The tariff-heavy trade policies of the second Donald Trump presidency do not represent a radical shift, but rather a return to historical norms, Rabobank Australia’s Executive Director of Global Economics and Markets, Ben Picton, told last week’s Northern Territory Cattlemen’s Association conference in Darwin.

Rabobank’s Ben Picton in Darwin during the Northern Territory Cattlemen’s Conference last Friday.

“What’s interesting about that is that free trade, globalisation, is the anomaly, it’s not the rule,” Mr Picton said.

“We’ve only had two periods of globalization – just prior to World War one, and just prior to now.

“So to be quite honest, throughout much of our history, we’ve actually traded in periods that look more like today.”

New direction of travel

For the past 30 years the United States had ensured security, openness of trade for everyone else and were willing to incur costs for the world economy.

But with the rise of China, which does not share the US value system and is a challenger to the US in Asia, the US has responded by mirroring Chinese economic trade practices, not just to China but to the rest of the world.

“So suddenly dealing with the United States looks a lot like dealing with China,” Mr Picton said.

“We no longer have this benign, globalising trade environment. We have great power competition again.”

President Donald Trump has stated reciprocal tariffs will be announced on April 2 – next Wednesday – and has also hinted agricultural tariffs may be applied from that date.

Mr Picton said it was very likely Australia will face tariffs from April 2, including on our beef exports which are Australia’s number one export to the US.

Reasons for optimism

There were however a number of reasons why the news is not necessarily bad for Australia’s beef industry, he said.

“If (Donald Trump) is applying tariffs to everybody, it’s all relative,” Mr Picton said.

“The US still doesn’t produce enough beef to meet its own consumption needs, so they are going to have to buy from someone, and if they’re applying a tariff to everybody, we’re probably going to still sell the same amount of beef to the USA.

“In fact, we might be better off because if others retaliate, the US might place higher duties on them, and we look relatively better.

Similarly, if other countries like Japan and Korea and China, for instance, are putting in place trade restrictions on US product, we might capture more of those markets. So there’s actually some opportunities for us.”

China lesson still fresh

Australia had also learned valuable lessons from the experience with China when it imposed restrictions on numerous Australian exports including beef, barley, coal, cotton, rock lobster and wine.

“And our way of handling that was don’t do anything, don’t retaliate, don’t put any impediments on Chinese trade, and effectively, we won that trade war.

“We found new markets for most of those products, wine and rock lobster maybe the exceptions.

“But we found new destinations, we diversified, and we kind of came out ahead, whereas China shot themselves in the foot – they had to pay higher prices, they had less security of supply, now they have rolled back all of those restrictions.

“So if we deal with the United States in a similar way to how we’ve dealt with China, if we keep a cool head, we can potentially pick the eyes out of some of these market opportunities and we might actually come out winners.”

Australias has survived bigger trade shocks in the past

Mr Picton pointed out that Australia has also successfully navigated larger trade shocks in the past.

One of the most significant came in 1973 when the country’s major export market, Britain, joined the European Economic Community (EEC), dramatically reducing its intake of Australian agricultural exports.

“We had to find new markets really quickly, we had to adapt, and if you look at Australia’s exports and our prosperity from 1973 through to the early 80s, you definitely notice it, but then it recovers really quickly. So we adapt and we find new ways to prosper.”

Inflation and interest rate outlook

Turning to the broader economic landscape, Mr Picton said Rabobank believes inflation is now sustainably under control.

“The soft landing has been achieved and we’re starting to see economic growth picking up.

“So we think that that means that the RBA will have some latitude to deliver a few more rate cuts this year.

“We think two more – May and August.

“And we also think that we’re going to see the Australian dollar continue to decline a little bit further down to around about 61 US cents.”