Trump’s tariff trade war launch bolsters the case for Reserve Bank of Australia rate cuts

Trump’s launch of his tariff trade war on Canada is going to tip Canda into recession and trigger further Bank of Canada interest rate cuts.

I think Australia will not be immune from Trump tariffs . For two reasons:

1. Trump is warring with all his allies, Canada, Europe … and he’ll get around to Australia when he has a moment.

2. Australia’s ambassador to the US, Rudd, publicly lambasted and ridiculed Trump prior to the US election. Rudd has removed his tweets since, which is the least he could do, but this is not going to cut it. The correct response from him would have been resignation in favour of a professional diplomat, or the Australian government firing him and replacing him with a professional diplomat. It probably wouldn’t have made much of a difference, tariffs are coming anyway, but it would have been an olive branch, and maybe a chance.

Anyway, if the RBA has a clue, they’ll take note of the impact that is a given for Canada’s economy and move preemptively with an Australian rate cut. But:

1. I don’t think the RBA has the gumption to act on what appears obvious, they’ll want to see data first, which will be way too late.

2. the RBA meeting is not until February 17 and 18, and there may be tariffs on Australia already by then!

This article was written by Eamonn Sheridan at www.forexlive.com.