Global Trade Adapts as Trump's Tariffs Shift International Relations

Economists are reevaluating the impact of former President Donald Trump's recent tariff announcement on global trade. Warwick McKibbin, a former Reserve Bank board member, believes the tariffs will contribute to inflation, but may not be as severe as expected due to the US's relatively small share of global trade.

The remaining 85% of global trade is likely to adapt to the new tariffs, according to McKibbin. This adaptation is already underway in Canada, where Prime Minister Mark Carney is pursuing stronger economic ties with the European Union. Plans are being discussed for potentially elevating Canada to an 'associate member' of the EU.

Australia has also finalized a significant trade agreement with the EU, aiming to ease trade barriers and enhance cooperation. The deal, which could lower tariffs on 98% of categories of Australian exports, presents opportunities for sectors like wine and agricultural products.