Already, and this is the Daily This is the Daily OS. Oh, now it makes sense.
Good morning, and welcome to the Daily OS. It's Monday, the fourth of February.
I'm Billy, I'm emma.
It's been two weeks since US President Donald Trump became president, and there have of course been many headline making moves from the forty seventh president already. One that our audience has been asking us to explain is his policy on tariffs. Over the weekend, Trump signed an executive order to impose new tariffs on Mexico, Canada, and China. Trump claimed the tariffs, which will come into effect this week, will quote stop the flood of illegal aliens and drugs from pouring across
our borders. So what does that all mean? We are here today to answer all of your questions, Billy.
I think before we get to exactly what's happened, what these tariffs mean, and who they are going to impact, there are a few terms that we need to wrap our heads around some new language. The first is an executive order. Trump has been signing many of them in the last few weeks, hundreds in fact, But what exactly is an executive order? I love it.
Let's start with the glossary. Yeah, we're going to go through the terms before we explain exactly what this story is. I mean, you said that he has signed many executive orders. To be exact, he has signed more than three hundred as of the end of January and we are a few days into February.
Now, wow, so there are hundreds and correct me if I'm wrong, Billy, but that is more than most US presidents in recent history would have signed in their entire terms.
Yes, so that gives you an idea of just how much Trump is saying that he wants to do in his second term as president. In terms of what an executive order is, because we don't have it here in Australia, it is the president's main power. Now, what's interesting about it is that it doesn't require Congress's approval and therefore it's kind of considered like an instant law.
So Congress in the US being like their parliament, that's where we've got the two houses of parliament. But in the US that is separate to the executive branch, which is the White House administration the president exactly.
So the Senate and the House of Representatives are the two houses in the Congress, and like you said, m that is completely separate to the executive branch, which is what Donald Trump is the head of. So that's kind of a basic way of explaining the parliamentary system in the US. But again, what's important here is this executive order, which is basically just like an instant law. It doesn't need to go through the legislative process that most laws do need to go through.
Right, So is there any limit then to the power of an executive order?
So there are essentially two things that could stop an executive order from going through. One is Congress and the other is the courts. So even though these executive orders don't need to go through the Congress, which like we said is the Senate and the House of Representatives, Congress could still take action to block these orders. So one way they could do that, for example, is to deny
the necessary funding to stop an order from going ahead. However, Trump, as we know, is part of the Republican Party, and the Republican Party is in control of both the House of Representatives and the Senate. So because these are people in his own party who are in control of the Congress, they likely aren't going to stop his executive orders, And indeed, since he has been president, they haven't stopped any of his executive orders.
Yeap.
Now, like I said, there's another way that an executive order could be stopped, and that is through the courts. So that would be if one of the executive orders is deemed unconstitutional. Now, I've actually already seen an example of this happening and the court's intervening.
Billy, when you say the courts in the context of halting these executive orders, are we talking about the US Supreme Court.
So it can be the Supreme Court, but it usually won't start in the Supreme Court. It will usually start in a federal court. And then if the federal court makes a decision and then Trump appeals that it will then go to the Supreme Court. Okay, Yes, the Supreme Court is usually the court that is in charge of making sure that the laws in the US are in line with the Constitution. But it usually won't stop there. But they are the highest court in the land, so kind of the buck stops with them.
So there has already been some intervention at a court level to do with an executive order issued by Trump.
Yes, so Trump issued an executive order to stop some children from becoming citizens at birth in the US. So this is because under the US Constitution, children born to parents who migrated to the country are granted citizenship as their birthright. And Trump signed in executive order to stop some children from having that birthright citizenship, and that led to a number of states immediately taking legal action to stop the order from coming into effect, and a federal court judge.
So lower than the Supreme Court.
Yes, lower than the Supreme Court. So a federal court judge in the state of Washington approved the legal request to temporarily block Trump's executive order, and so that is a TBC. We're still waiting to see what the final outcome of that will be.
Okay, and so then that executive order, which has been temporarily blocked, that could end up going to the Supreme Court for final decision on Okay, I've got it. Thank you so much for explaining, Billy, just feed on the glossary for that one. My next question for Philly's definition's glossary for today might be a bit of an obvious one, but I think a lot of people are wondering, so I'll ask the silly questions, what is a tariff actually though.
There are absolutely no silly questions, as you know at the daily OS. And this takes me right back to year ten geography. I remember very specifically learning about tariffs in geography. To put it very simply, it is a tax on imports. So when goods are brought into another country from overseas, they are typically subject to fees or duties that are known as tariffs, and that means that
the taxes imposed on those goods make it more expensive. Now, the taxes are usually absorbed by the consumer, so usually it means that we as consumers will be paying more for overseas goods. It doesn't necessarily have to be absorbed by the consumer, it's up to every individual business, but
typically it usually is. So this would mean that if Trump is imposing tariffs overseas, it would mean the foreign made goods bought by US citizens is more expensive than if they are buying a good that is made in the US. Okay, but I think I've jumped the gun,
so we'll get into more of them. The general purpose is to encourage citizens to buy local products instead of products from overseas, because rather than absorb the cost of these import fees on foreign goods, consumers may be more encouraged to purchase domestic goods, which will be cheaper.
