Donald Trump’s tariffs create global turmoil as WA feels the impacts

US President Donald Trump’s global tariffs have bombed global share markets and created new affronts for WA that will challenge how the State asserts its place in a new world left alienated, politically and commercially, by Uncle Sam. Indiscriminate dishing out of tariffs to 180 allies, foes — and even a pair of uninhabited Australian antarctic island territories 4100 kilometres from Perth — has left businesses scrambling, trading partners infuriated and analysts scratching their heads about what comes next. It has also cemented a bubbling belief among many economists and politicians the US is now only looking out for numero uno. Even though protectionist action was expected as part of the America-First President’s term, fears that inflation-stoking tariffs would stunt spending and trigger a recession in the US has spooked markets — and investors’ reaction was swift and brutal. In just two trading days the world’s most influential share markets, the US S&P 500, lost $US5 trillion in the worst meltdown since June 2020, sparking renewed financial analyst fears of a global recession. It, along with other Wall Street markets the Dow Jones and NASDAQ, are down at least 10 per cent from their record levels set just a few months ago. Investors sold off the United States’ Magnificent Seven companies — Nvidia, Apple, Alphabet (Google), Microsoft, Meta, Tesla and Amazon — in droves. The world’s most valuable company, Apple, lost more than $US300 billion from its market capitalisation in a day. Mr Trump downplayed the market plunge, saying will reverse as the benefits of his policies kick in, and has shown little indication he intends to change course. On Friday morning, he reposted a video by a TikToker speculating that the rout was all part of a plan to redistribute wealth and drive down interest rates. Australia’s ASX200 followed Wall Street’s lead and lost eight months of market growth on Friday alone. The ASX had been celebrating a record high of 8555.8 just weeks before, in mid-February. US Federal Reserve governor Jerome Powell on Saturday warned the imposition of tariffs could keep inflation high. “It is now becoming clear that the tariff increases will be significantly larger than expected,” he said. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth. “The size and duration of these effects remain uncertain. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.” Mr Trump preceded Mr Powell’s speech with a social media post: “Cut interest rates, Jerome, and stop playing politics!” JPMorgan Chase chief economist Bruce Kasman on said told clients he now sees a 60 per cent chance that US tariffs will push the global economy into a recession this year. His message bore the title: “There will be blood.” Reserve Bank of Australia governor Michele Bullock, speaking on Tuesday, believes Australia is well-placed to handle global uncertainty. The RBA kept interest rates on hold this week but analysts now expect the tariffs to lead to up to four rate cuts in Australia, while Finance Minister Katy Gallagher reaffirmed Ms Bullock’s commentary. “This global trade instability is not good for global growth and that could have impacts here,” Senator Gallagher said while campaigning in Perth on Saturday. “But Treasury is forecasting our economy to grow. We have been amazingly resilient.” Treasury has also been commissioned for updated modelling on the impact to Australia from Mr Trump’s decision, she added. For those with most of their wealth locked up in superannuation, Perth finance commentator Sarah Wells is of the view it’s not a bad time to ensure investors are comfortable with their nest-egg’s exposure to equities. “Are they exposed a lot to international shares? Are they exposed to domestic shares? Do they have the right investment policy or risk appetite at this current market?” she said. Markets craved certainty, and Mr Trump and his policies often delivered the opposite, she added. “It’s really hard to price in the long term impact of Trump policies.” Australia was delivered a 10 per cent baseline tariff on goods exported to the US, the same rate applied to the UK and New Zealand, while neighbouring countries were issued with tariffs as high as 46 per cent, in the case of Vietnam and 34 per cent for China. Perth USAsia Centre founder Gordon Flake is less than optimistic that the tariffs will be beneficial, from an economic or diplomacy perspective. “In the first term, most of the tariffs were targeted at what you would consider to be competitors of the United States, and most of the discussion was on China,” he told The Sunday Times from the US. “The consensus, not just here in Washington, but internationally, is that this will be ruinous, that it will have long standing impacts on America’s role in the world, but also the global economy.” Australia is considered a “treaty ally” of the US, imports more from the US than it exports and has an open trade-dependent economy, Professor Flake said. “By any logical measure, Australia should not be tariffed,” he said. As an exporter of resources and agriculture goods mainly to Asia, WA would not necessarily directly feel the impact of US tariffs, Professor Flake explained. “The impact on Australia I don’t think is going to be felt in the bilateral space, but in the broader impact on the global economy upon which we