Trade tariffs and Australia’s resource sector Artwork

RSM's talkBIG Podcast

talkBIG is RSM's business finance and economics podcast, helping you save, create and protect your wealth. This podcast delves into real-life stories and inspires listeners to talk and think BIG. This is edutainment at its finest, suited for financial geeks or newbies. Tune in and subscribe to get your hit of personal and business money talk.

All Episodes

RSM's talkBIG Podcast

Trade tariffs and Australia’s resource sector

September 30, 2025 • RSM Australia • Season 3 • Episode 12

How do US tariffs and trade wars affect Australia’s economy?
In this episode of talkBIG, host Andrew Sykes is joined by economists Joe Brusuelas and Devika Shivadekar, along with corporate finance expert Craig Amos, to unpack the global ripple effects of US trade policy.

From Trump’s tariffs to shifting trade agreements, they explore how these policies impact Australia’s mining and resource sector, gold markets, and long-term growth.

What you’ll learn in this episode:

Which Australian industries are hit hardest by US tariffs
Why gold demand is booming—and its role in the resource sector
How tariffs disrupt global supply chains and investment flows
Why economic diversification is vital for Australia’s future
The geopolitical forces reshaping global trade

If you want to understand how international trade battles shape Australia’s economy, this episode has the insights you need.

Watch now to learn what tariffs, trade wars, and global tensions really mean for Australia’s place in the world economy.

Experts in this episode:
Craig Amos, Partner, National Resources, Mining and Energy Leader, RSM Australia
Joe Brusuelas, Chief Economist, RSM US
Devika Shivadekar, Economist, RSM Australia
Andrew Sykes, Canberra Managing Partner, RSM Australia

Don't forget to SUBSCRIBE:
https://www.rsm.global/australia/insights/podcasts/talkbig-podcast#subscribe

See more from our talkBIG series:
https://www.rsm.global/australia/insights/podcasts/talkbig-podcast
Apple podcasts: https://podcasts.apple.com/us/podcast/rsms-talkbig-podcast/id1587839521
Amazon music: https://music.amazon.com.au/podcasts/b65be160-f764-4c7e-83ea-5f3b48e84779
Spotify: https://open.spotify.com/show/5cA2ocKrICgYMCZxMQ8N3U

Text us your questions!

Thanks for listening! Visit the RSM Australia website to ask the hosts a question.

