The Chinese empire collapsed in isolationism. Rome’s borders fell when the empire turned inward. Smoot-Hawley caused the great depression. The UK experienced its ‘troubles’ when the Commonwealth ceased free movement.
Time will tell if ‘Liberation Day’ is seen by history as the day the Pax Americana ended: but it almost certainly will be known as the day the greatest industrial powerhouse in the history of the world destroyed its economic hegemony in a fit of pique at imagined slights.
At TIP, we have been hyper-aware of the coming end of this centuries roaring 20’s. So what do we see as the four key takeaways for Australian business?
1. Someone will have to fill the vacuum
America imports over US$3.3tn a year of good and services.
Approximately 15% of that comes from China and will now be subject to a 54% duty. Another 28% comes from Mexico and Canada and will be subject to a minimum 25% duty.
That US$1.5tn per annum (minimum) vacuum will have to be filled from somewhere. With a much lower tariff of 10% applied to Australia, how is your business placed to take advantage of this material opportunity?
2. The only winner from tariffs is corruption
Tariffs damage the economy who uses them. They damage those whose productivity falls in dealing with them. The only winner from tariffs are those who provide the channels to avoid them.
Whether the brandy smugglers in Napoleonic France, the bootleggers in the days of Al Capone, or organised crime moving cigarettes: import duties do little to stimulate domestic capacity, but everything to stimulate black markets and brown paper bags.
As a country with a reputation for rigour and transparency, how can we use our supply chains and reputation to win markets that were previously limited?
3. The US recession is here
We often look back on events and define “the tipping point”. Was it Fannie Mae, Freddie Mac, Bear Stearns or Lehmann Brothers? We have seen the bubble deflating over the past few months, but Liberation Day almost certainly marks the point of acceleration.
Since the days of the Mercantalists economists have known that economic output (GDP) can be expressed as simply as workforce multiplied by productivity.
This drove the European empires of the 16th century to take land and people, it drove the industrialists of the 18th century to urbanise, and it has driven the capitalists of the last 150 years to mass production and technology.
But apparently the US knows differently. To Trump and Lutnick, GDP can rise despite deliberate actions to reduce the working population at the same time as throwing up barriers to innovation and productivity.
They may not believe in gravity. Unfortunately, gravity believes in them.
How are you poised to pivot in an era of a self-inflicted US recession?
4. “When there’s blood on the streets it’s time to buy property”
At the end of the 18th Century Baron Rothschild uttered his immortal words in the face of the French revolution.
They were right then, and they apply now.
The only difference is “property” today is more than just houses and land. It encompasses physical assets as well as technological know-how and intellectual property.
With valuations likely to fall significantly, what can your dry powder buy? And how can you use it to set your business up for decades of growth?
We may not all end as wealthy as the Rothschild’s. But there’s no reason we can’t copy a winning strategy.
Now is the time to act. Markets are shifting, and those who act fast will seize the best opportunities. The TIP Group Corporate Advisory team is ready to help you move decisively—whether it's expanding exports, securing trade finance, opening new channels or capitalising on acquisition opportunities.
Don’t be left at the pier after the ship has sailed.
Empires End when Arrogance, Autocracy and Autarky Align