Barefoot Investor Scott Pape has warned Australians that the country could be plunged into recession if Donald Trump goes ahead with his trade war.
The US President on Tuesday enacted an executive order imposing 25 per cent tariffs on all aluminium and steel imports flowing into the US ‘without exemption’, which he had announced on his way to the Super Bowl in New Orleans a day earlier.
He previously announced a 10 per cent tariff on all goods imported into the US from China and threatened a similar 25 per cent tariff against Mexico and Canada, though he has paused those for 30 days after both agreed to boost their border security.
Trump indicated the tariffs are needed to boost domestic manufacturing in the US and counter the flow of illegal immigrants and illicit drugs into the country.
‘For the record, I think Trump’s tariffs are like setting your house on fire to keep burglars out – they’ll cause higher prices, mass job losses, and very likely a recession,’ Pape wrote in his latest column.
Dr Greg Jericho, chief economist for the Australia Institute, warned before the US elections last year, that if Trump went through with his tariff threats, any recession wouldn’t only be confined to the US but becomes ‘much more likely’ in Australia.
He pointed to an OECD report from May that found if Trump imposed new tariffs and other countries retaliated by imposing their own – causing an overall drop in global trade – then Australia’s economy would be among those to suffer the most.
The report found that a 10 per cent reduction of trade across all sectors between the OECD and the major non-OECD countries, including China and India, would see Australia’s GDP fall by 1.2 per cent – the second-worst behind South Korea.
The Barefoot investor Scott Pape (pictured) said Donald Trump’s tariff trade war would risk a recession – if the US President followed through with it
Trump enacted an executive order in the Oval Office on Tuesday that slapped a 25 per cent tariff on aluminium and steel exported into the US from overseas ‘without exception’
Dr Jericho explained this is because Australia relies so heavily on mining and agriculture exports, and would also be the country third most affected by reduced oil and gas trade, behind only Russia and Brazil.
For a country to be in recession, a prolonged period of a shrinking of the GDP needs to be coupled with rising unemployment.
Australia’s unemployment rate fell from a July high of 4.2 per cent in the second half of last year with an uptick in December to finish the year back on 4.0 per cent.
This is on par with December 2023, avoiding the recession criteria of a 0.5 per cent increase compared to the same period in the previous 12 months.
Pape, who made a name for himself with his bestselling series of finance books as The Barefoot Investor, said he was sceptical about how far Trump would take his threatened trade tariffs.
‘Trump is as likely to go ahead with these trade tariffs as he is to officiate a gay marriage at the Mexican border,’ he wrote in his column.
‘His former adviser Steve Bannon famously explained the Spray-Tan Sultan’s strategy: “The real opposition is the media. And the way to deal with them is to flood the zone with s***”,’ he wrote.
‘That is precisely what the President is doing. And we’ve got another four more years of this. Worse, this year we’re having our own political beauty pageant in Australia, starring Peter Dutton, as Trump’s way less entertaining understudy, and Anthony Albanese, who blends Biden’s energy with the puffball platitudes of Kamala.’
Australian Prime Minister Anthony Albanese said on Tuesday morning he had spoken on the phone to US President Donald Trump and argued Australia’s case to be exempt from tariffs on US imports – specifically aluminium and steel which Trump had mentioned on Monday
Pape argued that while Trump might appear to be gung-ho about sparking a potential trade war, much of it was bluster that should be taken with a grain of salt.
‘I’ll be keeping informed, but I won’t be obsessively checking the political news every hour, and I’m not on social media… Instead, I carry a physical book with me and read a few pages when I’m bored,’ Pape said.
‘When I set the book down I look at my new bookmark and feel like I’ve achieved something. Read whatever floats your boat, though perhaps don’t read Donald’s The Art of The Deal.
‘After all, Trump not only didn’t write the book, he’s apparently never even read it. His ghostwriter, Tony Schwartz says Trump had way too short an attention span to read.’