0:06

Hello everyone and welcome to our latest episode of the RSM talkBIG podcast.My name is Andrew Sykes, I'll be hosting you today.I'm a partner in RSM Australia and have been talking business, economics and strategy for over 25 years.I've got some terrific guests with me today.First and foremost, I've got Joe Brusuelas.Joe is a principal and chief economist of RSM US,serving as a leading voice of the middle market and the US economy.I also have our very own Australian RSM economist, Devika Shivadekar.Devika is our in-house economist and an Asia-Pacific expert.Also joining us is Craig Amos.Craig is a partner in the Corporate Finance Division in Perth, and he specialises innational resources, mining and energy.So today we're to be talking about trade tariffs and the Australian resource sector.So welcome, everyone.Good to have you here.Now, tariffs have been a big conversation and currently there are a number of US tariffsdirectly impacting on Australia.Amongst those, we have a 10% baseline tariff on most Australian goods entering the USsince April 25.We have a 50% tariff on steel and aluminium effective June 4 and copper and coppercontaining products effective August 1.We have a 25% tariff on automotive parts and vehicles.And we also have a suspension of the de minimis exemption for low value imports.So that's imports under $800 from the 29 August.So some potential effects there.Joe, can I ask you first up, what is the rationale behind the US imposing these tariffs onglobal goods?Well, the administration feels that the US has been taken advantage of for a number ofyears and that's highly debatable.But the point is, they've taken the initiative and they've set a pretty high tariff bar.You know, Andrew, by the time we get to October, the average effective tariff on goodsentering the United States will be around 17.5%.Now, right now, all Australian goods, the average effective tariff is 6.1%.That's well above the 25 year average of basically one half of 1%.So it's a pretty big shock in terms of the terms of global trade.Essentially what Washington is attempting to do is to narrow the US trade balance.Now, you're talking with two economists here.We're likely to tell you that trade is mutually beneficial set of interactions where we'reall gonna be better off after we engage in trade,especially as we specialise in what we can produce, right?And as an economist, the trade balance plus capital inflows equals zero.That's a pretty good thing going on if you're running a deficit, right?It means you're gonna have large capital inflows.In the case of the United States, that's part of American exceptionalism, is it attractscapital like a magnet from around the world.Seeking a better return on yield because we run those large deficits that requireseconomies to recycle the American dollars back into the American economy.And until a few years ago, it was widely considered to be a pretty good deal, but we'regoing through a populist economic revolution right now.And so for the time being, going forward, we're going to have very high tariffs on goodsentering the United States of the like we haven't seen in over a century.So that's going to have some impacts and certainly on the Australian economy.Devika, which sectors are going to feel the most immediate pressure from these changes inAustralia?Yeah, Andrew, the biggest squeeze in my opinion is going to be steel, aluminium, copper,automotive parts and most notably pharmaceuticals.For instance, US tariffs on steel and aluminium have already surged to 50%, which havedrawn some sharp rebukes from our policymakers already.And similarly, proposed pharmaceutical tariffs could climb as high as 200%, potentially to250%, which has sparked a huge concern in the industry given pharmaceuticalexports alone account for close to $2.1bn Aussie dollars in exports.So that's a big number.On top of that, a new 10% baseline tariff broadly on all Australian exports.It's not new.It was the most innocent tariff rate that was announced.But effectively what that does is it is still higher than the previously agreed free tradeagreement between the United States and Australia, which highlighted thattariffs should be at zero, but even 10% on the most basic goods and services is also quite significant.So the key exports that we do, steel, aluminium, copper, auto parts and pharmaceutical arethe ones that are going to be hit the hardest.Agriculture is another important sector, but I feel it's fairly insulated compared to theothers because we do have a fairly diversified agricultural commodity base, unlike theother manufacturing or industries that we discussed previously.Thank you, Devika.So Joe, if I could go back to you, Devika did mention previous free trade agreements.We've had a long term movement towards that.Do you see these tariffs and the current policies as temporary or are we seeing a longterm policy shift here?No, you're seeing a long-term policy shift in which multilateral organisations such as theWorld Trade Organisation are essentially going to be marginalised.During Mr.Trump's first term, he was very clear about this, that he did not like multilateral tradeforms.He wanted bilateral negotiations where they could set the terms.Moreover, It's very clear the Trump administration sees tariffs as a cudgelto compel behaviour, not just in the economic realm, but also in political andgeostrategic realms.So not only are tariffs going to be a permanent feature of the global landscape whenengaging in economic interaction with the United States, but when you engage politicallyand strategically, from time