TRANSCRIPT
The volatility from the rapid shifts and reversals in US President Donald Trump's trade policy has resulted in plummeting business confidence and investor uncertainty.
Mr Trump has conceded there is likely to be what he called short-term economic pain from his tariffs policy.
He repeated that sentiment in an interview on Fox News over the weekend, sparking a two-day global stock sell-off, with billions wiped off sharemarkets around the world, including in Australia.
“There is a period of transition because what we're doing is very big - we're bringing wealth back to America. That is a big thing. And there are always periods of... It takes a little time. It takes a little time. But I think it should be great for us. I think it should be great.”
Speaking to reporters at the White House, Mr Trump downplayed the sharp market sell-off - and for a second time refused to rule out a recession in the wake of his tariffs policy.
REPORTER: Do you think there will be a recession?
DONALD TRUMP: I don't see it at all. I think this country is going to boom. But as I said, I can do it the easy way or the hard way. The hard way to do it is exactly what I'm doing. But the results are going to be 20 times greater.
Critics have called it a scorched earth tariffs policy.
Economist Larry Summers was a former US Secretary of the Treasury from 1999 to 2001 - in the Bill Clinton administration.
He has told Bloomberg, he sees as 50-50 chance of recession in the US this year.
“These tariffs are a self-inflicted supply shock wound. Higher prices, less competitiveness because businesses are having to pay more for their input. And because they have to pay higher prices, less purchasing power for consumers, which means fewer jobs down the road. So these are like an oil price shock. They're just all bad for the economy.”
In the first month of his second term as US President, Donald Trump made a series of tariff announcements to remedy what he called the unfair treatment towards the US by trading partners, both friend and foe.
The US' three largest trade partners were the first to be targeted, with a 25 per cent tariff on imports from Canada and Mexico; and a 10 per cent additional tariff on imports from China.
That has led now to the start of a trade war in earnest, with retaliatory tariffs announced by Canada, Mexico and China.
Mr Trump has now gone a step further, with the White House confirming that all countries would be subject to a 25 per cent tariff on imported steel and aluminium items, effective from midnight March 12.
No exemptions, including to Australia, have been granted.
Prime Minister Anthony Albanese says Australia will push ahead with plans to further diversify its trade relationships, reducing the reliance on the US; and there are also plans in place to help the local aluminum and steel sector.
He says Australian officials will still be making the case for the US tariff to be scrapped.
“Tariffs and escalating trade tensions are a form of economic self-harm. And a recipe for slower growth and higher inflation. They are paid by the consumers. This is why Australia will not be imposing reciprocal tariffs on the United States. Such a course of action would only push up prices for Australian consumers; and increase inflation.”
There have been pauses and temporary reprieves granted, including to the Canadian province of Ontario, after it announced a 25 per cent surcharge on electricity exports to several US states.
Ontario Premier Doug Ford says he had no choice but to make the announcement, after Mr Trump vowed to double his planned tariffs on steel and aluminum for Canada from 25 per cent to 50 per cent.
He says he is pleased that the tariffs can be put on pause as a bilateral high-level meeting is arranged to discuss next steps.
“And rather than going back and forth, and having threats to each other. We have both agreed that cooler heads prevail. We need to sit down and move this forward.”
It is the uncertainty created by the policy volatility that has economists now forecasting a revised outlook on the risk of recession in the US and other parts of the world.
David Rosenberg is the chief economist of Rosenberg Research.
He told Toronto-based business news outlet BNN Bloomberg that uncertainty increases the risk of a recession in the US, but also in other parts of the world.
“I think that the economic outlook is extremely murky. I can tell you that we modelled out various levels of uncertainty. Economic uncertainty, policy uncertainty, trade uncertainty, and ran it into our models. If (this uncertainty) is sustained, it drags GDP growth by negative 2 per cent in both countries (Canada and the US) by the way. The uncertainty alone causes businesses to shelve capital spending. The Bank of Canada knows that. And it causes households to raise their precautionary savings rate at the expense of spending. So if even if nothing else happens here, just this level of uncertainty is going to be a deadweight drag on the economy for some time to come.”
David Frum is a Canadian-American political commentator, author and speechwriter for former president George W. Bush.
He has told Canada's public broadcaster, CBC News, it is hard to make any sense of the true motivation - or strategy - underlying Donald Trump's tariffs policy, with the constant shifts and reversals.
“I don't think it's very likely that any party - let alone the Republican party would have campaigned on let's start a trade war against the world. Against the three biggest trading partners. Also against the European Union and against everybody. That is not anybody's idea of good policy or sensible policy. But Donald Trump has put enough people on the record. It is very hard for them (Trump administration officials) to walk away... The idea of advanced industrial products with thousands of components and sub-components - and each of those components crossing a NAFTA (Canada, Mexico, and the United States free trade deal) five or six times over the course of its career, from beginning to end, with a tariff at every transfer. That's not the way that Donald Trump understands the world economy. He is a man of the 1970s. He thinks in terms of toasters. He thinks in terms of cars. He doesn't understand how the modern economy works. How supply chains work; and how destructive this all this. But the stockmarket gets it and the stockmarket is reacting with panic.”
