With the re-election of Donald Trump as the 47th U.S. president, the commonwealth anticipates mixed implications that Trump’s victory would bring, notably impacting trade, currency markets, and inflation pressures. Trump’s pro-business, low-regulation stance has already driven financial markets upward. With stocks, including those in banking and tech, surging in anticipation of looser government oversight, Bitcoin and other risk assets hit new highs. The U.S. dollar also strengthened significantly, recording its largest single-day gain since 2020. This strength in the dollar led to a drop in other currencies, with the Australian dollar hitting a three-month low.
Australia, a crucial Commonwealth ally, is poised to experience the consequences of Trump’s resurgent protectionist stance, as his administration’s proposed tariffs on imports have the potential to disrupt global trade. Several other countries that significantly depend on exports to the U.S. and China may also face the impact. With Australia narrowly avoiding new tariffs on its steel exports in Trump’s first term, experts worry that broader trade policies this time could have a more lasting effect. Economists like Steven Hamilton warn that tariffs of up to 20% on U.S. imports, alongside a proposed 60% tariff on Chinese goods, will raise prices for U.S. consumers, with potential ripple effects throughout the global economy. If Chinese exports fall, so will their demand for Australian resources like iron ore, which would likely hurt Australia’s economy.
Canada, another Commonwealth member with deep trade ties to the U.S., may also face trade policy turbulence. Trump’s first term brought tariffs on Canadian steel and aluminium, and his second term could see renewed tensions. With trade policies potentially shifting, Canada may confront new barriers, possibly dampening exports to the U.S. and affecting key industries, leading to heightened economic uncertainty.
The Trump presidency is less directly impactful on Sri Lanka. However, there could be indirect effects on economic stability. With Sri Lanka’s reliance on trade with China and other global powers, heightened U.S.-China tensions could decidedly create economic risks. A U.S. tariff on Chinese goods, for instance, could lead to decreased Chinese imports from suppliers like Sri Lanka, particularly as Chinese demand slows under trade strain. Sri Lanka’s reliance on U.S. dollars for borrowing also means that rising U.S. interest rates could make debt more costly, further challenging an already delicate economy.
Additionally, Trump’s history of abandoning multilateral agreements, such as the Paris Climate Accord, brings new questions about the AUKUS pact involving Australia, the U.K., and the U.S. Under Trump, AUKUS could face scrutiny, with Australian groups such as Labor Against War, expressing unease about close military alignment with a militarized U.S, although former U.S. Ambassador Joe Hockey believes Trump values Australia’s defense role and is unlikely to undermine AUKUS.
Trump’s re-election making way for his protectionist trade policies, dollar dominance, and defense strategy under AUKUS call for Commonwealth countries to adapt to their economic and strategic positions, signaling a period of significant adjustment to come.