to time, it's likely that the United States is going to usetariffs as a way to compel behaviour.Now, in the case of Australia, Australia has got the chance to carve outanother special relationship with the United States, much like the one Great Britain has.And that has got to do with the security cooperation in the Indo-Pacific, specificallyaround containing risks from China.Now, my sense is at one point something will happen.There'll be a development.And a keen forward-looking diplomat in Australia probably is going to be able to link thatcooperation in the Indo-Pacific.with obtaining lower tariff rates.Now, are you going to get back to one half of 1%, the 25 year average?Probably not.But my sense is there will be opportunities going forward.And Andrew, that's why tariffs are going to be a permanent or an endemic feature of theeconomic, geostrategic and financial landscapes going forward.Thank you, Joe.And I can understand what you're saying there, but Do you think these tariffs are havingthe desired effect?And it's certainly very much a question in Australia is How are they impacting the USeconomy?So outside of achieving those kinds of aims, what's our impact?So the effective tariff at 6.1% is still very low.There are four areas along the global supply chain where you're going to see those costsborne right?It's the exporter, the importer, retail, and then consumer.Now in the United States, the import price index is going up.So we're not seeing Australian or Japanese companies for the most part engage in invoicepricing and cut prices to offset the tariffs, right?And in fact, the United States dollar has gotten weaker by about 10% the first half of theyear.So what we're seeing is corporate margins in the United States thin.You're starting to see inflation pass through, but it's still very modest.So the consumer really hasn't felt it yet.But what we know is these things don't happen overnight.This isn't textbook economics.It takes about two years for tariffs to be fully passed through.And at that point,you typically see the consumer bearing the lion's share, if not the super majority ofthose costs.So this is a symphony in three movements, and it's gonna take a while for us to get to thefinal scene.Yeah, thank you, Joe.Craig, I could turn to you as our national leader in resources mining and energy, are weseeing any impacts or is there any sort of feedback you're getting from that sector on thepotential impacts of these tariffs?Thanks, Andrew.sort of Earlier this month, we had the one of the bigger national mining and metalsconferences here in Perth, which is the Diggers and Dealers event in Kalgoorlie, which isa couple of days of, you know, fairly in depth look at the industry.And I think in terms of these tariffs, probably the biggest impact is going to be where itends up in China.So I think the impactdirectly to the mining and energy sector in terms of Australia, US is a bit more limited.As most people know, the vast majority of our natural resource exports end up in China andend up in a combination of consumer goods and industrialisation over there.So there has been quite a bit of discussion around if these tariffs have the effect thatthey'redesired, which is to essentially lower dependency on China for imported items into the US,then that will have an impact back into the sector in Australia and will have an impactback on Australia.That pretty much dominated the thinking around tariffs, certainly as far as the mining andmetals industry goes.It's what will be the impact on Chinese demand.Yeah, and it's interesting that you raise that because there's some indirect impact oftariffs, particularly on some of our major trading partners.Not just our trading partners, but ourselves.And retaliatory tariffs can lead to global supply chain disruptions, not just in China,not just in America, but OECD and wherever uncertainty is created.Devika, what are some of those broader implications for global trade when we look at itacross the world, when we look at some of the direct and indirect impacts?Yeah, thanks Andrew.So I think Craig covered the mining industry fairly well.So let me focus on the non-mining part of it.Look, the direct impacts are pretty simple.Our exporters are going to face higher costs and shrinking margins, especially inindustries like pharmaceutical, auto.And these tariffs make Australian products less competitive in the US market naturallywhen they become more expensive.The indirect impacts are thatspillover pressure from slowing global economy.Now, the risk is that tariffs could drag down global growth, which could in turn impactthe demand for Australian exports more broadly.China is one of the largest players, which is why our concern or our focus is very much onwhat happens in China, being our largest tradepartner. But imagine the size of the Chinese economy and the impact it's going to have onit. If it's smallerwhere even the countries that we are also dealing with, much smaller in size, in economy,a much smaller export base, that is also going to be impacted.Australian demand for those goods and services would also be impacted, should the tariffsactually materialise into much concerning numbers and percentages for those smallerplayers.Now, again, one of the points I raised previously is that agriculture currently seemssheltered a fair bit because the US runs a significant trade surplus with Australia.So beef is one pain point which President Trump has been very vocal about and we haveactioned or we have come up with initiatives to reduce his concerns around importing USbeef.So he's saying that we