The United States has implemented a 25% tariff on steel and aluminium imports, affecting all countries, including Australia. Despite Australia’s attempts to secure an exemption, the White House has decided to proceed with the tariffs as initially outlined.
This policy shift poses questions about its impact on the Australian economy. While the tariffs are expected to deter US businesses and consumers from purchasing Australian steel and aluminium, the overall effect on Australia’s economy may be limited. Exports of these metals to the US represent less than 0.2% of Australia’s total trade output, and only about 10% of the country’s steel and aluminium is sent to the US. As such, a significant portion of the industry may remain unaffected.
However, this scenario could create challenges for specific sectors in Australia. Workers in steel and aluminium manufacturing may face job insecurity, particularly in areas like Illawarra and Portland. Additionally, the tariffs might lead to an influx of cheaper foreign products into the Australian market, potentially jeopardising local producers while inflating market prices.
US President Trump has framed these tariffs as a means of boosting domestic manufacturing and generating revenue. The initial implementation included tariffs on goods from Canada, Mexico, and China alongside the steel and aluminium tariffs aimed at most trading partners. Trump’s intention is to level the trade playing field, although no exemptions were granted to any countries, including Australia.
Interestingly, the tariffs might also prompt a shift in Australia’s trade dynamics, possibly encouraging increased trade with neighbouring countries in the Indo-Pacific region. Australia has established agreements with several of these partners, which could mitigate some economic drawbacks resulting from the tariffs.
On the diplomatic front, while many nations, including Canada and China, propose retaliatory tariffs, Prime Minister Anthony Albanese has stated that Australia will refrain from imposing similar measures on the US, citing concerns about rising consumer prices and inflation. Instead, Australia aims to negotiate for an exemption while also bolstering support for local industries to navigate the fallout from the tariffs.
Experts have noted that while the tariff impact is unlikely to be substantial in the larger context of Australia’s economy, there remains significant anxiety about the potential for increased foreign competition in the domestic market. The government plans to enhance its “Buy Australian” campaign in the upcoming budget as a strategy to support local producers amidst these changing trade dynamics.
In summary, while the tariffs present immediate challenges, they may simultaneously create opportunities for Australia to strengthen trade relationships with other nations and reinforce support for its manufacturing sector.