In this interview, Adam Creighton appeared on Steve Price, Sky News Australia to discuss the IPA’s research on Australia’s taxation system.
All media appearances posted onto the IPA website are directly related to the promotion and dissemination of IPA research.
Below is a transcript of the interview.
Steve Price:
Well, Donald Trump’s been obsessed with tariffs forever. Joining me now, Chief Economist and Senior Fellow at the IPA, Adam Creighton. Adam, great to see you. What’s your read on the global ramifications of this tariff war? Is it too early to tell?
Adam Creighton:
Look, I think it probably is too early to tell. Of course, tariffs are not great. They’re another form of taxation, and the US has dramatically increased the level of taxation on imports. That’s not terrific. But the stock market declines that you alluded to earlier, are not that great, really. I mean, I think the Australian market fell by 1.5% today, which is not huge. The US market, 3, 4% or something like that.
So I think there is some exaggeration in the political and media class about the damage of these tariffs. And you have to look at the US fiscal situation. I mean, this is a country that’s spending $7 trillion a year, the government at least, and only raising $5 trillion in taxes. So these tariffs will raise about 600, $700 billion a year for the US Treasury. That goes some way to closing that gap. And like I say, they’re not ideal, but if the US government’s not going to cut spending, they have to raise tax revenue in some way, and this is the only way the US President can do it.
Congress is not going to pass an income tax increase. They’re not going to pass a consumption tax. This is a quasi-consumption tax, if you like, for the American people. And just as I said in my column today, I mean this is a tax on the American people. It’s really none of our business. The world is furious and hysterical about these tariffs, but this is a tax on Americans, not on us. No Australian is going to pay a cent of tax to the US Treasury as a result of these. And the mere fact that they’re on all countries, and indeed Australia did the best out of it. I mean, we have a 10% tariff, I believe, on our exports to the US. That’s the equal lowest of any country in the world.
So as I said today, I think we should be sending a thank you note to the US, not all this nonsense about not the act of a friend and so forth. And by the way, this not friend is completely undermining our security.
Steve Price:
You spent a lot of time with The Australian in Washington. What do you think the reaction in America will be? As you said, we talk about beef, and I mean, I found out more about beef this week than I ever knew I’d find out in my life. We apparently produce lean beef which goes to the US, $3 billion worth every year, and it gets minced up into burgers that go into burger chains over there. Well, Americans are not going to be particularly happy about having to pay more for a hamburger, are they?
Adam Creighton:
No. This is a big gamble for Donald Trump. I agree. I mean, most economists, understandably and I think quite rightly, say that this will lead to inflation in the United States. I mean, there’s going to be price increases in the US. That’s a certainty. And how he explains that away, I think is going to be a huge challenge for Donald Trump. He’s the champion of the working class in the United States, but he’s going to put up their prices. No question.
I mean, what is interesting is he talks all the time about lowering income tax. And he sees this, and it may not happen, but he sees this as a swap from income tax to tariffs. And I think, personally, that there’s some merit to that. But he can’t cut income taxes without the agreement of the Congress, and I don’t think he’s going to get that. So what I think you’re getting here is just a flat out tax increase. And no one wants a tax increase. I think tax increases are bad, but as I just said earlier, if the US government is not willing to cut spending by a huge amount, then it has no choice but to lift taxes in some way. And this is the only way the US President can lift them.
Steve Price:
Adam, I mean, Donald Trump described it today as you have an operation, it takes you some time in recovery. I was thinking about this yesterday watching him do this, and I was thinking it’s almost like you’ve got an older house and you decide to do a massive renovation, and you have to live through the renovation, but at the end of it, you’ve got a better house. I mean, what he’s going to do, and if what he tells us is right, is that manufacturing is going to explode in the United States; a huge amount of money is going to be spent by all of these companies that have been making stuff offshore, and he’s convincing them to come and make it onshore.
Adam Creighton:
Well, maybe they will bring production back to the US. I mean, I’m somewhat sceptical about that. I mean, the reality is US wages, which are such a huge component, of course, of manufacturing costs; that’s why these companies moved offshore in the first place. They are still so much higher than third world and second world countries that I don’t think these tariffs will make enough difference to bring them back. And not only that, but the differential of cost between the US and other countries is so great. So I’m sceptical. And also, of course, they may not be permanent.
I mean, if you’re a large American company and you’re assessing the future here, you’re going to be thinking, “Are these tariffs permanent or are they not?” And it may well be the case that the next administration in the US reverses them. If you have that belief, you would just grin and bear it and wait. Right? So I think there’s a lot of uncertainty right now with these tariffs. But like I said, you’ve got to see them as a revenue raising mechanism.
Steve Price:
Adam, great to catch up with you. Thank you very much. That’s Adam Creighton there.
This transcript of Adam Creighton appearing on Steve Price – Sky News Australia from 4 April 2025 has been edited for clarity.