are very protectionist about Australian beef.We're not allowing US beef to enter our markets.We have opened the Australian market for that.So that should pacify President Trump and perhaps shelter the sector for now.But broadly, the other sectors are some which have a much greater impact.Now, if we look at it globally, I think a point that Joe also raised previously andsomething that you two mentioned is there's a shift towards protectionism and that willunsettle the global markets.And I think the biggest example here is the fallout between the United States and India,what has been happening.It's in a matter of few weeks, the relationship went on from being...best friends to completely at loggerheads with each other with India and China now movingto a strategically closer relationship in order to avoid the tariff hit on manufacturinggoods and services in India and exporting those products to the United States.So it's all about protectionism now.Businesses definitely are struggling with unpredictability.When tariffs, The issue with tariffs so far has been that there is no clarity.The timelines keep shifting.The number or the percentage of tariffs keeps moving.So there's a lot of uncertainty and what that essentially does for businesses in Australiais it puts all the investment plans on hold.Nobody is willing to take any risks.Everyone is worried that should we act now?Would it be premature?How long should we wait?Would it be too late?So there's no uncertainty about when businesses should actually start acting on theirinvestment decisions.And if this becomes a trend, I think we can expectfragmented trade blocs because protectionism uncertainty essentially means you startgravitating away from who have been your traditional partners to a marriage ofconvenience.Okay, you're hit I am hit let's partner up.But is that a sustainable relationship?If you've not had a strong history so far, having a marriage of convenience may or may notwork out in the long term.So it's all extremely uncertain right now, which is weighing greatly on the outlook forglobal.Yeah, so some uncertainty around trade and investment on a worldwide basis.So Craig, can I ask you based on that, how much does our energy and resource sector relyon exports and how much of that is actually to the US?Well, Andrew, energy and natural resource exports are our biggest export out of Australia.It's our biggest foreign income earner, so it's significantly important to the Australianeconomy.There are certain commodities where the US is a large consumer, like aluminium, et cetera.But it's still a significant secondto China and I think even India is emerging as a significant importer of those naturalresources from us.I think the impacts in terms of these tariffs, as we've been talking about direct andindirect impacts, overall, the direct impact is not that great, but the indirect impactthrough what will happen in China and India is significant.And there are subsets of that, aluminium being onewhich will be significantly impacted, Andrew.Yeah, so if we look at that and we break down some of our exports, iron ore, coal, LNGexports, they're all tipped to drop over the coming years.Is this because of tariff trade tensions or a consequence of a trend that was alreadyoccurring?Look, it's difficult to say if it's connected in any way to the tariffs.As Devika has mentioned, what the tariffs are creating is a level of global uncertainty.And when there is global uncertainty, the outlook in terms of production, capitalexpenditure and all of these things are softer.And a lot of those activities, whether it's manufacturingprocesses or whether it's capital expenditure, require natural resources.And so if the outlook for that is soft, it will dampen the outlook for energy andresources.And there's probably an impact there as well, Andrew, that's not connected to the tariffsand that the industrialisation in China is maturing and moving much more into sort of asecondary and third phase there of demand for energy and resources forfor manufacturing export as opposed for industrialisation.So I think that trend has been on for a while, which will impact the outlook for iron ore,LNG, et cetera.I think when you talk about energy, we can talk a lot about that.The energy market is in, you're seeing some very unusual things happening there.You see thermal coal prices going through the roof.Energy transition globally is struggling at the moment for a variety of reasons in termsof energy security.It really started post the Ukraine war.So the supply demand factors, particularly for gas, coal and others, it's, there's a lotof political motivation around what's impacting that.You know, the demand for thermal coal unfortunately still remains strong becausemost of the unindustrialised or the lesser in developing nations are still heavily coalreliant and are still building new coal, thermal coal power assets.Gas is now starting to emerge as a proper recognised transition energy.And the demand for long-term gas offtake globally, particularly out of Japan, remains verystrong.So some of it tariff related,Andrew, but I think there's a lot of other things driving natural resources beyond justthe tariffs.Yeah, and it's really interesting.if we went back to the turn of the 20th century, it would have been said Australia,Australia rode on the sheep's back as we were mainly an agricultural exporting country.With the modernisation, industrialisation of resources, we've come to think that as longas we can dig things out of the ground, Australian economy will be okay.And that's been true for a long time.

