The re-election of Donald Trump as US President surprised many. He is seen as a major disrupter of the status quo. Since the result, analysts and commentators have been trying to predict the effect on Australia’s economy and investments.

One theory says US inflation and interest rates will stay higher for longer. Trump campaigned on tax cuts and government subsidies in his favoured areas. If implemented that will mean bigger deficits. Extra government spending will be stimulatory, keeping inflation up, and so interest rates.

That may well occur in the US, but higher interest rates there don’t necessarily mean higher rates here. US rates are likely to have little effect here.

President-elect Trump says he will impose tariffs on imports to the US. Goods from most countries would be subject to 10 or 20 per cent import duty. Australian exports to the US aren’t large. They include meat, aluminium, pearls, gemstones, technical equipment and pharmaceuticals.

During the first Trump presidency Australia was given an exemption from tariffs as a close ally. Hopefully we can earn one again. If not, 10 per cent isn’t high. A bigger concern is the proposed 60 per cent tariff on imports from China. That would be a problem for us.

We supply raw materials that Chinese factories manufacture into goods to sell to the US. If that trade slows Australian mining companies will be affected. Treasury has predicted it could shave up to 1.5 per cent off the size of our economy.

We would have to develop alternative markets. Manufacturing might increase in low-cost Asian countries to replace Chinese production. We could supply raw materials to them. The tariff on China is unlikely to be as high as 60 per cent. Big US bank Goldman Sachs predicts 20 per cent.

Obviously China would to try to export more to other countries. Perhaps the cost of our imports from China would reduce, lowering inflation here.

President-elect Trump has promised a reduction in business regulation to improve efficiency. That would have minimal effect on Australia. Likewise, his promises on immigration to the US are irrelevant to our economy. 

There is unlikely to be any major effect here from a Trump presidency, with the only significant concern the proposed tariffs on China. Treasurer Jim Chalmers says we will be OK.

The Trump policies are designed to boost US businesses. That would help their share prices. We have seen some gains already. If US shares do well, Australian shares usually benefit. At least our market is unlikely to fall. Increasing our investment exposure to US shares may raise our returns.