Yesterday Donald Trump kicked off his international economic bullying in earnest, slapping 25% tariffs on the US's two closest neighbours Canada and Mexico. He also hit China with an extra 10% and signalled the EU will be next. A global trade war that will disrupt economies and drive up unemployment and prices for ordinary people is a real probability - including here in Australia. The real winners? The oligarchs and MAGA elites who thrive on protectionism and power plays while everyone else foots the bill.
Trump justified the tariffs with his usual belligerent rhetoric: tough talk about illegal immigration, drug trafficking, and "unfair" trade imbalances. But let's cut through the noise. As someone who trained as an economist, I know that no-one wins from trade wars - except for a few oligarchs and industries temporarily shielded from competition. Ordinary people, on the other hand, pay the price. Literally.
Tariffs function as a hidden tax. They increase the cost of importing goods, and businesses pass these costs on to consumers in the form of higher prices. Inflation ticks up. Real wages shrink. Consumers have less spending power. This drags down wealth and economic growth. Canada and Mexico have already announced retaliatory tariffs and China will most likely follow suit. All of this will disrupt global supply chains and impact industries worldwide. Australia isn’t immune to the ripple effects. Our exports to China, in particular, will take a hit.
History also shows protectionism is a double-edged sword. Trump may claim he's protecting American jobs and collecting revenue, but in the long-run, his tariffs will have the opposite effect. Higher costs from the tariffs will squeeze US industries that rely on imported materials. In sectors like manufacturing, layoffs will become a reality as costs rise and profits dwindle. Over the longer-term, hiding behind tariff walls will also make US industries less competitive and thus further increase their costs.
But what about the environment? As an environmentalist, I admit free trade isn’t blameless - it can encourage over-consumption and resource exploitation. Yet, trade wars do nothing to address these underlying issues. Instead, they foster political instability, empowering leaders who exploit fear and nationalism for personal gain. In this case, it’s Trump playing the strongman, bullying on the global stage at the expense of ordinary people.
Cooperation, not coercion, is the key to peace and prosperity. But Donald Trump and his oligarchs aren't interested in that. They're intrested in power. So Australia needs to get ready. If Trump is willing to start a trade war with the US's best friend Canada, there's no reason why we won't be on his radar. And in the meantime, our exports to countries that he's already started bullying will take a hit.
Read my recent post on why given America's democratic decay, it's time for Australia to find new friends. And share your thoughts on trade wars and Trump's tariff tanrums below.
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