Richard Holden, professor of economics at University of NSW, says Trump’s trade plans, if implemented, would cause massive disruption in the international trading system.

Loading

“Given how important exports are to the Australian economy, that would be a huge problem for us,” he said. “I worry that he’s going to blow up the trading order that served Australia so well over the last 40 years.”

Trump often claims the US is being “ripped off” by trade with other nations and sees tariffs as a way to strike back. “It’s basically you hurt us, and we hurt you,” he told a rally in Pennsylvania earlier this month.

But tariffs hikes and trade wars are not the only economic policies being canvassed by Trump that pose a global threat. Economists are especially worried by his plans to deport millions of undocumented migrant workers from the US. That would slash the supply of labour in the US, pushing up wages and inflation.

“Once you get inflation in the US, it tends to be transmitted globally,” says McKibbin.

The independence of the US central bank may also be under threat should Trump win office. Earlier this month he claimed American presidents should have “a say” in how the US Federal Reserve sets official interest rates.

“If Trump were to shatter the independence of the Federal Reserve there would be a bad financial market reaction,” says Holden. “I don’t know how bad but somewhere between pretty bad and catastrophic. We know what happens when global financial markets go into a tailspin.”

The prospect of Trump having a direct influence on Fed decisions has also stoked fears of higher global inflation. For more than two years central banks across the world, including in Australia, have lifted interest rates in a bid to reduce inflation. But Roland Rajah, lead economist at the Lowy Institute, warns much of Trump’s economic agenda “points to more inflation” and more damage to the global economy.

“A return to Trumpian economic nationalism is not what the world needs,” he says. “Unfortunately, the world does not get a vote.”

There’s been surprisingly little public debate in Australia about the implications of Trump’s economic plans, especially his trade policies. “People either don’t believe Trump will win or they don’t believe he’d be that stupid,” says McKibbin. But prediction models of the electoral contest between Trump and Democrat nominee Kamala Harris show a very tight race for the White House.

Protectionism has been on rise since Trump’s first term; President Joe Biden left most of his predecessor’s tariffs in place and has come up with new ones of his own, including a 100 per cent impost on electric vehicles imported from China.

But a re-elected Trump is set to take global trade conflict to a whole new level. The federal government estimates around one in every four Australian jobs is related to overseas trade and the taxes paid by our commodity exporters are a crucial source of public revenue. If Trump does return to the White House, Australians will likely get a painful reminder of just how important trade is to us.

Matt Wade is a senior economics writer at The Sydney Morning Herald.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.