And Devika, can I ask you: 18:48

If we are seeing another transition now, we transitioned from agriculture to resources.Is Australia's economy diversified enough to absorb the drop in mineral exports?Look, I'll say that we are making good progress in the sense that initiatives like FutureMade in Australia, even in their fledgling state, have actually been born out of a needfor diversification.So within such initiatives, the focus is on green metals, renewable hydrogen, batterymanufacturing, critical mineral processing, to name a few, all with the intention ofstrengthening our economic foundation.Now agriculture,like you said, barring weather conditions, very resilient exports expected to hitsomewhere around $72bn Aussie dollars, which is just 3% shy of what has been last year'srecord number.So meat exports alone have the potential to bring in $40bn.So barring mining, agriculture is a stronghold.We've got a few good initiatives going on.So, yes, the mining sector definitely matters, but we are in the process of buildingstronger alternatives.Naturally, we may not necessarily see the impact in the short to medium term, but Ibelieve if we are to be seen as playing the long game, then I think we are on the righttrack.Yeah, thank you, Devika.And Joe, if I could ask you a question along the same lines, at the risk of looking likean Australian who's wondering what the rest of the world thinks about us, from the USpoint of view, or from your side, is Australia really just seen as a resource driveninvestment play or resource driven economy?Well, largely it's not well understood.And I think most Americans who participate in global finance and economics think of youguys as a commodity currency, right?And it's driven primarily due to development of resources that are then exported to China,right?The coastal life's not well understood, the role of housing, finance.I know who Macquarie is.Now, most Americans would have no idea who Macquarie is or why they're so important downunder, right?In many ways, Andrew, the American economy is a $30 trillion dynamic and resilient beast.Imports account for about 14% of US GDP.It's about $4.2 trillion if my math is correct.Okay, that's an enormous sum.But what it also means is the US is largely a closed economy.And that dichotomy, right, that US imports alone are larger than the UK economy, right,yet the US is largely closed.It explains a lot about why the US is largely self-reliant, but if you can produce as muchlithium and rare earths as you can, we'll buy as much of it from you as we can, right?Because we're deficient in it.And our neighbor to the north, through the environmental regulations, simply at this timehas chosen not to produce or release their prodigious rare earths and lithium supplies.So you get these potentials for tension and conflict throughout the global economy,especially around resource extraction, because it fuels iPhones and chips and other formsof sophisticated technology.it's As technologically proficient as we've become, in many ways, resources are thefoundation.So we're not that far away from the turn of the 20th century,even in 2025.Yeah, and that's really interesting.Thank you for that comment.It's one of the most enlightening things I've heard on this debate is just the relativesize of imports to the US economy and how little or how self-sufficient that thereforemakes the US, even though we like to think we're important here.I'd imagine most Americans just think Australia is a place with nice beaches, buteverything will injure you or kill you there.umand Kylie Minogue.I think those are the three cornerstones of Australia in the United States, yes.RSM Australia has conducted some research that shows our energy and resource sector isactually struggling with around 68% of the listed entities on the ASX with a going concernnote coming from the energy and resource sector.So it does make you wonder how much trouble the energy and resource sector is in.Craig, why do you think our resource sector is under stress?Andrew, the energy and resource sector is a very, very big sector in Australia.I think I saw something in the last week or two talking about the top 20 taxpayers inAustralia, and I think something like 16 of the companies or something on that list wereenergy and resource businesses.So it's massively large.I think it goes across a very wide area.So if you talk about our tier one bulk commodity companies, Iron Ore, BHP, Rio,Fortescue, I think these businesses are going quite well.And I think if you look at their earnings coming out of earning season right now, they'redoing just fine.And they're enormous contributors to our economy and fairly financially stable.And similarly, if you looked at Energy, so Woodside, Santhos, and some of these, I think alot of that, our ASX is also a very friendly economy to mining.So we have a lot of small junior listed companies.And so by number,We have a number of small junior exploration level businesses by value.We're very dominated by our majors.And second to the majors, we've got the gold sector, which is absolutely having aphenomenal run at the moment.I mean , the gold price is almost stratospheric and all things around gold is justsignificantly shining right now.So I think when you look at the perceived distress,it would be coming from the junior exploration side where the capital markets have beenquite constrained over the last few years for capital for early stage exploration activitydriven by high interest rates.Capital raising activity has been challenging.And then we've had the stress through the lithium sector and the nickel sector.The nickel sector largely due to structural things happening in Indonesia and other areas,but lithium being a function ofcurrent global supply-demand issues with