rely,” he said. “So there’s nowhere that is more clear than the case of Western Australia. “The underlying theory behind globalisation was that a rising tide floats all boats.” The huge impost on Chinese goods — one of the most severe of Mr Trump’s taxes — could have negative implications for the growth of WA and Australia’s biggest trading partner. Goods sold to China from WA totalled $143.1 billion in the 2023-2024 financial year, making it the largest export market for the State at 57 per cent, followed by Japan at 11 per cent and South Korea at 7 per cent. But China is already a comedown from a massive commodity supercycle, with insatiable iron ore demand driven by huge construction projects to accommodate a new and growing population. The CEOs of mining behemoths BHP and Rio Tinto have both in the past week assured investors any hit to their bottom line from certain parts of their business that are exposed to the US will be manageable. Most local miners have been spared direct tariffs due to either not selling to the US, or the commodity being left off the White House’s list of taxed goods. WA lithium producer Liontown Resources is encouraged to be among that cohort. “We’ve gone through the various announcements that the US Government’s put forward and lithium chemicals, including spodumene, appear to be exempt,” chief executive Tony Ottaviano told The Sunday Times in an interview. The listed miner has for years had agreements to sell the raw lithium material it produces from its Kathleen Valley operation in the Goldfields to US car companies Ford and Tesla. It also has an agreement with South Korea’s LG. Liontown’s product eventually ends up in batteries, the demand for which Mr Ottaviano said was finding new momentum in China. “Whilst take-up on EVs is slowing in the US and slowing in Europe, it’s absolutely going very strong in China,” he said. “China consumption for 2024 was up 40 per cent and most of that is internal.” Day-to-day, he suggests there’s little merit in jumping at every piece of new information — which comes through thick and fast in the Trump era. “Most CEOs take a medium to long-term view on things. We cannot manage a business with daily changes,” he explained. “We’ve got to look through this and say ‘how does our strategy stack up with this?’ “We can’t be reactionary. It’s too disruptive.” For farmers, tariffs on beef will take the momentum out of what was proving to be a fruitful and growing relationship between WA exporters and the US. According to Meat & Livestock Australia, beef exports reached a record 1.34 million tonnes in 2024. Of that total, US exports climbed 60 per cent to 394,716 tonnes. WAFarmers livestock president Geoff Pearson said it begged the question as to why the Australian industry had come under scrutiny. “It was something that was definitely concerning before the detail of the percentage of tariffs came out. The question to be asked was why it was happening at all, because of the fact that we’ve had a long standing good relationship with US for so many years,” he said. Mr Pearson believes that the US will need to keep importing Australian beef, however, because it is one of the few countries that can deliver such large volumes of high-quality product. Australia has strict controls on US beef imports due to concerns the country does not have as strict traceability standards for its cows. “This is a little bit of a shock to Australia, but I think we can live with it and hopefully maybe negotiate it out into the future,” Mr Pearson said, but added a caveat that the Federal Government had not been delivering for agricultural sector thus far. A decision to phase out live sheep exports by 2028 has infuriated the industry. One week in to a Federal election campaign, the tariff disruption has loomed large into the leaders’ reckoning but how that translates to voters of course remains to be seen. JWS Research pollster John Scales said while such a hot-button issues could play into an election result, an event needed to be “truly seismic” to sway an election. The 2001 terrorist attacks in New York City were a prime example, he said, because they were seen as an attack on Western civilisation and raised fundamental questions about national identity and security with voters. He described the watershed moment as a “shot to the heart of western civilisation” that raised internal questions among voters as to “who we are” and “who do we stand with”. Though Mr Scales said the new tariff regime would upend global trade world order, he was not of the view the issue would strike the heart of voters at the ballot box. Much of the repercussions of the tariffs on Australian exporters was still yet to be determined, he said. “We’ll have to wait to see what that effect of the tariffs is, especially because of the relativity of the tariffs on US versus tariffs on others and whether the tariffs on other countries will then have flow impacts to us,” he told The Sunday Times. “Australians generally, probably can’t guess at what the impact of the tariffs are. They’ll wait to be told.” Rather, it would be policies directly impacting people’s living costs and household economics that could become game-changers — such as the carbon tax campaign ran by Tony Abbott in 2013, he said. “The Coalition’s a long way off right now, so they need something a lot more dramatic if they’re going to get in the game.”