'Lunatic' tariffs can directly hit Australia: Academics

Australia can get hurt by US President Donald Trump's 'incoherent' and 'lunatic' tariff policies that appear to have no logic or endgame if China's economy experiences a drastic slowdown, academics say.

Australian National University (ANU) emeritus professor of strategic studies Hugh White is at odds with determining exactly what the US is trying to achieve with its tariff policies, with some in the Trump administration seemingly wanting to "do a grand bargain with China" while others talk of isolating China.

Speaking at a panel hosted by La Trobe University discussing Australia's future alliance with the US, White said: "I'm not quite sure what Trump wants. I think in a sense, he just wants to pull up the drawbridge and make America essentially autarchic. But there's one thing to be said, though, and that is even the Trump administration is not immune to market forces."

White added this was evident in Trump's pullback from the Liberation Day announcements as soon as "the bond market started going peculiar."

One piece of good news, though, is that in the long run White thinks Trump will be "less disruptive economically than one fears at the moment, because he's swimming against the market."

"In the end, markets have a power all their own. A power I might not say that Trump, in his wacky way, acknowledges," he said.

On April 3, Trump slapped a slew of tariffs on goods imported into the US, ranging from 10% to 50%. China has since announced countermeasures, including imposing a 34% tariff on all goods imported from the US. Most Australian-originating goods imported to the US were hit with a 10% tariff effective April 5.

White said in the medium term, "we're just going to have to sit this administration out, because you can't work with them."

"But in the longer term, I'm less worried about the economic impacts of Trump's tariff madness, though I might otherwise be, simply because I don't think the markets will let him get away with a lot of other stuff he's talking about," he said.

In 2023, the US accounted for only 12.9% of China's total exports, according to the Observatory of Economic Complexity database. China's exports are spread out across the rest of the world, with Hong Kong (7.6%), Japan (4.9%), Germany (4.4%) South Korea (4.3%), Vietnam (4%) and India (3.5%) making up its next-biggest export destinations.

Several news outlets report that China's exports overall jumped 8.1% in April year on year amidst Trump's Liberation Day tariffs on shipments to the US.

CNBC calculates that China's shipments to the US plunged over 21% year on year, while imports dropped nearly 14%.

ANU honorary professor Gareth Evans said: "The economic risk flows from the quite lunatic Trump tariff policy that's now being pursued in an atmosphere of great uncertainty and unpredictability..."

While the tariff impact may not be as acute for Australia compared to other countries, Evans predicts that the economic risk "that could really, really hurt us" will flow from a potential major slowdown of the Chinese economy associated with the tariff war.

It will depend on the extent to which China can quickly develop its domestic consumption capability or find alternative markets, Evans said.

"But we have to assume that there'll be a significant slowing down impact that's already been identified by the economists internationally, and we'll be certainly dis-beneficiaries of that."