Trump Tariffs on China Would Hurt Australia, RBA Officials Say
(Bloomberg) -- Large US tariffs on China may have an “adverse effect” on Australia, though the Aussie dollar has so far shown limited reaction on a trade-weighted basis to Donald Trump’s election victory, a senior Reserve Bank official said Thursday.
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“In terms of tariffs we just don’t know how big and who it’ll be applied to,” RBA Assistant Governor Christopher Kent told a parliamentary panel in Canberra. “The big concern is large tariffs on China, which may have an adverse effect on us.”
Trump has threatened to raise tariffs to 60% on Chinese goods and 20% for the rest of the world. That would bring average US levies above 20%, a level not seen since the early 20th century, according to Bloomberg Intelligence. China buys almost a third of Australian exports and has an outsized influence on the nation’s economic performance.
When asked if the RBA has done any scenario analysis on the implications of a Trump presidency on Australia’s economy, Governor Michele Bullock told lawmakers that the rate-setting board discussed the issue this week, though the central bank hasn’t done any modeling yet.
“We have a broad understanding of the way some of these policies, if they’re implemented, would work out but we haven’t done very explicit scenario analysis on what it might mean for monetary policy because there’s things going in all sorts of directions here,” she said. “If China ends up badly affected by this then that badly affects us.”
Bullock assured lawmakers that the RBA would respond if it was necessary.
“It’s not easy to dissect what’s going to happen with all of this,” the RBA chief said. “He doesn’t actually take up duties until next year. We’ll wait and see what’s going to happen,” she said, referring to Trump.
Kent highlighted that a key unknown is how China might respond to any punitive US trade measures, noting that some in the market suspect authorities in Beijing are holding back on further economic stimulus until they know what they face.
The RBA officials’ appearance comes after the central bank on Tuesday held its key interest rate at a 13-year high of 4.35% and said it was still “not ruling anything in or out” as inflation remains “too high.”
Financial markets expect the RBA will only embark on an easing cycle in May with the terminal rate seen at 3.8% by late 2025, implying just two rate cuts.
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