How much chaos does Nationals senator Bridget McKenzie think Trump’s tariffs could wreck on the world’s economy?

I think it’s not just Donald Trump, it’s – a potential trade war between China and the US would wreak havoc on the global economy.(Which Trump sparked when he put tariffs on products coming from China) We saw Australians’ superannuation and savings smashed over the last seven days and that volatility, I think in the global market itself as a result of these decisions, is an offshore threat to our economic future and I guess we have also got those onshore threats to our economic future in the form of the Labor Party and after Adam Bandt’s efforts at the National Press Club yesterday potentially being in the minority Government with the Greens and outlining $250 billion more of taxes on Australians which is a recipe for disaster for economic stability.

The Greens are not talking about being in a coalition with Labor – the party is talking about holding the balance of power when it comes to bill negotiations (which is a position it already holds at times in the senate) so let’s calm down Bridget.

The Coalition’s latest attempt at an economic policy is to create another future fund ( an offset fund) to pay down debt.

Now, Labor uses funds as well – the Housing Australia Future Fund being a great example – and what funds do is have a whole heap of money in them offsetting debt, with the dividends, not the capital, being used to fund projects.

Which sounds great in theory, but also means not a lot gets done. The best way to pay for something, is to use your capital. So setting up two future funds to offset debt doesn’t do a lot, other than have the Coalition be able to point to a very big number and say ‘behold, our $XX billion future funds’!

The plan, as laid out in the Australian newspaper (shockingly Coalition media have ignored our requests to be put on their media lists) is to take 80% of ‘windfall gain’ from mining revenues and put those into a special fund, where it will sit and offset the debt.

So let’s take a mining giant like BHP. It has quite a few commodities, and let’s say gold has a great year, but the arse falls out of iron ore, cancelling out the Australian gains. What goes into the fund? If BHP says – yeah, gold was great, but iron ore cost us and our books say they cancel each other out, how is the windfall calculated for the fund?

Funds like the future fund (and the HAFF) are considered ‘off budget’ spending, which means they don’t appear on the budget books. Which usually means the value of the fund is ignored when we talk about net debts.

At the same time, the Nationals are crowing about getting the returns of this $20bn new fund, which would suggest there is no money in the immediate future for regional investment. So sorry about those roads Wannon! You’ll have to wait until the fund starts making returns in a few years. And then it would be about $1-$2bn in the future, which anyone who has seen the numbers on infrastructure projects knows buys you less highway than you would think.

There is a good way to build a commodity fund – like introducing royalties on gas pulled up from Commonwealth waters, but that’s not a conversation the Liberals will be having.

So, as always, the devils are in the details and the details of this are…not great.

Australia won’t see any changes, because it has the baseline 10% rate, which the Trump administration is applying to every country as a minimum. And that hasn’t been changed. Countries like South Korea and Japan had 24% and 25% tariffs placed on their goods, which is why their has been the flurry of negotiation teams. But South Korea, Japan and China have also signed an agreement that they will look to diversify their trade.

Expect a whole heap more flip flopping before this is over.

AAP has a wrap on how the market has responded to Trump’s about face on tariffs, with a three month pause now on offer:

The S&P 500 has closed up 9.5 per cent after US President Donald Trump declared a 90-day tariff pause for many countries, effective immediately, bringing some relief to investors worried about the global economic impact of US trade policies.

In an afternoon announcement, Trump said he would temporarily lower many new tariffs, but raised the levy on imports from China to 125 per cent. The pause on tariffs from dozens of trading partners came less than 24 hours after they kicked in.

The increase in China tariffs was in retaliation to China’s announcement of a levy of 84 per cent on US goods starting April 10.

While Trump’s announcement still left investors with uncertainty about his ultimate tariff policy, traders took the opportunity to shop for beaten-down stocks. Since Trump announced broad tariffs late on April 2, stocks had fallen more than 12 per cent, for their biggest four-day selloff in five years.

“Markets had been looking for a reason to rally for a few days. Markets can only sustain extreme conditions for so long before exhaustion sets in, rather like a toddler and a tantrum,” said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis.

