The Australian dollar fell to its lowest level in three months just minutes after Donald Trump’s presidential victory, with experts now concerned about what his return to the White House will mean for Australia’s relationship with China.
Trump’s vow to clamp down on Chinese imports with a 60 percent tariff is of great concern to the Albanian government as any blow to China, Australia’s largest trading partner, will have repercussions Down Under.
“A renewed trade war between the US and China is bad for the US and Chinese economies,” Commonwealth Bank of Australia analysts said.
“And what’s bad for China is bad for Australia, Korea and New Zealand because of the high exposure to Chinese domestic demand.”
There are fears a trade war between the US and China could lead to higher interest rates and inflation for millions of Australians.
“Exports to the US are just 4 percent of total Australian exports and could be spared from Trump’s tariffs because Australia has a trade deficit with the US,” AMP chief economist Shane Oliver said.
‘However, as an open economy with high trade exposure to China, Australia is vulnerable to an intensification of global trade wars under Trump, especially if this weighs on demand for Chinese exports.
“Commodity stocks would be most at risk and the Australian dollar would likely fall (further).”
The Australian dollar fell to its lowest level in three months just minutes after Donald Trump’s (pictured) presidential victory over Kamala Harris on Thursday
Mark Haefele, Chief Investment Officer of UBS, shares Oliver’s concerns, saying that “the mooted 60 percent tariff on imports from China and a 10 percent tariff on imports from the rest of the world will destroy a large part of trade between the could make the US and China unviable.
Mr Haefele said this would “reduce US domestic demand and corporate profits, and lead to lower GDP growth around the world, especially in China”.
But the shadow foreign secretary, Simon Birmingham, is more optimistic about what will happen after Trump’s inauguration on January 20.
“Donald Trump has made strong and bold policy statements and of course we should all respect them,” he said.
“But Australia last time was able to ensure that President Trump and his administration understood that the Australian economy and our close relationship with the United States meant that it was in both our countries’ primary interests to be as strong as possible.
“That’s why we obtained exemptions from the tariffs the first Trump administration imposed on steel and aluminum.”
Mr Birmingham then launched an attack on the Labor government.
“It is important that the Albanian government now pursues similar commitments from the Trump administration because it is in the US interest for Australia to be as strong a partner as we can be,” he said.
Prime Minister Anthony Albanese is pictured with Chinese Premier Li Qiang in June
US tariffs on Chinese goods could lead to lower demand for Australian exports such as iron. An iron ore mine in Port Hedland, WA is shown
In the US, financial markets have reacted well to Trump’s victory: Wall Street has reached an all-time high and Bitcoin has reached an all-time high.
The digital currency rose $6,000 to a record $75,371.67, surpassing the previous peak of nearly $74,000 in March.
Previously a crypto skeptic, Mr Trump changed his mind and took a positive stance on cryptocurrencies before the election.
During the campaign, he promised to make the US the “bitcoin and cryptocurrency capital of the world” and put tech billionaire Elon Musk in charge of a comprehensive audit of government waste.
Mr Musk has been dabbling in cryptocurrencies for years, most notably dogecoin, which rose as much as 15.40 percent on Thursday.
Mr Trump said he would create a “strategic reserve” of bitcoin and accepted cryptocurrency donations for his campaign.
He also launched a new venture with family members, World Liberty Financial, focused on cryptocurrency trading.