Trump’s new tariff call may narrow Aussie export edge
The competitive advantage enjoyed by some Australian exporters under the Trump administration’s trade regime could be narrowed if a marked increase in the US tariff rate to 15 per cent is carried out.
President Donald Trump was quick to respond with a Plan B after the U.S. Supreme Court found much of the White House’s existing tariff infrastructure illegal.
The president has promised to use separate powers to impose a 10 percent tariff globally starting Feb. 24, and has since signaled on social media that the rate would rise to 15 percent.
EY partner Luke Branson said the US government has yet to officially update its announcement on the new rate and more legal challenges are ahead.
But if such an increase in global rates continued, he said, the competitive advantage enjoyed by some Australian sectors exporting to the US would be eroded.
Under the agenda, which was declared illegal by the US’s highest court, many rival markets face rates much higher than the 10 per cent paid on Australian exports.
“The 15 per cent global duty rate will level the playing field for Australian exporters,” the firm’s Oceania global trade leader told AAP.
“The increase in the rate would bring the so-called ‘core’ tariff into line with a range of trade agreements between the US administration and major trading partners.”
The United States is a modest buyer of Australian goods, accounting for about five percent of total annual exports.
Beef and gold are among Australia’s biggest export markets to the US and early indications suggest these items will be exempt.
Independent economist Saul Eslake expected recent trade developments to have a modest direct impact on Australia, given the size of the market for domestic producers.
He stated that the worst economic scenarios will not come true in 2025.
“The effects of Trump’s tariffs on Australia have been quite limited to date,” Mr Eslake told AAP.
He predicted there would be more uncertainty as countries try to unravel and respond to the latest announcements, which he said could put pressure on economic activity.
The indirect impact of tariffs on Australia’s larger export markets such as China remains a concern; The weakening of these countries’ exports to the United States potentially negatively affects their imports from Australia.
Jared Mondschein, research director at the Center for United States Studies, said the legal tool pursued by the Trump administration, Section 122 of the 1974 Trade Act, has not been used for tariffs before.
“This basically allows President Trump to buy some time as they use more traditional methods of imposing tariffs,” he told AAP.
Mr. Mondschein said the trade agenda would slow as the United States pursued more traditional methods on tighter legal grounds.
“So we won’t have any crazy twists and turns.”
Mr Mondschein said recent developments were unlikely to make the situation much simpler for Australia, noting that the middle power was still engaged in results-oriented negotiations with the US on pharmaceuticals.