“The 90-day suspension does allow nice breathing room to allow negotiation to settle in and market valuations have clearly been reset. Yet the uncertainty for companies remains.”

After Trump’s reversal, Goldman Sachs said it was rescinding its recession forecast and reverting to its previous baseline estimate for the economy to grow in 2025.

Kevin Gordon, senior investment strategist at Charles Schwab, said Wednesday afternoon’s market rally from oversold levels made sense. But he cautioned that “to have a high conviction call on anything right now is a fool’s errand.”

“We just have to wait and see what the ultimate policy is, but unfortunately the policy changes almost on a daily basis,” said Gordon.

“You have to put yourself in the shoes of a business that’s trying to make capital spending or hiring plans in this environment. If the rules of the game are constantly changing on a day-to-day basis, I don’t see how that’s a healthy environment for businesses.”

According to preliminary data at closing, the S&P 500 gained 470.58 points, or 9.49 per cent, to end at 5,453.35 points, while the Nasdaq Composite gained 1,857.06 points, or 12.16 per cent, to 17,124.97. The Dow Jones Industrial Average rose 2,942.91 points, or 7.82 per cent, to 40,588.50.

Also helping investor sentiment was the US Treasury’s $US39-billion ($A65 billion) 10-year note auction, which came within market expectations, priced at a high yield of 4.435 per cent, lower than the rate forecast at the bid deadline, suggesting solid investor demand.

The upcoming earnings season will offer more insights into the health of corporate America as investors fear a hit to economic growth from the tariffs. US banks, including JPMorgan Chase, will report first-quarter results on Friday.

The CBOE Volatility Index – seen as Wall Street’s “fear gauge” – fell sharply after the tariff pause.

While the market was rallying on the tariff pause, minutes from the Federal Reserve’s meeting last month were released.

Fed policymakers were nearly unanimous that the US economy faced risks of simultaneously higher inflation and slower growth, with some policymakers noting that “difficult tradeoffs” could lie ahead for the central bank.

Hello and welcome back to Australia Institute Live. We are still shaking our heads at the treasurers’ ‘debate’ last night – what was meant to be Jim Chalmers and Angus Taylor answering questions dissolved into Taylor and moderator Ross Greenwood saying whatever they wanted while Chalmers stood there saying ‘that’s a made up number, you’re making up numbers’ while shaking his head.

Disaster.

Today we have Chris Bowen and Ted O’Brien, but that will be at the press club and it’s at lunch time, so while it promises to be painful, it can’t be as bad as what Sky hosted last night.

As expected, Anthony Albanese turned up in Cairns to give Matt Smith’s campaign as he attempts to take the seat from the LNP. Warren Entsch is retiring there, which gives Labor its best opportunity in years, but it at the moment, thinks it will just fall short.

The Coalition is holding on to its energy plan, as it is one of the only things, other than the fuel excise policy, it has to talk about this weekend. Peter Dutton has been left carrying the load, with his shadow ministers largely absent – which is a direct result of how Dutton has run the partyroom. So while there are complaints from Liberal MPs that Dutton is “out there on his own”, perhaps it would be instructive to examine how Dutton has run the Liberal party since taking over, which was picking up the mantle from Scott ‘five ministries’ Morrison and running with it. The Liberal party is learning what happens when you choose ideology over talent and it’s playing out in this campaign.

You’ll have me, Amy Remeikis to guide you through the morning, and then the lovely Glenn Connley will add his voice to the mix when I go from being a typing monkey, to a talking monkey for a couple of hours.

But you’ll have the entire day covered off, along with fact checks from the incredible brains at the Australia Institute. For those who missed it, we fact checked the $1,300 figure the LNP keep using when talking about how much electricity prices have gone up (you’ll be shocked to learn it’s wrong and impossible to work out how they have calculated it) and the 30% increase in groceries Coalition MPs have been throwing around (also wrong – it’s about 12%) yesterday, so keep your questions coming.

Coffee number three is on the stove, so let’s get into it.