EVs.And so I think if you looked at where there is some distress, the smaller companies wouldbe struggling to raise capital.We had a burgeoning lithium sector that has been in distress and we have a nickel sectorthat's been in distress.But I think our large mining companies, our large energy companies are still trackingquite well.Yeah, so our senior players, our large companies are doing well, it's more our juniorplayers.And that seems to indicate that there is some weakness in investment or a lack of appetiteto invest in there.Devika, is that correct?We're not seeing the investment that we should into our resource sector?Yes, Andrew.Look, non-mining investment has been sluggish for years now, particularly ever since COVIDhit.And there are a myriad of factors really.Part of it is structural, in the sense that businesses just haven't been spending.Now, even when interest rates were low during the COVID era, businesses were worried aboutwould there be enough demand if we were to invest in growing our business?So there was a question of demand and supply.Add to that, there were a lot of policy headwinds, high costs, complex rules, red tape,uncertainty, many projects that took off just never got completed.And some projects that were in the pipeline never even took off the ground.So all of this put together, what it did was ultimately firms became too cautious.As a result of the rebound in consumer demand immediately following the pandemic and oncewe were out of the lockdowns was that a lot of businesses then started setting veryunrealistic return expectations before they had invested.And when the reality hit over the years as consumption again started plateauing, that iswhen they realized that, we are still unsure of our future demand.We don't know how the economy is going to move.So that side ofthose concerns are very structural when it comes to businesses.The funny thing is there are also some people who argue that because of big governmentspending, it has crowded out the private investment space, which means it makes businesseseven more hesitant.So it's a combination of public, private, uncertainty, red tape, cost of capital andwhatnot, which has essentially made investment in the non-mining sector.a lot less lucrative, particularly when the mining sector has been the backbone of theAustralian economy for quite a while.Yeah, and that investment is flowing towards the bigger companies, the bigger projects,the lower certainty.So we're seeing in the mining sector, our juniors are struggling to get capital and therest of the economy is struggling to get capital.What policy changes do you see could stimulateglobal economic growth?Just because the United States has decided it wants to take an extended holiday from freetrade doesn't mean the other economy should do that.Trade diversification, free capital flows, investment, that's the way forward.You know, the big sort of 800 pound gorilla that we haven't talked about is the Chineseeconomy.That's been the primary driver in your region.And China now is caught in the middle income trap.The economy's growth is slowing.They're in a 7-10 year debt and deleveraging cycle.Now this has nothing to do with the trade war and everything to do with the business modelinside China.It's been exclusively reliant on exports and investment led growth, but it's reached apoint now where they've had a severe crisis in theirresidential and their commercial real estate industry, which means their banks are introuble.They're just going through what we call a slow motion train wreck.They're having to engage in a very extended period of the deleveraging and within which bothhouseholds and private sector firms draw down debt and they just simply don't have enoughconsumption and the governing authoritysimply will not give up that growth model.And so Australia needs to look at other countries, Brazil, India, the emerging growthchampions in Africa.Right.And what am I, what am I saying?More globalisation, not less.That's the way forward.That was a good one Joe.Yeah, that's an excellent comment.So what you're saying or what I'm hearing there is that the China economy was set up tocontinue to grow exports and it's now suffering because that cycle can't go on forever.And it's a natural consequence of how it's set up its export as part of the issue —What's worse is Andrew is that in order to keep employment high, China is generating asmuch capacity as it can in terms of its domestic manufacturing and it's exporting itssurplus to the world.So what they're asking all the other manufacturing based economies like Germany to do isto accept a smaller share of global manufacturing.And that's causing tensions to increase, not decrease.But the issue is China can't develop at the same pace that it had.It does not need to build as many homes.It does not need to build as many commercial real estate buildings.So inevitably that's just got to slow down.And that means the composition of demand with respect to resources is just going tochange.That's why India is so important.And you literally just can't get away from the fact that India, 20 years from now islikely to be the growth leader.And things are going to change along with that.The Indians are going to have their own preferences about how global economic affairsshould be organised.Yeah, you did mention briefly Africa there.I think I read somewhere the other day Africa, is a continent with 1.83 billion people andan average age of 27.Where does that figure into the growth prospects of the world?Do you have a view on that, Joe?Well, Africa is the ultimate frontier economy, right?But with that many people of that age, there's going, development's going to need tooccur, right?I mean, we're talking not just infrastructure, but substructure, basic