Hold onto your hats: As Trump 2.0 nears, we should be afraid. Very afraid.

This would not only cost billions to implement and drive up the cost of labour significantly, but also result in serious shortages in myriad industries throughout the US, affecting sectors such as farm output, infrastructure and housing construction.

Thunder Downunder

Think Australia is largely immune from all this? Think again. Australia has “imported” inflation as the US dollar has appreciated dramatically post-COVID.

Most of what we import (petroleum, cars, computers) have to be paid for with US dollars. As the Australian dollar has remained in the 60-cent range, this has been like setting a pyromaniac loose on domestic inflation. That’s why the RBA has kept interest rates high for a prolonged period – to defend the Australian dollar exchange rate.

Australia may also be collateral damage in Trump’s trade war with Beijing. Our two biggest exports – iron ore and thermal coal – power the Chinese economy. When the US, China’s biggest market, slams its tariff doors shut, Chinese firms will need less iron ore and less energy.

Beijing has held the keys to Australia’s prosperity for more than 25 years now; a plateauing Chinese economy would have serious effects on Canberra’s finances.

Indeed, the Australian National University’s Professor Warwick McKibben, a former member of the RBA board (and now a member of the “Shadow RBA”) likens our position to standing on fireworks fuses.

KPMG’s assessment gloomily predicts Trump’s policies could cost Australia’s GDP A$36 billion.

This week, Treasurer Jim Chalmers released Treasury modelling, showing the “indirect” impact of the Trump tariffs was worse than the immediate impact on Australia. This is meaningless drivel, to be frank. We can prove it’s drivel because Reserve Bank Assistant Governor Christopher Kent last week told the Senate that US deficits under Trump would lead to higher inflation and higher interest rates.

Revealingly, Treasury has not modelled the likely inflationary impact of Trump’s policies, because that would scare the living daylights out of the voters. (And we have one of those federal elections in 2025.)

It may be calm now before the storm, but Trump’s re-election proves lightning does indeed strike twice.