Luci Elis: Westpac Group Chief Economist says global economy struggling after Trump's tariffs

An increasing number of regional conflicts - as well as Donald Trump's tariffs, are threatening the global economy. 

Westpac Group Chief Economist Luci Ellis told Mike Hosking that she believes the tariffs were economic self-harm.

She says they still threaten the US economy and trade patterns will continue to change, but other countries aren't going to escalate. 

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Episode Transcript

Speaker 1 (00:00):
Another war underway. Of course, are going to keep that
in mind, the questions around the uncertainty of the global
economic or the global economy, increase shipping through the Middle East,
the price of oil as spiked. This is against the
backdrop of already reduced growth forecast due to things like tariffs.
Now Westpact groups A chief economist, Lucy Ellis happens to
be in the country with us this morning. Lucy, very
good morning to you.

Speaker 2 (00:21):
Good morning, Mike. Great to be here.

Speaker 1 (00:23):
Do you materially change your view of the world now
that Iran and Israel are going at it?

Speaker 2 (00:31):
It's not clear that it's a material change to where
we already were, which is an increasing number of regional conflicts.
They're not necessarily spilling out into global conflict. But we've
seen Israel and Iran go at each other a couple
of times. We've got your Russia having invaded Ukraine and

(00:54):
that's been going on for quite some time. We've also
seen Iran and Pakistan how to go at each other recently.
So I think where we're going to be seeing more
of these regional conflicts, and that's very worrisome. But I
think they do have a character of staying regional rather
than going global. At the moment, there are a lot

(01:14):
of countries saying we want you to de escalate, we
want you to de escalate. You're looking at the headlines
this morning, it's quite clear Israel has no intention of
just de escalating. It has a particular objective, which is
to remove Iran's nuclear capability, and it looks like it's
going to keep going until that's done.

Speaker 1 (01:35):
Economically, then do you worry more about the tariffs and
what may or may not happen there.

Speaker 2 (01:41):
We've always said at Westpact that what the US had
initially announced was an act of economic self harm. It
was far too self destructive to stand at the levels
that were originally announced, and so they were always going
to de escalate. And so you saw the US negotiating
with itself offering a cut and a carve out to

(02:03):
electronics when they realized how much an iPhone was going
to cost in the US if they went through with this.
We've seen this framework deal last week with China where
it does look like, well, there will still be significant
tariffs on China in the US, but it's a lot
lower than what was announced initially. China has de escalated

(02:25):
its retaliation. I think the way to think about the
tariffs is this is still going to be something that
imposes harm on the US economy. We will still see
trade patterns change to some extent, but other countries aren't
going to escalate. Other countries are not imposing tariffs back
on the US.

Speaker 1 (02:44):
How much work has Elbow got this week as he
heads to Canada to have a word with Trump, given
your situation as a surplus from the American side of
the equation, hence Donald Trump's sentiment that he's being ripped
off and you've got your steel issues. Is their business
to be done there or we just wouldn't have a
clue how Trump runs things.

Speaker 2 (03:03):
At some level, you almost don't want to draw attention
to yourselves. Australia, like New Zealand, has a ten percent tariff,
so you know, you guys, US and the penguins are
all being tariff at the same level. A ten percent
tariff isn't really going to change minds about how much
to import from Australia and New Zealand, So you know

(03:26):
this is not going to be particularly damaging to our
economies as a whole. The steel is a problem, but
that has already been the subject of considerable government support.
It's unlikely that we're going to be able to get
a carve out from the US just for steel and aluminium,
and in many respects these are things we can export

(03:47):
to other places. You know. The commodities that we do
tend to export to the US, things like beef, as
does New Zealand, which they're going to keep importing because
we have grain fed beef that makes back better hamburger patties,
or we can direct it to up elsewhere. We're certainly

(04:08):
selling more beef to China since all this happened. And
of course there's also services. People may not be aware,
but Australia had a seven and a half billion dollar
export industry called software licensing. Thinks Canvorin, Lassian and wivetech
all add up to almost as much of an export
industry as our wheat exports last year. It's more than bali,

(04:30):
it's more than our aluminium industry. So those things aren't tariffed.
And so I think we need to just focus on
the less damaging parts of our relationship, because drawing attention
to ourselves isn't going to help us wise.

Speaker 1 (04:44):
Woods Lucie appreciate your time very much, Lucy Elvis, who's
the Westpac Group chief Economists. For more from the Mic
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