The Aussie dollar fell to its lowest levels in three months just minutes after Donald Trump’s presidential victory, with experts now concerned what his return to the White House will mean for Australia’s relationship with China.
Mr Trump’s vow to slug Chinese imports with a 60 per cent tariff is a major worry for the Albanese government as any hit to China, Australia’s largest trading partner, would have consequences Down Under.
‘A renewed trade war between the US and China is bad for the US and Chinese economies,’ Commonwealth Bank of Australia analysts said.
‘And what is bad for China is bad for Australia, Korea and New Zealand because of high exposure to Chinese domestic demand.’
There are fears that a US-China trade war could lead to higher interest rates and inflation for millions of Australians.
‘Exports to the US are only 4 per cent of Australia’s total exports and may be spared from Trump’s tariffs as Australia has a trade deficit with the US,’ AMP chief economist Shane Oliver said.
‘However, as an open economy with high trade exposure to China, Australia is vulnerable to an intensification of global trade wars under Trump, particularly if it weighs on demand for Chinese exports.
‘Resources shares would be most at risk and the Australian dollar would likely fall (further).’
The Aussie dollar fell to its lowest levels in three months just minutes after Donald Trump’s (pictured) presidential victory against Kamala Harris on Thursday
UBS Chief Investment Officer Mark Haefele shares Mr Oliver’s concerns, saying ‘the mooted 60 per cent tariff on imports from China and a 10 per cent tariff on imports from the rest of the world could make much of US-China trade unviable’.
Mr Haefele said this would ‘reduce US domestic demand and corporate profits, and lead to lower GDP growth around the world, particularly in China’.
But Shadow Foreign Affairs Minister Simon Birmingham is more optimistic of what will happen after Mr Trump’s inauguration on January 20.
‘Donald Trump’s made strong and bold policy pronouncements and of course we all need to respect those,’ he said.
‘But Australia last time around was able to ensure that President Trump and his administration understood the fact that Australia’s economy and our closeness to the United States meant that it was in both our countries first interests for us to be as strong as possible.
‘That’s why we secured exemptions from the tariffs the first Trump administration applied to steel and aluminium’.
Mr Birmingham then took a crack at the Labor government.
‘It’s important that the Albanese government now pursue similar types of commitments from the Trump administration, because it’s in the US’s best interests for Australia to be as strong a partner as we possibly can,’ he said.
Prime Minister Anthony Albanese is pictured with Chinese Premier Li Qiang in June
US tariffs on Chinese goods could lead to a lower demand for Australian exports such as iron. An iron ore mine in Port Hedland, WA is pictured
In the US, financial markets have responded well to Mr Trump’s victory — with Wall Street rallying into record territory and bitcoin hitting an all-time high.
The digital currency sprung $6,000 higher to a record $75,371.67, topping its previous peak of nearly $74,000 in March.
Mr Trump had previously been a crypto-sceptic but changed his mind and took a favourable view of cryptocurrencies before the election.
During the campaign he pledged to make the US the ‘bitcoin and cryptocurrency capital of the world’ and to put tech billionaire Elon Musk in charge of a wide-ranging audit of governmental waste.
Mr Musk has spruiked cryptocurrencies for years, in particular dogecoin which rose by a massive 15.40 per cent on Thursday.
Mr Trump said he would create a ‘strategic reserve’ of bitcoin and he accepted cryptocurrency donations to his campaign.
He also launched a new venture, World Liberty Financial, alongside family members, focused on cryptocurrency trading.
