Australia has avoided an increase in tariffs, as the White House recently announced a new set of import taxes. Although former President Donald Trump had previously suggested a potential rise in the baseline 10% tariff affecting all countries, Australia was notably absent from the new list of nations subject to increased tariffs.
This development means that Australian exports, including wine, beef, lamb, and wheat, will continue to benefit from the existing 10% tariff established in April. Trade Minister Don Farrell described the situation as a validation of the Albanese government’s diplomatic approach with the United States. He emphasized the importance of taking advantage of this favourable condition to boost export volumes not just to the United States, but also to a range of other markets as Australia diversifies its trading relationships.
In contrast, other countries have seen substantial shifts in their tariff rates. New Zealand’s tariff increased dramatically from the baseline of 10% to 15%, while Japan‘s tariff was reduced from 24% to 15%. Canada faced significant tariff hikes, jumping from 25% to 35%, a decision attributed to their lack of cooperation in addressing the issue of illicit drug trafficking, particularly fentanyl. The White House report indicated that Canada has seen a surge in fentanyl production, which has escalated the urgency for increased tariffs.
Interestingly, despite ongoing challenges with drug trafficking originating primarily from Mexico, no new tariffs were imposed on Mexican goods. Instead, a 90-day postponement for tariffs on Mexico was announced following a productive conversation between President Trump and Mexican President Claudia Sheinbaum.
Though tariff policies often dominate discussions, the burden of tariffs ultimately falls on the purchasers. While Australian exporters remain unaffected cost-wise, it is American importers who will incur the tax. Consequently, this may lead to American buyers looking for alternatives, thereby impacting the demand for Australian goods. The indirect effects of these tariffs contribute to inflationary pressures in the US, even as inflation trends downwards in Australia.
Overall, the announcement represents a mixed landscape in global trade, with Australia managing to maintain its competitive edge while other nations face varying degrees of tariff adjustments.