The incoming Trump administration has flagged its core economic agenda: lowering taxes, raising tariffs, withdrawing from key global agreements like the Paris Climate accord. We could be expecting larger deficits and higher inflation under Trump’s presidency. The Trump campaign has promised US tax cuts, from lowering the federal corporate tax rate from 21% to 15%.
Tax cuts, alongside a spew of new stimulus proposals, don’t come cheap. It is estimated the US debt is likely to increase by US$7.75trn, where significant increases in US public debt and investment could keep global interest rates stuck higher for longer. For Australia, this will likely drive up borrowing costs and erode the budget surpluses we have enjoyed in recent years.
Steep tariffs of proposed 10-20% tariffs on all imports to US could disrupt global value chains, and targeted tariffs of 60% or more will hamper China’s economic growth. With Australia’s diversification of exports from commodities, majority of aircraft and space parts and machine tools are sent to the US – which poses a challenge to Australia’s goals of becoming an established player in the advanced G/S market.
The global impacts of these incoming changes to tariffs, increased volatility in the US dollar, and a general increase in uncertainty and risk, will almost certainly be felt in Australia.
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