Okay, So tariffs could question for example, then be used by governments maybe to boost local manufacturing. Exactly. If you put these tariffs on importing foreign made goods, they could become more expensive for customers. So customers might say, hey, actually would rather buy something that was made here in this country that I'm in because it's cheaper, exactly.
And that is the primary purpose of tariffs.
But there is another purpose of tariffs that we are going to get to a bit later that has a little bit more to do with diplomacy or political tensions. So what has been announced in terms of tariffs and this Trump administration that we are now talking about today.
So over the weekend on Saturday, President Trump signed an executive order to impose new tariffs on three countries. They are Mexico, Canada, and China. Now, Trump said he will impose a ten percent tariff on China and then a twenty five percent tariff on Mexico and Canada. And those, for contexts, are the US's three largest trading partners. So that's pretty huge. It's a massive announcement.
Yeah, and a twenty five percent increase on these taxes applied to goods coming into the US from Canada and Mexico. I think it's also interesting to point out that just geographically, you know, to go back to year ten giography with Billy, that they are on the map. You know, countries that you can drive to from the US. We've got North and Central America. They share borders.
They share borders with the US, so they are neighbors.
Which traditionally can mean that the tariffs are lower, that there are less barriers to importing.
But not anymore. No one wants to get into a fight with their neighbors, but apparently Donald Trump does with Canada and Mexico.
So to be really clear, then all of the goods coming from Mexico and Canada into the US will now be subject to those tariffs, and the same for goods from China.
Yes, pretty much all goods. There is one exception on energy products coming from Canada. They will be subject to a lower tariff of ten percent, But for all other goods coming from Canada, Mexico and China there will be this increased tariff. To give you an example of how this will impact people, in the US and also people in those three countries. I'm just going to use this one very small example, but most of the avocados in the US are imported from Mexico, so something like avocados
will now become much more expensive in the US. We said before that the primary goal of these tariffs is to encourage more local production, but the US can't actually doesn't have enough farms to produce all of the avocados that citizens consume there. So it's not as simple as saying that we should just make everything in the US, because of course there are limitations and how much you can do that.
You said that that was a small example, Billy, but I think for anyone who cares about avocados, yes, that would be a significant one. Yeah.
And another thing is the price of cars will likely go up because Mexico is all so the largest autoparts exporder in the US.
And also the manufacturing of automobiles in the US is an industry that died a long time ago. So like the avocado farms, I suppose that infrastructure isn't automatically in place to replace it. So what has Trump said in terms of why he's introduced these tariffs has he sort of addressed these concerns.
At a very top line level. Trump says it's because of two reasons. The first one is he says that these countries are allowing too many undocumented immigrants into the US. And the second is because he claims that they are also allowing too many illegal drugs to enter the US.
Which speaks to the shared borders that we spoke about earlier.
Exactly so with the undocumented immigrants, he said that it is not confined to just Mexico. These undocumented immigrants come into the US, but it's also he says, happening in Canada, and that there are a rising number of Chinese nationals two and he says, quote people on the terror watch list who are coming into the US from those countries.
And then on the illegal drug side, he says that the Mexican government is in an alliance with Mexican drug trafficking organizations, and he says Canada too has allowed quote a growing presence of Mexican cartels operating fentanyl labs that has increased the number of drugs going into the US.
Now fentanyl, we're talking about synthetic opioids, the sort of painkiller crisis that has become a huge problem across North America. If people haven't heard that term fentanyl. What about China? Obviously China is an outlier here geographically.
Yeah, exactly what he says about China is that Chinese officials quote, have failed to take the actions necessary to stem the flow of pre chemicals to known criminal cartels and shut down money laundering by transnational criminal organizations. Now, it's interesting about all of this. Again, before I said that the primary use of tariffs is to promote domestic production, but here, obviously none of the reasonings that he is
giving is because of that. He is basically using it as a bargaining chip to make these three countries do things that aligned with his policies, and he's saying that if you don't do this, then these severe penalties will be placed on imports coming from your country. And he has said that these tariffs will be in place until the crisis is alleviated. So he's not saying that these are forever. We don't know how long they will be.
But again, he's using it as a bargaining chip to say, until you do what I want you to do, these tariffs will remain in place.
So it's an example of how tariffs can be used for more political interests or for these kind of political conversations. I think in Australia, a recent example of that is during COVID, the diplomatic relationship between Australia and China became a little bit more tense concerns over China's handling of COVID, and the Australian government was essentially punished by the Chinese government for some of the comments it had made in the form of high tariffs from Australian goods being imported
over to China. Things have since eased, so I suppose that is a bit of an example closer to home about how these kind of tensions can ignite and eventually be resolved. But very different circumstances in the US and big claims from US President Donald Trump about the illegal immigrants, the drug trafficking, the drug cartels and money laundering, etc. What has been the response from the governments of these countries.