civilisationsspringing up from the ground in an organic process.So there's going to be plenty of economic opportunities going forward.But for now,it's largely going to be led by the oil exporting giant Nigeria and of course the anchordown south, South Africa.So you also mentioned there, Joe, that some of the things that are happening were causingother global tensions.Are there any signs that these trade tensions will escalate further?Are we going to enter into further ongoing trade wars?Well, I mean, it wouldn't take much to cause this to intensify between, the United Statesand China over Taiwan.The United States government just took a 10% stake in the chip producing company Intel.Now that's a revolution here for the United States.That's something that's done elsewhere, right?Nvidia, the single best and most important company in the world, is basically sharing 15%of its profits from whateverit makes from a certain class of chips that are going to be sold into China.When you think about the importance of the Taiwan Semiconductor Company in Taipei, youdon't have to imagine an escalation of tensions and a crisis over terms of trade aroundtechnology and chips.While, I don't think that's in the cards anytime soon.It's certainly one could not ignore the ingredients that are there.So, Devika, when we look at those trading relationships, and we see that Australia'srecently affirmed its trading relationship with China, is this an economic indicator ofAustralia reducing ties to the US in favour of other allies?No, Andrew, look, even though we are having this type of situation right now, we cannot,under any circumstances, undermine the importance of the United States for Australia.So US still remains our third largest export market and our second largest import sourceand the largest investor in Australia.So the reaffirmed cooperation with China, I believe, reflects a desire to diversify therisk.And it's not to abandon our US ties.The funny thing is, despite what has been happening and despite Australia cozying up toChina, if you look at a lot of survey polls that have been taken as of 2025, you can seethat the general Australian public sees China as both an economic partner as well as asecurity threat.So it's more about balancing trade relationships in a very uncertain and volatilesituation and definitely not about picking sides right now.For Australia, it definitely makes sense because China is geographically a lot closer,United States is far.But at the same time, Australia is a bloc of the five eyes nation blocs.It's also a part of Coord network.So while it is trying to build and diversify its risk emanating from the tariff side bycozying up to China, broadly, I think Australia is simply.somewhere in the middle and it's not willing to take sides just yet because it knows theimportance of both the United States and China and it's trying to find that balance in thebest way that it could without upsetting either.Yeah, okay, very well said.And when we talk about that balance, Joe, do you think that trade relations could disruptthe AUKUS relationship?No, I don't.I don't think so.I think that countries' economies will act in their own best interests and those interestsover time change.But my sense here is that Washington will want to move on from the trade questions soonenough.The major trading nations will arrive at a convenient point of cessation,and then the focus will be on China.So my sense is that that's largely the path forward and we'll see how that unfolds.So we use those economic levers and then we'll get back to that security question aroundChina at some point in time.Right, and that will trigger another round of negotiations.The long period from 1945 to 2020 really did represent the apex of that last wave ofglobalisation.We're sort of going to fall back to the status quo ante for a period of time here as wemove away from multilateral forums to bilateral forums.And each individual entente will result in its own logical outcome.But it will be different.It won't be purely global.And in fact, it may be more regional or more security specific going forward.Yeah, we have seen with all of the discussions around trade and uncertainty and as yousaid, moving away from multilateral trade relationships, the impact on the stock market.Is there any views, I think I'll get from each of the commentators, their view on wherethe markets are going over the next sort of three to five years?Are we still investing in the stock market or moving it all into property?Well, right now the equity markets in the United States continue to melt up on the back ofexpected breakthroughs in productivity and power organised around artificial intelligenceand increasingly agentic AI.Money, capital simply is just pouring in around the world.This year, four large companiesare going to be making US$360bn in capital investments.They call them the hyperscalers.And they're scaling up data centres that are then going to require enormous investments inpower generation.So that the United States firms can set the standard around AI, generative AI, and agenticAI.And I believe...that the breakthrough in productivity, which is still some years in front of us, willalter the landscape of the global economy.The competition is going to be who's going to set the standard, US or China, becauseEurope's just simply not a player now.And for a country and an economy like Australia, hard decisions are going to have to bemade around which standard will it allow to dominate its region.And which standard will be willing to accommodate.And so there'll be a lot more there, but that's why those markets keep melting up.Now it doesn't mean at one point there's not going to be malinvestment.That there won't be a market correction or even a recession.Those