you know, 89 00:04:40,960 --> 00:04:44,120 Speaker 3: Australia gets caught in the crossfire. And you know, we 90 00:04:44,839 --> 00:04:47,760 Speaker 3: run a trade surplus, which in simple speak means that 91 00:04:47,800 --> 00:04:51,080 Speaker 3: we actually import more American goods than what we export. 92 00:04:51,160 --> 00:04:54,480 Speaker 3: So Trump has no place in coming to Australia looking 93 00:04:54,480 --> 00:04:57,480 Speaker 3: for additional revenue, which is ultimately the heart of his 94 00:04:58,080 --> 00:05:00,760 Speaker 3: the heart of his measures. I mean, we've been running 95 00:05:00,760 --> 00:05:04,760 Speaker 3: a trade surplus with America since the Truman administration, and 96 00:05:04,800 --> 00:05:08,240 Speaker 3: so you know it would be quite unfair for Australia 97 00:05:08,279 --> 00:05:11,560 Speaker 3: to be caught up in this trade war. You know, 98 00:05:11,600 --> 00:05:13,640 Speaker 3: Trump did say it's going to be effectively a ten 99 00:05:13,680 --> 00:05:17,760 Speaker 3: percent tariff worldwide on all US imports, which does mean 100 00:05:17,800 --> 00:05:19,800 Speaker 3: it will have implications for Australia, but I think in 101 00:05:19,880 --> 00:05:22,200 Speaker 3: terms of what it means for mums and dads and 102 00:05:22,240 --> 00:05:27,200 Speaker 3: your listeners, ultimately things will get more expensive through the 103 00:05:27,240 --> 00:05:30,120 Speaker 3: currency channel, meaning the Aussie dollars already started to drop 104 00:05:30,160 --> 00:05:32,880 Speaker 3: this morning on the weekend news, meaning that if you're 105 00:05:32,920 --> 00:05:35,600 Speaker 3: trying to buy things offshore, or if you're doing online shopping, 106 00:05:35,920 --> 00:05:38,320 Speaker 3: if you want to go on an overseas holiday, all 107 00:05:38,360 --> 00:05:41,680 Speaker 3: of these sorts of things become more expensive for the Australians. 108 00:05:42,520 --> 00:05:44,360 Speaker 3: And then you've got to ask yourself, how does that 109 00:05:44,400 --> 00:05:47,800 Speaker 3: factor into Australia's inflation, Because if things become more expensive here, 110 00:05:47,839 --> 00:05:51,080 Speaker 3: it means our inflation level goes up. That obviously feeds 111 00:05:51,120 --> 00:05:53,840 Speaker 3: into the Reserve Bank of Australia's thinking about whether or 112 00:05:53,880 --> 00:05:56,840 Speaker 3: not they should lower interest rates. So at the margin, 113 00:05:56,880 --> 00:05:59,320 Speaker 3: it probably means that the RBA is going to have 114 00:05:59,360 --> 00:06:01,480 Speaker 3: to think a lot more about whether they cut interest 115 00:06:01,520 --> 00:06:04,280 Speaker 3: rates in Febry, which was probably almost a done deal 116 00:06:04,520 --> 00:06:06,640 Speaker 3: on the eighteenth of February, but they're really going to 117 00:06:06,680 --> 00:06:09,520 Speaker 3: have to think about this now because if we do 118 00:06:09,640 --> 00:06:12,200 Speaker 3: get this sort of trade spiral type of effect happening, 119 00:06:12,200 --> 00:06:14,560 Speaker 3: we could have a whole nother bout of inflation. And 120 00:06:14,600 --> 00:06:16,840 Speaker 3: I always make the joke, you know, Trump's trying to 121 00:06:16,880 --> 00:06:19,800 Speaker 3: make America great again, but in the process he might 122 00:06:19,839 --> 00:06:22,560 Speaker 3: also make inflation. Great again, that's the issue. 123 00:06:22,600 --> 00:06:25,640 Speaker 1: And also Christian, just the psyche of this that there were, 124 00:06:25,640 --> 00:06:29,080 Speaker 1: how this makes Americans and Canadians feel these great neighbors. 