Bonus: Trump's tariffs and you

In this bonus episode of the Friends With Money Podcast, Michelle Baltazar, editor-in-chief of Money magazine, chats with Stephen Dover, chief market strategist at global fund manager Franklin Templeton, which manages more than $2.35 trillion in assets globally.

They explore the implications of the 'Big Beautiful Bill'—a significant tax bill aimed at reducing dependence on imports, boosting jobs, and fostering economic growth through tax cuts and regulatory changes. 

They also discuss how Trump's new tariffs could impact Australian investors.

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Episode Transcript

Speaker 1 (00:01):
Welcome to the Friends with Money podcast, brought to you
by Money Magazine, creating financial freedom for Australians since nineteen
ninety nine.

Speaker 2 (00:12):
Hello and welcome to the Friends with Money podcast, your
weekly pod to help you earn, save and make more money.
I'm Michelle Baltas, our editor in chief here at Money Magazine.
Thank you for joining us on this bonus podcast on
the Big Beautiful Bill and the latest on tariffs. So
what we're going to do by the end of this
episode is try to understand what is happening in the US,

(00:34):
what does the government plan to do and what does
it mean for us here local investors. Joining us on
this podcast is the chief market strategist and head of
the Franklin Templeton Institute, Stephen Dover Steven. Thank you for joining.

Speaker 3 (00:48):
Us, Thank you for having me.

Speaker 2 (00:51):
It's been a crazy week in the US with the
announcement of the Big Beautiful Bill passing and also after
that shortly is the tariff's announcement. Stephen, can you please
tell us what is the latest.

Speaker 1 (01:05):
The US is.

Speaker 3 (01:06):
Going through a major economic structural change with the new administration,
and the positive way to look at it would be
that the administration is trying to change the US economy
so that it's less dependent on imports, so that there
is less fiscal spending, meaning the government is a more

(01:28):
balanced and that it becomes a real growth engine and
provides more jobs to middle class people. So that's at
least the objective of what the Trump administration is trying
to do. Whether it's meeting that or not is a
different question. But they're trying to do that through changes
in tax policy, changes in regulation, and then of course

(01:51):
these tariffs that we hear so much about.

Speaker 2 (01:54):
So let's start on the changes in regulation. The Big
Beautiful Bill. Month ago or so, we were talking about
the revenge tax here in Australia, but that has since
been scrapped. So just very quickly, what is the latest.
What are the key takeaways for Australian investors.

Speaker 3 (02:14):
The Big Beautiful Bill is primarily a tax bill that
was signed into law on an important day for US
July fourth, our Independence day on Friday, so it's very
new news. The big components of the bill are that
it is a large tax cut, primarily at the higher

(02:34):
income levels, that it reduces a lot of the benefits
that the previous Biden administration had had for clean energy
and that it reduces regulations or cuts taxes for business.
So I think from an Australian point of view, what
it does is it's stimulative to the economy. It does

(02:58):
things like allow company to expense the capital expenditures that
they have, so we expect it to at least from
an economic point of view. I'm not coming on the
social side of it. From an economic view, it should
be stimulative to the American economy.

Speaker 2 (03:15):
At the risk of simplifying this, which sectors would be
the immediate winners to these changes and which ones would
be disadvantaged.

Speaker 3 (03:26):
The big winners are the big companies primarily, and that's
because they can deal with all of the changes that
the government has. We think it's going to help financials,
and we think it's generally helping value companies. That doesn't
mean that the big tech companies aren't going to do
well because they have a lot of capital expenditures. What's

(03:49):
hurt Any of the smaller companies are hurt, and certainly
those companies that are in the alternative energy sector are
absolutely hurt. In fact, their punit be hurt with this bill.

Speaker 2 (04:02):
And what do you say to those who think this
is going to impact inflation in a bad way.

Speaker 3 (04:09):
I think that the Big Beautiful Bill could impact inflation
because it actually increases deficits spending, primarily because the tax
cuts are so large. We would expect the famous bond
vigilantes to come in at some point and increase interest rates,
but at least at this point, that hasn't happened. So

(04:31):
over time, that Big Beautiful Bill is inflationary, but we
haven't seen that at this point.

Speaker 2 (04:39):
And finally, not too long after the Big Beautiful announcement,
and I hope you had a wonderful celebrations on Independence Day.
How was the news on tariffs?

Speaker 3 (04:50):
Well, President Trumps gave until July ninth to come to
agreements on tariffs, and what we need to know is
that to negotiate terror is actually quite difficult, so we
weren't able to have agreements with most countries. So over
the course of this past week or so, President Trump

(05:12):
has said he will send notifications on tariffs, and we
expect that to impact the market, probably negatively. Generally, businesses
don't like tariffs. It's probably a damper on the economy.
You asked about inflation. The cost of tariffs is passed
on to the companies who do the importing and then

(05:34):
generally passed on to consumers. So tariffs from most economists
point of view, are overall net negative. That said, from
an American point of view, if they are able to
increase manufacturing and stimulate the US economy, there's a possibility

(05:54):
that there could be a positive side to it. Now
Australia is in that very rare mode from an American
point of view, we actually export more to you than
we import, so I think Australia as a country will
not be impacted. In fact, on a relative basis, I
would expect off Australia to benefit from the tariff impact

(06:16):
because it will reduce imports to the United States from
other countries, but not much from Australia. I think that
probably Australia will end up with the ten percent tariff
that seems to be the basic level for all countries
exporting to the United States.

Speaker 2 (06:35):
Fantastic. Well, we like any positive restructuring of the economy because,
as they say, when the US niezes, Australia catches a cold,
and when you guys get wealthier the same for US. Steven,
You've been very generous with your time. Thank you for
joining us.

Speaker 3 (06:51):
Thank you for having me really appreciated it.

Speaker 2 (06:54):
Thanks for listening to this podcast. I'm Michelle Baltazar. Bye
for now.

Speaker 1 (07:00):
Thanks for listening to the Friends with Money podcast. For credible,
independent and easy to understand financial commentary, visit moneymag dot
com dot au. Please remember that the views and opinions
expressed in this podcast are general in nature, and further
independent advice and research based on your personal circumstances should

(07:20):
be sought before making an investment decision