Economist Claims Trump's Tariffs Will Deflate Australian Economy
- Economist Leith van Onselen argues that Trump's tariffs will result in increased availability of discounted Chinese goods.
- Australia's inflation rate is currently above the target range set by the Reserve Bank.
- Overall, Trump's tariffs could lead to deflationary pressures on the Australian economy.
Leith van Onselen, chief economist at MacroBusiness, suggested that Donald Trump's proposed 60 percent tariffs on Chinese goods would lead to deflation in Australia. He explained that under these tariffs, China's goods would be dumped in global markets at reduced prices, impacting Australia's inflation rates. As of now, Australia's inflation rate is 3.5 percent, exceeding the Reserve Bank's target range. Furthermore, while Australia's status as a partner in a free trade agreement with the United States may provide some insulation from American tariffs, the potential decrease in demand for commodities from China, Australia's largest export market, could lead to lower prices for iron ore. Despite varied predictions regarding interest rate cuts in Australia, uncertainty about Trump's policies may delay such measures by the Reserve Bank of Australia.