125 00:06:29,440 --> 00:06:31,720 Speaker 1: There were unprecedented scenes at an ice hockey game on 126 00:06:31,760 --> 00:06:40,000 Speaker 1: the weekend where Canadians booed the American national anthem. How 127 00:06:40,040 --> 00:06:43,440 Speaker 1: America sees itself through this is so interesting. It's an 128 00:06:43,440 --> 00:06:44,640 Speaker 1: interesting prism. 129 00:06:44,720 --> 00:06:48,599 Speaker 3: Yeah, Christian, Yeah, and yeah, no, no, sorry, now you 130 00:06:48,640 --> 00:06:50,480 Speaker 3: were I was just wrapping you up down. You had 131 00:06:50,480 --> 00:06:53,360 Speaker 3: anything else to add, well, I was just going to 132 00:06:53,400 --> 00:06:55,960 Speaker 3: say that, you know, Trump in Trump one point, oh, 133 00:06:56,000 --> 00:06:57,880 Speaker 3: he pulled out of the trans Atlantic and the Trans 134 00:06:57,920 --> 00:07:01,040 Speaker 3: Specific Partnership in twenty seventeen, which was basically a global 135 00:07:01,080 --> 00:07:06,080 Speaker 3: trade collaboration agreement to basically give them more economic grunt 136 00:07:07,279 --> 00:07:09,039 Speaker 3: that when they went to China they could ask for 137 00:07:09,040 --> 00:07:11,680 Speaker 3: a better deal. And what America has to realize is 138 00:07:11,680 --> 00:07:14,640 Speaker 3: that they're diminishing world power. In nineteen eighty, they were 139 00:07:14,680 --> 00:07:17,720 Speaker 3: twenty eight percent of global GDP. They now are only 140 00:07:17,760 --> 00:07:20,600 Speaker 3: sixteen percent. In nineteen eighty, China was two percent of 141 00:07:20,600 --> 00:07:24,080 Speaker 3: global GDP, they are now eighteen. China is the surge 142 00:07:24,080 --> 00:07:26,960 Speaker 3: in global power, and what Trump needs to realize he 143 00:07:27,040 --> 00:07:30,040 Speaker 3: needs friends, he needs partners, and he needs to have 144 00:07:30,120 --> 00:07:32,240 Speaker 3: collective bargaining if he wants to get the best out 145 00:07:32,280 --> 00:07:35,640 Speaker 3: of China and these trade disadvantages. And that's what he's underestimating. 146 00:07:35,680 --> 00:07:37,480 Speaker 3: And going to the point that you just made about 147 00:07:37,640 --> 00:07:41,440 Speaker 3: the Canadians and Americans and the fall out there, you know, 148 00:07:41,480 --> 00:07:44,440 Speaker 3: Trump's not realizing that as you become smaller and your 149 00:07:44,520 --> 00:07:47,560 Speaker 3: economic grunt becomes less, you need more friends, not less, 150 00:07:48,360 --> 00:07:51,200 Speaker 3: and that flows into military responses all of these sorts 151 00:07:51,200 --> 00:07:53,480 Speaker 3: of things. And so that is something he really needs 152 00:07:53,520 --> 00:07:56,160 Speaker 3: to think about. What a time what He's not a 153 00:07:56,160 --> 00:07:57,679 Speaker 3: fan of the trans that's for sure. 154 00:07:59,080 --> 00:08:00,080 Speaker 1: I'm not a fan. 155 00:08:00,880 --> 00:08:04,360 Speaker 3: On many fronts, On many fronts, doctor Christian Baylist, thank 156 00:08:04,400 --> 00:08:05,120 Speaker 3: you for joining us. 157 00:08:05,160 --> 00:08:05,480 Speaker 1: Thank you. 158 00:08:05,520 --> 00:08:06,160 Speaker 2: That was great. 159 00:08:07,040 --> 00:08:09,640 Speaker 3: Thank you so much, doctor Christian Baylist. 160 00:08:09,680 --> 00:08:13,440 Speaker 1: There he's the founder and CEO of Fortlight Asset Management, 161 00:08:13,480 --> 00:08:14,600 Speaker 1: and that is fascinating. 162 00:08:15,160 --> 00:08:16,720 Speaker 3: When you hear the word tariff. 163 00:08:16,400 --> 00:08:19,080 Speaker 1: My eyes just instantly gla interesting. 164 00:08:19,160 --> 00:08:20,600 Speaker 3: But it's grown up stuff, isn't it.