Australia records rare US trade surplus on tariff | Australian Markets

Australia has recorded a rare trade surplus with the United States for the second consecutive month, on the identical day as President Donald Trump introduced 10 per cent tariffs on Australian exports.

The federal authorities had pointed to the nation’s historic trade deficit with the US as a purpose why it must be spared from Mr Trump’s trade sanctions.

But February’s $1.1 billion surplus reported by the Australian Bureau of Statistics on Thursday, following a $1.7 billion surplus in January, undermines these claims.

It is unlikely a continuation to Australia’s historic deficit would have made a distinction, given no nations have been spared a minimal 10 per cent tariff, trade deficit or no.

The surplus was pushed by a surge in non-monetary gold exports, as importers seemed to stockpile gold holdings forward of the tariffs, mentioned AMP economist My Bui.

Australia has recorded constant trade deficits with the US since records started within the Eighties and that’s anticipated to renew to renew because the short-term export leap unwinds.

“It’s nothing structural in terms of trade with the US,” Ms Bui instructed AAP.

“In terms of the overall trade balance, the surplus has narrowed from a peak of about $15 billion per month in 2022 to about $5 billion per month.”

Ms Bui expects it to keep narrowing as geopolitical dangers increase and Australian shopper demand picks up, lifting imports.

Tariffs have been singled out as a risk to Australia’s financial stability by the Reserve Bank in its bi-annual review of Australia’s financial health, however not as a result of of their direct influence to Australian industry.

Ongoing uncertainty surrounding the tariffs may have a “chilling effect” on business investment and family spending, suppressing financial growth.

That may result in share price volatility, given already high risk premiums.

Australia can be weak to turbulence in China’s financial system, the RBA discovered, given the additional 34 per cent tariffs imposed by Mr Trump on Australia’s largest trading associate.

Treasurer Jim Chalmers ordered Treasury to conduct new modelling on the influence of the tariffs on Australia and promised to release it publicly as soon as full.

“We know that we won’t be immune from these tariffs, even though the US is only about five per cent of our export markets,” he instructed reporters in Adelaide.

Ms Bui estimated the direct hit to the Australian financial system from the tariffs could be about 0.2 per cent of GDP, though sure industries like metal, prescription drugs and beef would really feel the ache more acutely.

Following the tariffs announcement, the charges market slashed the percentages for a fee cut on the RBA’s subsequent assembly in May, now predicting an 85 per cent likelihood of a 25-basis level cut.

The purpose: the tariffs went far past what the market had been anticipating, mentioned IG market analyst Tony Sycamore.

“Inflation is rapidly becoming yesterday’s problem,” he mentioned.

“The RBA are expected to shift their attention to shoring up growth.”

An extra 50 foundation factors of cuts are priced in by November, which would depart the money fee at 3.35 per cent by yr’s finish.