To put it very simply, they're not happy. I'll go to Canada first because they have made the most concrete or most specific announcement about how they will retaliate. So they have announced that starting from today Tuesday, they are imposing tarifs on thirty billion dollars worth of goods imported from the US, on things like orange juice, peanut butter, wine, coffee, footwear, cosmetics,
and other similar things. So they're not saying everything. They're not saying all goods, but they have released a list of goods that it will impact.
And some pretty sort of staple essential items that they're saying to US importers, hey, this is going to cost you more to bring it into our country now.
Yeah. They said explicitly in their announcement that this will make these products less desirable for Canadian consumers to purchase, and they said that this should send a message to US businesses and the US government on the need to reverse the imposition of tariffs for the benefit of both Canadians and Americans. Now, Mexico has also responded. Their government has said that they don't want confrontation and that they would have rather deal with this through negotiation and discussion.
But they say now they've been left with no other choice and that they will introduce tariffs. We don't know the exact rate of the tariffs that they are saying they will introduce or what goods will be impacted, at least at the time of recording, but they have said that tariffs will be introduced. In terms of China, they've taken a little bit of a different approach. Their Commerce ministry has promised a legal case at the World Trade Organization WOW, and also they've said that there will be
corresponding countermeasures. So we don't know too many further details, but it looks like they're going down the legal route, and Canada and Mexico are going down the retalitory route.
Okay, So we're seeing kind of in real time this response play out. Trump had touted these tariffs for a long time, particularly heavy time Paris for China. He'd spoken about them a lot during the run up to the election last year. But I suppose the conversation has now turned in the other direction that as much as it will become more expensive for other countries to import US goods, it will also become more expensive for US manufacturers to
take their goods to sell to other countries. So given that kind of knock on effect, do we know if this could impact Australia.
So Trump hasn't explicitly said that there will be any new tariffs announced for Australia, so that could be seen as a promising sign for US here in Australia, but all the experts, of course say that we never know what's going to happen, what Donald Trump is thinking.
Foreign Minister Penny Wong was actually in Washington, DC just last week and released a statement sort of describing the strength of Australia's relationship with the US, and in part of how strong our relationship is, she specifically called out the trade relationship between the two countries. So you could argue maybe there that the Foreign Minister was trying to kind of soften or speak up the relationship between the alliance between Australia and the US to avoid being caught up in this.
Yeah, the Australian government, in everything I've seen, every time they've spoken about US and Australia's relationship after Donald Trump was elected, they've really been at pains to emphasize the relationship between the US and Australia has never been stronger, etc.
Etc.
And trade is also strong and that we won't be impacted. I guess time will tell, but in the more immediate future, I would say the most tangible impact it has had already is on the share market. So the Australian Stock Exchange went down yesterday and also the Aussie dollar dropped to sixty one US since yesterday. And I might throw to you because you actually recently did a deep dive into why the Aussie dollar is dropping.
Yeah, what did you find? So we started looking into this because the Aussie dollar had dropped significantly and at the surface level it's sort of, you know, bad news for Australians who are planning to travel to America for a holiday. Maybe. But we spoke to some experts and we figured out this link between sort of tariffs they're changing dollar fluctuating currencies and the Chinese economy, which actually
has a lot to do with it. And of course we're talking about China having tariffs imposed on it by the US. The Chinese economy has been struggling more broadly, so aside from concerns about tariffs, and this is down to many factors. But there's been falling house prices, high youth unemployment, so China's currency actually dropped to a sixteen month low this year earlier in January, and demand for Australian exports to China has declined as a result. So
one of Australia's highest earning exports is iron ore. It's worth over one hundred billion dollars a year. But the Chinese economy is not doing well, so the demand for iron ore, or how much iron ore it can afford from Australia has dropped. And experts say the Australian dollar is really viewed by investors as an indicator of how well China is doing, because generally we know that if the Chinese economy is strong, the Australian economy is also
probably doing pretty well. Now, how this kind of circles back around into Trump's tariffs is that they present an added level of uncertainty for the Chinese economy, which is already hurting, and you know, by the metric of what we've just talked about, Australia as a result could hurt economically even more. And this all comes at a time when America's economy in comparison, is relatively stable, so no
one knows what's happening next. But Australia really could get caught up in economic uncertainty if things become more unstable for China because of these US China trade tensions.
I am no expert on the sheaf market, but I feel like the one thing I do know is that uncertainty or extreme uncertainty is never a good thing for the share market. Soone knows what's going to happen next. That's when there does seem to be these sudden downturns or downturns over time. But I don't know. Like I said, I'm not an expert on specifically share market.
Well, I think you're more of an expert than you think, Billy. And certainly the volatility of these kind of international diplomatic relationships when we have global leaders taking big swings in terms of tariffs, that has to lead to that uncertainty, but we will keep a close eye on it as always.
Thank you so much for listening and thanks for joining us em.
Thank you so much, Billy.
That was a great explainer, thanks to your ten geography lessons very much did me. Well, just quickly before you go today, if you want to help TDA grow, it would mean the world to us. If you support our podcast by hitting follow or subscribe wherever you listen or if you're watching over on YouTube.
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My name is Lily Maddon and I'm a proud Arunda Bungelung Caalcutin woman from Gadighl country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and Torres Strait Island and nations. We pay our respects to the first peoples of these countries, both past and present.