Treasury estimates 0.02% hit to GDP from steel and aluminium tariffs
Make us a preferred source
Make us a preferred source on Google
The news: Federal treasury has estimated the direct hit to GDP as a result of US steel and aluminium tariffs on Australia to be worth less than 0.02% by 2030.
In a pre-budget address to the Queensland Media Club on Tuesday, Treasurer Jim Chalmers will say that when indirect figures are added, the impact will rise to 0.1%.
This includes the ramification of a global trade war. But Chalmers is set to remain firm on refusing to retaliate, calling it a "race to the bottom".
But he will say that since Inauguration Day in the US, change has accelerated and the rules that underpinned the global economic order for the past four decades “are being rewritten”.
Chalmers will label the Trump administration’s decision not to exempt Australia from US tariffs on steel and aluminium as “disappointing, unnecessary, senseless and wrong”, “a form of economic self-harm” and “self-defeating, and self-sabotaging”.
And he says that Australia has not been “uniquely disadvantaged … but we deserve better as a long-term partner and ally”.
And he notes that the OECD is primed to downgrade its economic growth expectations for the next two years, largely due to trade barriers, while inflation is due to stick around for longer.
The context: Chalmers is due to reiterate that during this period of “churn and change” the government has “been careful to make a distinction between the cyclical and the structural”.
He has particularly focused on short-term fluctuations, that he will say need to be managed, compared to larger transformations that require long-term planning. This includes the shift away from globalisation and towards fragmentation.
The numbers: Treasury is forecasting China’s economic growth to slow to 4.5% next financial year, with American growth to slow to around 2%. These forecasts will be published formally in the budget on 25 March. The US estimates are the same as at the mid-year update, but Chalmers noted that the “downside risks are weighing more heavily now” and this is the “global backdrop for the budget”.
What they said: “This is a time of serious volatility in a global economy which is increasingly uncertain and unpredictable,” Chalmers will say in his speech on Tuesday.
“A new US administration disrupting trade, a slowdown in China, a war in eastern Europe and a fragile ceasefire in the Middle East, political division and dissatisfaction around the world. We’ve seen extreme market volatility in the US and elsewhere, as a consequence,” he will say, noting that the S&P has fallen 10% since mid-February and other markets have been pulled down alongside it.
“... Even in the most benign scenario, global growth over the next three years is expected to be its weakest since the 1990s.
“As a trading nation, Australia has a lot at stake.”
The source: Treasurer Jim Chalmers speech
