Analysis of the Implications of Trump Tariffs on Australian GDP Growth

This economics report analyzes the implications of Trump tariffs on the Australian economy, specifically focusing on the impact on Gross Domestic Product (GDP). It begins with an introduction to Trump's tariff policies and their global impact, particularly the trade war between the US and China, and its effects on Australia. The report details the decline in Australia's GDP growth rate, the government's response through interest rate cuts, and the various factors indirectly affecting GDP, such as personal-credit crunch and housing slump. It highlights the concerns of the Australian government regarding economic deceleration and the need for fiscal stimulus to avoid recession. The report concludes that Trump's tariffs have significantly affected the Australian economy, leading to a decline in GDP growth and necessitating government intervention to mitigate the negative impacts.

Economics
9/10/2019

Economics 1
Contents
Introduction......................................................................................................................................2
Trump tariffs....................................................................................................................................3
Implications for the Australian economy with regard to the Gross Domestic Product (GDP).......3
Decline in GDP growth rate........................................................................................................5
Cut Interest rate............................................................................................................................5
Different issues indirectly affects GDP.......................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
Trump tariffs are the series of the US tariffs that are imposed at time of presidency of Donald
trump, which is share of his American first economy policy that can decrease the US
employment shortage by shifting the American trade strategy from the basis of multilateral free
trade contracts to two-sided trade deals. The aim of the report is about major implications for
Australian economy in relation to Gross Domestic Product (GDP).

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Trump tariffs
In the month of March 2018, it has been found that Donald trump decided to impose the tariffs
on steel 25% and on aluminium by 10% from most of the countries that are covered as a
predicted 4.1% of the US imports. At present, trump administration slapped tariffs on roughly
approx. $110 billion in the Chinese imports in September 2019 that is marketing the latest
escalations in the trade war that is leading to the damage across the economy of world (Leonard
and Niquette, 2019). This how the tariffs imposed by trump leads to impact on entire world. This
import tariff leads to the trade war among US and China. These taxes were majorly on imported
goods to make them less attractive than the local goods for China majorly. In addition, it has
been found that Australia ships around a third of its exports to china which include most of the
commodities like Iron ore and Coal that are majorly used for the heavy industry kike iron ore as
well as coal that is used by the heavy industry also for forming the building apartments. The
exports continue in demand as Beijing go faster construction expenditure to head off injury that
is majorly triggered by Washington raising tariffs (Hoyle and Glynn, 2019).
This is one of the reasons due to which trade war can influence the economy as well as GDP of
country.
Implications for the Australian economy with regard to the Gross
Domestic Product (GDP)
International markets have sunk after china that has defied Washington by declaring the
retaliatory tariffs, the updated salvo in both countries has improved the belligerent trade war that
is making the investors to spend fleeing equities for thee less assets risky. The trump tariffs

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implications are on the Australian economy that has been found with the fact that Australia has
suffer the major setback as nation’s exporters risk that being caught up in morning trade war
among the United states and China (Farrer, 2018).
The trade implication is clear on Australia that would see a major Gross Domestic Product
(GDP) would see a damage of $36 billion over five years. It has been found that belongings were
to increase and nations across world introduce 15% tariffs, KPMG forecasts 60,000 job losses
over coming decade with damage in actual salaries of approx. $16 per hour (The Socialist, 2018).
The loss in the jobs affects the GDP of Australia as unemployment affects the economy. In
addition, the economy of Australia has decelerated to a period low last sector that is underlining
necessity for violent financial as well as the economic inducement with motive to stop nation
rich in the resource from descending into recession just after 28 straight years of development.
Gross Domestic Product (GDP) figures showed that A$1.9 trillion ($1.3 trillion) economy that
produced by 0.4% in 3 months which is ended in March and gets double in 0.2% clocked in
fourth quarter but that is under the prediction for a 0.5% rise. Although, there is 1.8% of yearly
growth that fell little of long-term average 3.5% and it was weakest since time of the worldwide
monetary crisis. The trump tariff has affects the Aussie economy which has misplaced the
momentum which is reflected in economy. Further, this is summarised monetary as well as the
fiscal stimulus is required to bring the decline in the unemployment as well as to revive the
inflation. The major implication is that GDP will have to pick up the unusually in present quarter
to accomplish RBA (Reserve Bank of Australia’s) that is reduced prediction of 1.7% for the 12
months to 30th June (Pandey, 2019). The government is worried about the economy that is
declining, improvement in the unemployment as well as the lukewarm inflation.

