11 April 2020
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There's plenty at stake for a trade-oriented country like us.

Should we go to war with Donald Trump's America?

Peter Switzer
3 August 2018

Every morning before I start tapping away at what I think is the most relevant hip pocket story of the day, I peruse my favourite news sources to see what’s grabbing the headlines. The ‘crap’ that masks as news is probably saying a lot about what the media has learnt most of us are interested in.

And while Karl Stefanovic calling Hugo Weaving a disgrace (for not fronting up at the Logies) is of low ball importance to me (though the headline got me temporarily in!) I kept searching for (but didn’t find) anything about our trade surplus!

Yep, at a time when the most talked about man in the world — President Donald Trump — is threatening something that hasn’t happened since the prelude to the Great Depression i.e. a trade war, we can’t even get interested in our own pretty damn good trade performance.

Roman emperors knew the masses basically could be kept onside with bread and circuses, to keep them fed and entertained. I guess this explains why we have some clowns sitting in Canberra nowadays. But I promise to keep putting ‘lipstick on my important pig’ stories, on the basis that I can be a media digital disruptor!

In case you missed this (or in case your favourite media outlet failed to inform you), our trade surplus rose from $725 million in May to $1,873 million in June. This was the 11th surplus in 13 months! Once upon a time, we were overloaded with deficits! This isn’t just a surplus that looks better than a deficit, it actually helps our economic growth number that’s important for job creation, business and consumer confidence. And basically, why we even care about the economy.

And the sexiness of the subject is made even more alluring because President Donnie is threatening tariffs to any economy that has a big trade surplus at the expense of the ‘too generous and formerly too soft’ USA!

In fact, in his own criteria, we should think about hitting him with some tariffs because our trade story with the Yanks is a deficit of $18 billion! Yep, they sell us more than we sell them, which helps to explain why Donnie didn’t put tariffs on our steel, accepted our surplus refugees and why he’s nice to Malcolm.

In contrast, his gripe and battle with China gets down to a trade imbalance of $375 billion in China’s favour. And that’s why he’s cheesed off about their inclination to not play by the rules when it comes to intellectual property theft, which has been a problem for decades.

This $375 billion deficit for the US is why Donald has been threatening to raise his latest tariff slug on China to $500 billion, in order to KO the deficit. Even the Chinese know this is bluffing beyond someone insane!

I guess the question that has to be asked and answered is: should we declare a trade war on Trump’s America? The answer is “No” because it could lead to the Chinese doing the same to us because we have a $38 billion surplus with our northern neighbours!

Australia is a trade-oriented economy because our population is too small compared to our wonderful supply of resources. The more open global trade is, the better it is for us.

Let me play economist for a couple of sentences, as these facts need to be shared.

First, our  exports were driven by the group of goods labelled as “other rural”, which were up $98 million. Cereal grains were up $67m, while metal ores and minerals were up $118m. “Other non-rural (including sugar and beverages)” were up $117m. “Other manufactures” rose $109m, while gold was up $104m and travel credits rose $90m. Second, within our imports, consumer imports fell by 0.2%, while capital goods imports rose by 5% and intermediate good imports (‘stuff’ made overseas that’s then used in Australian production) fell by 3.6%.

The fact that consumer good imports are falling and capital goods are rising says we’re importing the right stuff to sustain our economic growth, which is good for job creation and future wage rises.

By the way, you might be wondering what we buy from the USA. Well, we do buy their cars, as any Tesla driver would tell you. But we’re also into the products and services of the six companies that, until a few weeks ago, were responsible for 98% of the growth in the stock market index called the S&P 500, which looks at the moving share prices of the USA’s top 500 listed companies.

Those companies are now an integral part of our lives. Many of us turn to Google every morning, read the news on our Apple iPhone, use Microsoft stuff at work, buy anything from Amazon, watch Netflix at night, while checking Facebook or Instagram, which is owned by Facebook!

This is a crazy, hi-tech, modern world but it’s not one that really will be improved by a trade war. I reckon even Donald Trump knows that. And right now, that’s why Wall Street has not panicked and sold off on trade war threats — smarties know even the US President knows how important free but fairer trade is to all our economies.

Peter Switzer's book Join the Rich Club is on sale for 30% off from the Switzer Store until the end of Easter. Click here to pick up a copy today!

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