United States President Donald Trump's plan for big trade barriers could cause a "very big shock" for the world economy, the Reserve Bank head has warned.

Key points: RBA head warns against retaliation over US tariffs, says escalation could cause global economic shock

RBA head warns against retaliation over US tariffs, says escalation could cause global economic shock Adds that if tariffs remain confined to steel and aluminium, situation could be manageable

Adds that if tariffs remain confined to steel and aluminium, situation could be manageable Malcolm Turnbull says Australia is urging the US to make Australian products exempt

Mr Trump is planning to impose a 25 per cent tax on all imported steel, and a 10 per cent tariff on aluminium.

The Federal Government fears those extra costs would be applied to Australian products being exported to the US, despite a previous promise that Australia would be exempt.

Reserve Bank governor Philip Lowe this morning described the US plan as "highly regrettable" and "bad policy".

When he announced the tariffs, Mr Trump said trade wars were "good, and easy to win".

He repeated that sentiment today, saying "when we are behind on every single country trade wars aren't so bad".

"We've been mistreated as a country for many years and it is just not going to happen any longer," the President said.

"We're going to straighten it out and we will do it in a very loving way, it will be a loving way.

"They will like us better and they will respect us much more."

Sorry, this video has expired Donald Trump says tariffs will be applied "in a very loving way". (Photo: Reuters)

But Mr Lowe has made it clear he has concerns.

"History is very clear here, protectionism is costly. It's costly to the country that implements the protectionism and it's costly to everyone else," he said.

"It's just not the right thing do."

Situation 'manageable' if countries resist retaliation

Mr Lowe said the question of how damaging the tariffs could be remains open.

"If it's just confined to the current higher tariffs on steel and aluminium then it's manageable for the world economy, it's not a positive but it's manageable," he said.

"This could turn very badly though if it escalates.

"If we see retaliation and counter-retaliation, this could turn into a very big shock for the world economy."

There has been uncertainty about the implications for Australia because of the chaotic atmosphere inside the White House.

Mr Lowe urged other nations not to do anything that might provoke Mr Trump.

"So the best thing for everyone to do — perhaps the hardest thing to do, but the best thing to do — is just to sit still and do nothing," he said.

He encouraged nations not to respond and said they should instead keep advocating for open trade.

Mr Lowe acknowledged that some countries would want to retaliate against the new trade policy because the tariffs are seen as unjust.

"But the best thing to do is just sit still. If countries around the world can do that, I think this is a manageable, although regrettable, development," Mr Lowe said.

Prime Minister Malcolm Turnbull said Australia had made a strong case to the US that the higher tariffs should not be imposed on Australian steel and aluminium exports.

"There is nothing to be gained in the US at all from from imposing a tariff on Australian steel exports," Mr Turnbull said.

He said the impact would be to increase the cost of housing construction in California and the US west coast because Australian steel is used for roofing.

Julie Bishop to meet with Rex Tillerson over tariffs

Foreign Minister Julie Bishop is among the senior members of Cabinet urging the US not to impose new tariffs.

Ms Bishop is in the US and said she is hoping to have talks with Secretary of State Rex Tillerson on the issue while she is in New York.

She said the Australian economy would not have recorded 27 years of economic growth if it had put up tariff barriers.

"So we will be urging the US to not proceed down this path," the Foreign Minister said.

Ms Bishop said she has also been holding talks with US business representatives.