Analysts suggest that perhaps there will still be a deal with Trump.
News Analysis
Analysts are asking Australia to win, not to panic immediately on the Trump administration’s decision not to exempt 25% tariffs on imported steel and aluminum.
When the news slowed, ASX lost 1.5% of its value, and the Labour Cabinet Minister mobilized to condemn tariffs.
Tariffs have been hit directly by Australia’s $1 billion worth of US metal exports, but some economists believe the pain could be short-lived.
“Because (the Trump administration) tariffs look like mercury, they could still get a grace period, as they are based not only on trade but also on strategic or tactical benefits that can be obtained in exchange for the threat of imposing tariffs.”
“A lot of Trump’s actions are performance. It’s about evoking a response. When he gets the right response, I think things will be quiet and the relationship will be normal,” he told The Epoch Times.
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UNSW professor Gigi Foster, who is also an American citizen, evoked this sentiment and pointed out that negotiations were never over in Trump’s world.
“The deal will never end completely,” she told the Epoch Times, suggesting that Australia may still secure exemptions and concessions.
Despite the substantial dollar value attached to the affected exports ($378 million (USD 237 million) for iron and steel products and $503 million for aluminum), the broader economic impact may be limited.
These figures account for just 1% of US steel imports and 2% of aluminum, while Australia accounts for just 0.2% of the overall value of Australian exports in 2024.
“The US only buys about 11% of its exports (compare it with over 30% going to China). The majority of these US symbolized exports are actually services. About 10% of US exports are made up of steel and aluminum that are hit by US tariffs,” Foster said.
The molten steel is made on February 9, 2024 at BOS, Slabcaster and Steel Processing Factory at Bluescope Steel Works, Port Kembra, Wollongong, New South Wales, Australia. AAP Image/Dean Lewins
Whether or not to retaliate?
Countries like Canada are retaliating, but Australia can try to navigate that response more carefully.
“I don’t know what the Albanese government was offering, but like Ukraine, there’s quite a lot of rare earth sediments. There’s probably a trade there to do there,” Young added.
He also noted that increased defence spending could be a factor.
“It’s true that the next federal budget needs to realistically raise defense spending to 3% in the near future, not beyond future estimates.”
Young also warned against retaliation.
“We are an economy exposed to small trade that involves only 25% of GDP, whereas 46% of GDP is exports and imports, while the US is the world’s largest economy and has far less trade exposure.”
The Australian and US flags will adorn the Eisenhower Executive Office Building in the White House in Washington on October 21, 2023. Daniel Slim/AFP via Getty Images
Other export concerns may be affected
Independent economist Saul Eslake was concerned about other exports, such as meat and medicine.
Under Trump’s “mutual tariffs” doctrine, some interpretations suggest that Australian Goods and Services Tax (GST) could be viewed as a trade barrier despite its equal application to domestic and imported goods.
Eslake suggested that Australia should be pushed back.
“Someone should ask in a language like Trump understands. How much rent does the US pay for bases and other facilities maintained in Australian soil? Perhaps they should pay more and more.”
Cold War and Hot War
Young believes tariffs are driven by two battles.
“The Cold War with China is intended to prevail after the hot World War II, a hot war between Republicans and Democrats,” he pointed out.
He argues that the key goal he argues is to re-land manufacturing in the US to offset China’s control.
“Allies won World War II because America was the world’s manufacturing hub. Its mantle moved to China. Without manufacturing, the US would not be able to win the Cold War.”
He said the world is ready for a foothold of war and is the nations needed to “equip” it.
“The US is fighting over the Indo-Pacific. We are an important part of the alliance, but we managed to do it in the more recent conflict since Vietnam, so we need to do much more than send a small detachment of the military.”
Meanwhile, domestic tariffs are one way of helping countries repay debts and can create jobs.
“He’s more concerned about Pittsburgh steel workers than Wamara (South Australia) because he’s denying a domestic victory to the Democrats,” Young added.
Australian diplomacy test
Political, refusal to exempt pressured the Albanese labor government. Albanese’s labor government had been lobbying with several ministers flying to Washington, D.C. for weeks.
Hope for an exemption was first raised when Trump assured Prime Minister Anthony Albanese that he would give “big consideration” to the fact that the US had surplus with the United States.
In the latest event, federal opposition parties have already seized the announcement.
In a speech after the announcement, Dutton said his party would be better placed to sign a contract with the Trump administration.
“I believe that if there is a change in government, we will do business with the Trump administration, and there is no doubt about that,” he said.
“There is a lot of work in financial services as well as in the field of defense and materials. We have a trade surplus for reasons, because we are a desirable destination for US investment.”
Young believes he thinks Kevin Rudd is a reminder of him as an ambassador to the US.
“Not only has he shamed Trump in the past (not a wise strategy so that Volodymyr Zelenskyy can tell him), but his two terms of Shambolic’s as Labor Prime Minister suggest that he is not the right person to negotiate with the Americans.”
Can Australia turn the tariff table?
It has a potential silver lining.
If Trump’s mutual tariff system imposes more severe penalties on other countries than Australia, local exporters could be competitive in the US market.
Similarly, if other countries retaliate against US imports with their own tariffs, demand for Australian goods could increase as an alternative.
Foster noted that if US companies stop buying Australia’s steel and aluminum due to higher prices, other countries such as China and infrastructure-hungry economies could step in as alternative buyers.
