What is a 'Trumpcession' – and what does it mean for Australia?

The term 'Trumpcession' is a mash-up of 'Trump' and 'recession', referring to a potential economic downturn linked to US president Donald Trump's policies. With Trump now back in the White House, his administration has moved quickly to implement a series of tariffs on a range of imports – including those from China, Canada, Mexico, and from here in Australia.

The US has already imposed a 25 per cent tariff on Australian steel and a 10 per cent tariff on aluminium, policies similar to those that were introduced during Trump's first term. However, Australia's then-government was able to secure exemptions from these tariffs. The current government has not been able to replicate those privileges.

Now, with Trump expanding tariffs on China (up to 20 per cent on some goods), as well as additional tariffs on imports from Canada and Mexico (up to 25 per cent on most goods), there’s growing concern that Australia could face further trade restrictions. 

For example, Australia’s trade minister Don Farrell told Sky News last weekend that tariffs could be extended to Aussie beef exports and, potentially, a number of other products.

“I wish I could tell you exactly what the American Government is finally going to do. To be honest with you, I suspect they don't even know themselves right now.

“They're conducting this review. They're conducting the review in respect of every single trade agreement they have.”

– Australian trade minister Don Farrell

So, what does this mean for our nation’s economy, businesses, and everyday consumers?

The return of tariffs and trade tensions

While Australia was initially optimistic about securing an exemption from Trump's aggressive trade policies, that never materialised.

Now, with Trump's administration ramping up protectionist policies, there’s a real risk of further tariffs or duties that could impact Australian trade. Key risks include:

• Higher costs for exporters: Aussie businesses selling steel and aluminium to the US face higher costs, making them less competitive.
• Retaliatory measures: If Australia responds with its own tariffs, industries reliant on US imports could see prices rise.
• Weaker economic ties: Strained relations between Canberra and Washington could impact trade deals and investment opportunities.

China’s strategic trade tactics

In 2020, China imposed trade bans on Australian goods after Australia called for a COVID-19 investigation. These sanctions hurt exporters, especially in winemaking. However, China lifted the bans before Trump returned to office, possibly to position itself as a stable partner as US trade policies become unpredictable. It’s unclear if this is a long-term shift or tactical gambit.

What this means for Aussie consumers

A trade war between the US and Australia might feel like a distant concern, but it could hit wallets here in a few key ways:

• Higher prices: If tariffs expand beyond steel and aluminium, Aussie companies importing American goods – like cars, electronics, or agricultural products – might pass on extra costs.
• Job uncertainty: If Australian exporters struggle to compete due to tariffs, industries like mining and manufacturing could see job losses.
• Market volatility: Uncertainty around US trade policies can shake global markets, potentially impacting superannuation balances and investment portfolios.
• Stronger Australian dollar: If trade tensions weaken the US dollar, it could make overseas travel cheaper for Aussies but also reduce demand for Australian exports.

How bad could a 'Trumpcession' be?

The last time Trump was in office, his trade war with China and other nations contributed to economic slowdowns worldwide. While the US economy remained resilient, global supply chains took a hit. If Trump continues to expand tariffs, Australia could experience:

• Lower demand for exports: If key trading partners like China or the US impose their own countermeasures, Australian goods could become less attractive in international markets.
• A hit to the Aussie dollar: Trade uncertainty often weakens currency values, potentially making overseas travel and imported goods more expensive.
• More inflation pressure: If imported goods and raw materials cost more due to tariffs, inflation could return, leading to increased interest rates and weaker household budgets.
• Pressure on industries beyond mining: While mining exports are a key concern, other industries – such as agriculture, wine, and manufacturing – could also see price rises.

Is there a way out?

Australia could try to negotiate exemptions or trade agreements to offset the impact of tariffs. So far, attempts by Australia's ambassador to the US, Kevin Rudd, have proved ineffective. 

During recent remarks in the Oval Office, Trump reaffirmed his commitment to imposing broad “fair and reciprocal” tariffs, set to take effect on April 2, 2025. While he insisted there would be no exceptions on tariffs, the President did offer some hope on the potential for "flexibility".

Strengthening ties with other trading partners – such as the United Kingdom, European Union, India and Asia – might also help cushion the blow.

For consumers, keeping an eye on rising costs and shopping smarter by comparing options could be key strategies. If tariffs start impacting everyday prices, looking for local alternatives or budget-friendly options might help manage household expenses.

How Australians can stay financially prepared

While a full-blown 'Trumpcession' is still hypothetical, Trump's aggressive trade policies are already causing concern in global markets. If tariffs expand beyond steel and aluminium, Aussie businesses and consumers may face higher costs, job pressures, and economic uncertainty.

Whether Australia finds a way to navigate these challenges or gets caught in a full-blown trade war between the US and China remains to be seen. Either way, it's sensible for Australians to be financially prepared for tough times. Here’s a few considerations that might be helpful:

For households

• Compare savings accounts: Explore high-interest earnings with achievable requirements.
• Investing: Consider creative ways, such as term deposit laddering, to maximise returns.
• Refinance home loans: Seek out better rates to reduce mortgage costs.
• Find low-fee credit cards: Minimise interest and annual fees on credit card balances.

For businesses

• Explore competitive loans: Look for favourable business loan terms to support operations.
• Assess transaction accounts: Compare business accounts with low fees.
• Review energy providers: Switch to a cost-effective energy provider to reduce overheads.