鈥淯njustified鈥 and 鈥渘ot the way that friends and allies should be treated鈥. That鈥檚 how Prime Minister Anthony Albanese and Foreign Minister Penny Wong have in United States President Trump鈥檚 trade war.
Effective today, there is a 25% tariff on of steel and aluminium into the US 鈥 including on Australian products.
Australia鈥檚 direct economic hit will be relatively small 鈥 less than A$1 billion of steel and aluminium was exported to the US in 2023, according to .
But the tariffs pose a more fundamental challenge to Australia鈥檚 trade strategy and how we manage key alliances in an era of resurgent protectionism.
No longer a hypothetical
Trump鈥檚 plan was announced in February, but Australia was hoping to negotiate , as in the previous Trump administration. They have not been successful.
This development shifts analysis from hypothetical to immediate. Steel and aluminium exports to the US represent just a tiny fraction 鈥 鈥 of Australia鈥檚 total exports, so experts expect the impact will not be widely felt.
Australia鈥檚 few ageing aluminium smelters pose no threat to the US鈥 aluminium producers, contrary to Peter Navarro.
Steel is slightly different. will experience the biggest direct hit. It exports around 300,000 tonnes of semi-processed steel annually to the US. It will now be subject to tariffs.
While BlueScope is Australia鈥檚 largest single exporter of steel to the US, it also has a plant in Ohio that employs 4,000 workers and will see some initial short-term benefits from the tariffs that will hike up the price of Canadian steel imports.
In the long term, however, tariffs are an 鈥渙wn goal鈥 in the trade game. Data from tariffs in the last Trump presidency have demonstrated their and negative effects on domestic industries that rely on these inputs.
Ripple effects
The next challenge for Australian steel and aluminium exporters, as well as their upstream and downstream counterparts, is how to navigate the uncertainty in global markets, as global supply chains adjust.
China may increase exports of cheaper steel and aluminium to Australia, putting further pressure on local producers, and potentially sparking further anti-dumping investigations.
The 12,000 Australian companies that export to the US will be asking 鈥渨hat will be the next target?鈥
More than 40% of Australia鈥檚 high-tech engines, 50% of aircraft and space parts and almost 60% of machine tools are . These industries are at significant risk.
It鈥檚 also a worry for services suppliers, who worth of professional and other services each year. Australia鈥檚 are financial services, gold, meat, transportation services and vaccines.
Many more exporters are watching anxiously in case these tariffs spark a global trade war and Australia is caught in the crossfire. The overnight between Canada and the US shows the dangers of escalation.
We鈥檙e not going tit-for-tat
The absence of Australian steel and aluminium from the US Trade Representative鈥檚 highlights the arbitrary nature of this decision. Australian steel and aluminium have never been viewed as a threat to the US until now. They are inconsistent with the agreed tariffs between the two countries.
The Australian government might consider whether to bring a dispute to the World Trade Organisation (WTO), but due to the (also at the hands of the US), the WTO is currently something of a toothless tiger.
Australia鈥檚 commitment to (mostly) free trade means the government will refrain from on the US. This rationale makes sense: even reasonable retaliatory measures would be unlikely to protect Australian interests and instead merely escalate tensions.
While it鈥檚 cold comfort to affected Australian businesses, experts agree that Trump鈥檚 tariffs will become an 鈥渙wn goal鈥 for the US, with prices certain to rise, causing additional pain for consumers and producers alike. Financial markets are already showing stress.
Damaging to the alliance
The failure to secure an exemption despite Australia鈥檚 strategic alliance with the US sends a concerning signal about how the US values its Australian relationship. Public support for the US alliance weakens in the face of apparent bullying and flouting of international rules.
What emerges is a trust deficit that extends beyond government relations to public sentiment. Many Australians may begin questioning whether the 鈥渟pecial relationship鈥 with the US delivers tangible benefits during times of economic tension.
Under the latest Trump administration, Australia has suffered a serious decline in trust that the US would act responsibly in the world, according to polls from the .
In 2024, the same poll showed that an astounding view political instability in the US as an 鈥渋mportant鈥 or 鈥渃ritical鈥 threat to Australia鈥檚 vital interests.
Rethinking relations
Trump鈥檚 tariffs test Australia鈥檚 ability to balance different facets of its relationship with the US 鈥 security, cultural and economic interests.
It also raises questions about how Australia can best navigate an increasingly unpredictable global trade environment where traditional alliances provide less economic loyalty than they once did.
These tariffs are more than just a tax on specific materials. They are a timely reminder to Australian businesses of the importance of market diversification. But it also shows that the current US administration has thrown out the rule book. For at least the next four years, it is nothing like business as usual.
, Professor of Law,
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