Christopher Joye, the Chief Investment Officer at Coolabah Capital Investments, made an appearance on Mark Bouris’ podcast, sharing his insights on the significant consequences of Trump’s tariffs, the underlying issues facing China, and the potential for Australia to become entangled in a global trade war.
Joye explained how Trump’s tariffs will result in Australia being dumped with cheap Chinese goods, which will be highly deflationary for Australia:
“There’s big implications for Australia because what is going to happen is you are going to have these huge walls erected around the US economy. The Chinese aren’t going to be able to sell jack Sh#t into the US economy. They are going to block China from the US economy completely”
“China is the biggest supplier of goods into Australia. And if China can’t sell BYD cars into the US, where do you think they are going to dump these cars and all the other goods? Little old Australia, the EU and other markets. We are going to get a ton of cheap Chinese goods dumped into Australia”.
“Are we going to do anything about it?… No chance we have got no spine. So, we are going to have actually a lot of deflationary forces from cheap goods that result from the trade war”.
“So it’s counterintuitive because you think with a trade war, prices would go up. It’s very inflationary for the US. But if you look at the Peterson Institute modeling… You get deflation in Australia because of the cheap goods getting dumped on us”.
“So what does that mean for the RBA? Well, you got two things. China’s economy is f#cked. China is uninvestable for over a decade”…
“They are going to be blocked from most Western liberal democratic markets, but particularly from the biggest market which is the US. So, that’s not good for Australia”.
“So you have the Chinese economy, which is already struggling. That is going to be amplified and really exacerbated by Trump. He’s going for the jugular”…
“The tariffs are going to build a war around America and make everything much more expensive in America potentially”.
“But for Australia, the Chinese economy is going to really get pounded. And that is bad news for Australia”.
“If everything arrives here cheaper, well that’s a positive. But China is our number one trading partner”…
“I think the RBA will look at this as not positive for Australia. If China has a quasi recession of sorts, it can’t be positive for Australia”…
“You are going to get a deflationary impulse. The prices of goods will be lower than they otherwise would be”…
“What that means is for the RBA, they could cut in May quite comfortably. The inflation data could start surprising on the downside, particularly if they extend these cost of living subsidies, which they seem to be doing”.
“You could get a decent number of RBA rate cuts”.
I made similar arguments in multiple radio interviews and television.
The RBA is likely to cut rates sharper and deeper owing to:
- Slower global growth, most notably in China.
- Australia will be dumped with cheaper Chinese goods, lowering imported inflation.
- The negative wealth effect from the collapsing share market.
Australian house prices could also experience a strong bounce on the back of lower interest rates and an investor flight into bricks and mortar.
