Bad news for Australian commodities today as it emerges that Trump’s White House will not be exempting our exports from a swathe of tariffs targeting friendly countries including Canada and Mexico.
Earlier this week, the US announced a doubling of tariffs on Canadian steel and aluminium to 50%.
The 25% duty on aluminium and steel is headed our way this afternoon – it’s due to take effect at 3pm AEDT today – despite last-ditch diplomatic efforts by the Australian government.
The US president had previously toyed with the idea of granting an exemption from the tariffs, but White House spokeswoman Karoline Leavitt said he had ultimately decided against it.
It’s a devastating kick in the guts for the Australian government, which has lobbied intensely to stave off the tariffs in recent weeks.
Prime Minister Anthony Albanese called the move "entirely unjustified," saying it contradicted the long-standing economic and strategic partnership between the two nations.
What are the implications?
Australia exported around US$500 million worth of steel and aluminium to the US in the last financial year, a relatively small share of the country’s total exports.
Steel and aluminium sales to the US account for less than 0.2% of Australia’s total export value, and they are not among the top ten Australian exports to the US.
But while the direct impact on the Australian economy is expected to be minimal, concerns are growing over the broader implications of the Trump administration’s escalating protectionist policies.
The decision also calls into question the new regime’s commitment to long-standing strategic economic and geopolitical alliances, in a month where we have seen Trump effectively switch sides on the war in Ukraine and once again dog-whistle the abandonment of the successful post-WWII NATO alliance.
Ongoing diplomatic efforts
Perhaps in vain, the Albanese government has pledged to continue diplomatic discussions with the Trump administration in hopes of reversing the ruling.
The failure to carve out an exemption follows weeks of high-level engagements that have fallen on deaf ears and cold hearts, including efforts by Australian ambassador Kevin Rudd and Treasurer Jim Chalmers in Washington. There have also been direct negotiations between the two governments.
Hopes had been buoyed last month when President Trump suggested Australia would receive "great consideration" following a phone call with Prime Minister Albanese.
But key Trump trade advisor Peter Navarro later dismissed the possibility, accusing Australia of "killing" the American aluminium industry and alleging that countries previously exempted from tariffs during Trump’s first term had "abused" those privileges.
Political fallout
As expected, the opposition in Australia has made hay of the Albanese failure, with deputy opposition leader Susan Ley criticising Albanese for not personally travelling to Washington to build a rapport with the mercurial leader – though its debatable whether this would have made any difference to Trump.
The broader market reaction to Trump’s tariff measures has been sharp, with stock markets tumbling alongside fears that this is not the nadir of the trade tensions.
Investors remain concerned that the latest round of tariffs could trigger a more aggressive phase of Trump’s trade agenda.
No retaliatory tariffs
Despite all this, and in contrast to fiery rebukes from European allies over the earlier Ukraine affronts, the Australian government has ruled out imposing retaliatory tariffs on US imports.
The government seems terrified of provoking Trump further, to the detriment of Australian consumers and inflation figures.
What’s more, experts and public figures including Treasury Secretary Steven Kennedy say Australians would "bear nearly all the cost" of retaliatory tariffs.