Aussie dollar plunges on Trump tariffs

Dollar drops

President-elect Trump announced today that 25 per cent tariffs would be introduced on all goods entering the United States from Mexico and Canada, while there will also be significant additional tariffs imposed upon China of 10 per cent.

This is strong news for the US dollar, and the Aussie dollar immediately dropped quite sharply on the news. 

The Aussie dollar hit the lowest level in four months. 

This is correspondingly bad news for an already-struggling Chinese economy, given that Trump had already promised 60 per cent tariffs if elected. 

Given Australia's reliance on exports to and trade with China - for iron ore and coal in particular - it's not a surprise to see bond yields falling here too.

Australia's 3-year bond yield was trading under 4 per cent this afternoon, down from a recent high of around 4¼ per cent a fortnight ago. 

The Reserve Bank of Australia had already anticipated such an outcome from a Republican sweep, as disclosed via the Freedom of Information log here:

It's quite possible that Trump's tariffs could also lead to a supply glut of cheap manufactured goods, pushing global goods inflation lower. 

In other news, the estimated resident population of Australia just went through 27½ million.

Although population growth has slowed, it is still assumed to be rising at around 1,600 per day, or an annualised pace of a massive 584,000. 

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