The Australian dollar fell to its lowest levels in three months just minutes after Donald Trump’s presidential victory, and experts are now worried about what his return to the White House will mean for Australia’s relationship with China.
Trump’s promise to limit Chinese imports with a 60 per cent tariff is a major concern for the Albanese government, as any hit to China, Australia’s largest trading partner, will have consequences for Australia.
“A renewed US-China trade war is bad for the US and Chinese economies,” said analysts at Commonwealth Bank of Australia.
“And what’s bad for China is bad for Australia, Korea and New Zealand because of their high exposure to Chinese domestic demand.”
There are fears a trade war between the United States and China could lead to higher interest rates and inflation for millions of Australians.
“Exports to the United States represent only 4 per cent of Australia’s total exports and may be free of Trump’s tariffs as Australia has a trade deficit with the United States,” said AMP chief economist Shane Oliver.
‘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.
“Resource stocks would be most at risk and the Australian dollar would likely fall (further).”
The Australian 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 Oliver’s concerns, saying “the mooted 60 percent tariff on imports from China and a 10 percent tariff on imports from the rest of the world could make much of of trade between the United States and China.
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 secretary Simon Birmingham is more optimistic about what will happen after Trump is inaugurated on January 20.
“Donald Trump made strong, bold political statements and, of course, we should all respect them,” he said.
“But last time Australia 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 it was in both countries’ interests to be as strong as possible.
“That’s why we got exemptions from the tariffs that the first Trump administration applied to steel and aluminum.”
Birmingham then attacked the Labor government.
“It is important that the Albanese government now seeks similar types of commitments from the Trump administration, because it is in the United States’ interest for Australia to be as strong a partner as possible,” he said.
Prime Minister Anthony Albanese is pictured with Chinese Premier Li Qiang in June.
US tariffs on Chinese goods could lead to lower demand for Australian exports such as iron ore. Pictured is an iron ore mine in Port Hedland, WA.
In the United States, financial markets have responded well to Trump’s victory, with Wall Street rebounding to record territory and Bitcoin hitting an all-time high.
The digital currency rose $6,000 to a record high of $75,371.67, surpassing its previous high of nearly $74,000 in March.
Trump had previously been a crypto skeptic, but changed his mind and adopted a favorable view of cryptocurrencies before the election.
During the campaign, he promised to make the United States the “bitcoin and cryptocurrency capital of the world” and put tech billionaire Elon Musk in charge of a sweeping audit of government waste.
Musk has pushed cryptocurrencies for years, particularly dogecoin, which rose a whopping 15.40 percent on Thursday.
Trump said he would create a “strategic reserve” of bitcoins and accepted cryptocurrency donations for his campaign.
He also launched a new company, World Liberty Financial, together with members of his family, focused on cryptocurrency trading.