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Decline in GDP growth rate
The economy of Australian advanced a seasonally adjusted by approx. 0.5% in the month of
June quarter of 2019. The graph given below shows that GDP growth rate is decline from
January 2018 but decline until the year January 2019. Further, there is slow improvement in the
year 2019 (Trading Economics, 2019).
(Source: Trading Economics, 2019)
Cut Interest rate
It has been found that government of Australia are considering different factors that have direct
link with GDP of country. The reserve bank of Australia signalled its willingness that involves
the cut in the interest range. Australian reserve bank cut the rates to all the time low by 1.25% on
Tuesday by marketing its initial easing in the coming 3 years. In the near future, the change in
tariff will lead to impact on rates future that imply approx. 50-50 chance of another cut to
approx. 1.0% in the coming month. Although, it has been found that drop in Australian dollar
might have made it nervous (Dixon, 2017). Thus, the government of country would prefer to
control the same rather than the unpredictable decline in the dollar of Australia.

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Different issues indirectly affects GDP
Australia has faced the issue of the personal-credit crunch, weak confidence of corporate as well
as housing slump that is threating to the derail that is the longest-running growth that streak in
the developed world. However, it has been found that later Australia got a trade boost as US and
china relations soured which influence the GDP (Dixon and Rimmer, 2010).

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Conclusion
In the end of report, it has been concluded that trump tariffs that shows that tax on imports has
affected the economy of the countries across the world. It has been found trump tariff leads to the
major implication for economy of Australia in terms of Gross Domestic product. Australian
economy has been declining which is clearly witnessed with decline in growth rate. Along with
this, the high import tariff leads to many more issues, which are indirectly linked, with the GDP.

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References
Dixon, J. (2017) The Impact on Australia of Trump's 45 per cent Tariff on Chinese
Imports. Economic Papers: A journal of applied economics and policy, 36(3), pp.266-274.
Dixon, P.B. and Rimmer, M.T. (2010) Optimal tariffs: should Australia cut automotive tariffs
unilaterally?. Economic Record, 86(273), pp.143-161.
Farrer, M. (2018) Australia's economic growth at risk as US-China trade war escalates [Online].
Available from: https://www.theguardian.com/business/2018/sep/19/australias-economic-
growth-at-risk-as-us-china-trade-war-escalates [Accessed on 10th September 2019]
Hoyle, R. and Glynn, J. (2019) US and China are fighting a trade war and Australia is reaping
the benefits [Online]. Available from:
https://www.business-standard.com/article/international/us-and-china-are-fighting-a-trade-war-
and-australia-is-reaping-the-benefits-119090900101_1.html [Accessed on 10th September 2019]
Leonard, J. and Niquette, M. (2019) Donald Trump heaps more tariffs on China, still no deal in
sight [Online]. Available from: https://www.livemint.com/news/world/donald-trump-heaps-
more-tariffs-on-china-still-no-deal-in-sight-1567320770456.html [Accessed on 10th September
2019]
Pandey, S. (2019) Australia's GDP growth hits decade low, stimulus needed to avoid recession
[Online]. Available from: https://www.reuters.com/article/us-australia-economy-gdp/australias-
gdp-growth-hits-decade-low-stimulus-needed-to-avoid-recession-idUSKCN1T606I [Accessed
on 10th September 2019]

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The Socialist (2018) Trade war: How will it impact Australia? [Online]. Available from:
https://thesocialist.org.au/trade-war-impact-australia/ [Accessed on 10th September 2019]
Trading Economics (2019) Australia GDP Growth Rate [Online]. Available from:
https://tradingeconomics.com/australia/gdp-growth [Accessed on 10th September 2019]