things happen.Business cycles come to an end.But, you know, I can now participate in this.I have access to artificial intelligence.that makes me hyper productive.Within a couple of years, I'm going to be able to employ an infinite number of bots atalmost zero cost to solve the problems that I want solved or to promote my ideas and my brand.We're about to step into a very different world.And I've got to tell you, the best thing about my job as the chief economist at RSM is Iget to go all around the world.The technology that's being developed here is separate and distinct from what's beingutilised elsewhere.And it's going to change things, for better or for worse.It's going to change things.Yeah, and it's really interesting you raise that idea of productivity as one of thegreatest challenges facing Australia is a long term decline in productivity being definedas producing more outputs from the same input.And what you're talking about is a potential solution or a pathway for Australia to followvery closely.Devika, what's the outlook for our local markets?I think you pretty much hit it on, hit the nail on the head, Andrew, when he said that,are the markets going to do anything or do we put all the money in property?I think Australians have been way ahead of this.We've always only invested in property that has been our preferred mode of investment foryears and years together.And look, when it comes to understanding the Australian market versus the rest of theworld, I think it is very important to acknowledge that while we have a verywell-developed platform, particularly in the capital market space,we are still extremely small compared to a massive economy or a massive market like theUnited States.So, of course, we have a lot to learn from what's happening globally, but at the sametime, we are way too small to be impacted drastically by what's happening the world over.Naturally, there are some knee-jerk reactions when something goes wrong, when more tariffsare slapped or when the inflation number just comes a point higher than what was expectedby the consensus.There are some knee-jerk reactions.There are some sell-offs.But broadly, I feel that we are insulated because we are not very big market players inthe traditional sense that a weakness in the global economy might just materially deterioratethe Australian market in any sense because we still traditionally prefer investing in hardassets over going into the markets.Yeah, and thank you.And Craig, not being a market expert, I won't ask your views on the economy, but, orsorry, the market and its impact, the economy's impact.But what I will ask you is, you mentioned you went to diggers and dealers in Kalgoorlie.Any particular sector they thought we should be focusing on?I think, Andrew, I mean, it would be Kalgoorlie, it's in the gold fields of Australia.I mean, the gold sector was just very much in focus.The gold price is through the roof.And while I don't necessarily want to give a view on share markets, it does feel to me ifyou look at global public equity markets, whether it's Australia, even in the US, they'rerelative to the risk premium we should be seeing in the world for global growthuncertainty.And where the interest rate cycle is, does feel like public equity markets are very, veryfull.And I think the one market that's really benefiting from that global uncertainty is gold.The price defies gravity at the moment.There isn't necessarily a fundamental demand for gold.It acts as a hedge against global financial instability.So it's fascinating to seea soaring gold price and a soaring public equity market, because I think those two thingshave generally not always moved in the same direction.So it's all about gold, gold projects getting up, etc.I think the other area that's probably getting a bit of focus, and this does havegeopolitical connotations, is critical minerals, Andrew.On the podcast today, we've spoken a little bit about trade tensions globally and otherglobal geopolitical things, I think.One of the next things that's going to be on the table there is critical minerals and theinputs of rare earths and other things into global defense, global renewable energy, etcetera.Supply of these rare earths are limited to a few countries.Processing of these rare earths is very limited globally.So there was a bit of focus on the rare earths industry as there always is in terms of anewa new industry in the mining and metal space, starting to get some attention.Yeah, thank you.And thanks everyone.Some fantastic points made in our podcast today.listening to our exports, can certainly, and definitely Joe's keen insight is that tariffsare here to stay and they're going to be part of long-term policy.So if we base our thinking on heading back to the old days, that's not going to happen.We also got an understanding that the US remains the leading economy in the world,and some relativity on what the impact on their economy will be given the fairly low levelof inputs and the self-sustainability of the US.I think it's very important as Australians to go out and get a different view.And really thank you on that, Joe, because we get an external view.It's very easy to form a view here in Australia of policies when we don't see the fullimpact.We only see the impact on us.So very much appreciated.Encourage our listeners to do that.Read some of the RSM economic research.It's available.Our economics team, Devika and Joe operate together and we do have access to thatworldwide economic research.I'd like to thank you all for being guests on the RSM talkBIG podcast.And I would encourage our listeners to subscribe to our podcast and you can do thatwherever you get your...favourite podcast from.Thank you very much.It's been a pleasure.

Andrew Sykes

Host