With new headlines coming out of the United States on a daily basis, it’s hard to keep track of what will actually have an impact on our lives. I believe we should be paying attention to the current trade war.
Following 2 April 2025, so-called ‘Liberation Day’, the 47th President of the United States declared a national emergency, caused by the national trade deficit. He then announced global tariffs on goods from nearly 70 countries.
This has predictably set off panic around the world. It’s a messy process. There are some country-by-country negotiations, as well as negotiations with the European Union. Other countries have simply had the tariffs slapped on them. Tariffs are also being wielded as a weapon. Canada is being punished for proposing to recognise Palestine. Brazil is being hit with the largest tariffs, of 50%, because Trump is unhappy that his buddy, Bolsonaro is under house arrest.
Again, the lucky country
But Australia seems to be a lucky country, and I think we could be in a better situation than many countries. We’re in a select group of countries with a rate of 10% that came into effect on 7 August, along with the United Kingdom, Singapore, Columbia and Chile.
There are a few reasons why we seem to have come out pretty good in this process. Our trade deficit with the United States is less than 1%, compared to, say, Mexico at 15.5% and China at 13.4%.
Where’s the beef?
The other issue is beef. Trump specifically called out Australia on Liberation Day for restricting US beef imports because of biosecurity reasons. New arrangements came into place on 28 July, which eased US imports of fresh beef products, after Labor announced, as reported in the Guardian, that ‘the agriculture department would allow imports into Australia of meat processed in the US but grown in Mexico and Canada.’ I see this issue isn’t based on much logic, as Trump seems to like a show as much as anything. He may be able to say that he got Australia to concede to his demands on beef imports, but whether Australian consumers want to buy US beef is another question.
Aluminium, steel and copper: still hit hard
It’s important to note that Australian steel and aluminium manufacturers will still pay tariffs of 50%, along with the rest of the world (as of 4 June 2025). Sectoral tariffs remain on many goods across the board from all countries, as reported in the Financial Review, with 50% steel and aluminium tariffs and the same on copper, excluding refined copper. In fact, this is a hike from the 25% tariff imposed on 12 March 2025.
Australia benefits?
Could Australia benefit from this situation? Susan Stone, writing in the AFR, says yes:
“The fact that Australia remains at the lowest tariff rate imposed by the US could be a competitive advantage for our exporters.
Brazil, a big competitor in the beef market, has been slapped with 50 per cent tariffs. Switzerland and the EU, major exporters of pharmaceutical goods, have 39 per cent and 15 per cent tariffs, respectively.
Wine remains questionable as big competitors such as Chile also remain at 10 per cent. But overall, vis a vis other trading partners, Australia may have a cost advantage. And the continuing weak Australian dollar will only help.”
What’s next?
Aside from upending the previously accepted rules of global trading, it’s hard to tell. Trump hopes that the tariffs will bring substantial revenue to American coffers, and that the increased costs of goods to consumers will be offset by cutting costs of regulation and lowering taxes. But is that going to work? How? And when?
Stone sees the cost cuts and lower taxes as ‘unlikely to usher in a golden age of increased investment and job growth’. Andrew Duehren, writing in the New York Times, points out that the effects of the tariffs – higher prices on everyday goods – will be borne by lower-income Americans, and analysts worry that the US will become addicted to the income from the tariffs.
And for Australia?
While it’s interesting how the tariffs will affect the American economy and support for Trump, it’s hard to see what direct impact they’ll have on Australia.
For Australia, other than the competitive advantage for Australian exporters, the government will have to get used to a ‘new realm of trade policy’, though Stone advises that it should recognise the ‘benefits of trade’ and ‘continue to engage with like-minded countries, those that respect the rules of the global trading system, and support such a system’.
What’s more, even before the tariff threats were concrete and continuing during the first murmurings of them, a wide range of pundits, from Senator Don Farrell, the Minister for Trade and Tourism, to David Sedgwick Lobel-Mandrake, Deputy Secretary General for Australia and Oceanic Region of the International Society of Diplomats, have been strongly calling for Australia to diversify trade partners as much as possible, not only beyond the United States but beyond China as well.
As Trumps seeks to be the most powerful and loudest of trade partners, I believe that Australia should actively court other countries for more trade, looking into not only tariffs (or a lack of them) but any other policy levers that can make trade easier with countries beyond the United States and China. Let’s not put all of our eggs in one basket.
