News that the US president, Donald Trump, was going to put a 25% tariff on all metal and aluminium imports in to the US got here because it usually does with such issues – out of the blue, with no reasoning, and little to no understanding of whether or not Trump even is aware of what he’s doing.
Talking to reporters on Air Drive One on the best way to the Tremendous Bowl, Trump talked about “reciprocal” tariffs. As an apart he mentioned that “we’ll even be asserting metal tariffs on Monday” and when requested who they might have an effect on he mentioned “everybody”. When additional requested about aluminium he replied “aluminium too” (as a result of hey why trouble to say that upfront?).
The headlines went loopy and we noticed studies right here of how $15bn was “wiped from the Australian share market” within the first hour of buying and selling. That seems like lots till you realise it meant solely a couple of 0.5% fall and most of it was recovered quickly after.
At this level I wish to pour out an extended one to the USAFTA – that superb free commerce settlement the Howard authorities signed with the USA, which on the time John Howard mentioned was “an historic settlement” and that “it can add monumental long-term advantages to the Australian financial system”.
“Lengthy-term” was lower than 20 years.
The Australian authorities would possibly ponder such issues when it rushes to speak up Aukus which the defence minister, Richard Marles, suggests “supplies vital, long-term strategic advantages for all three international locations”.
If a free-trade settlement is ready to be ignored as a mere scrap of paper, how rock stable are agreements to ship submarines at some imprecise level sooner or later and solely when the US has determined it doesn’t have any want for them?
The federal government may additionally ponder that given in 2023 we exported a contact over $800m in metal and aluminium to the US and final week the defence minister graciously delivered that quantity to the US as a part of our instalment fee for the $360bn Aukus settlement (solely 450 funds to go!).
So perhaps the USAFTA wasn’t a “long-term” factor, however what about the advantages? Nicely Howard instructed journalists on the time that he thought the FTA would scale back our commerce deficit with the US. In actuality it elevated:
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Going right into a commerce warfare with Australia is a fairly dumb factor for the US to do, given it’s already “profitable” the warfare. In 2024 we exported about $23.8bn value of products to the US and imported $50.6bn.
Most of what we export will not be metal or aluminium both.
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We ship as a lot wine, beer and spirits to the US as we do metal.
The US is the fifth largest vacation spot of Australia exports, however that quite overstates its significance. In 2023 all of Australia’s exports to the US was equal to lower than 20% of the worth of simply our iron ore exports to China.
The US hasn’t accounted for greater than 5% of all of Australia exports for practically a decade:
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That doesn’t imply it isn’t vital – particularly for metal exports. As the primary graph exhibits, round a 3rd of our metal exports go to the US. However right here’s the place Trump’s precise coverage (and that could be a beneficiant use of the time period) begins to turn out to be much less of a difficulty.
Tariffs are paid by the importers. So Australian exporters don’t pay something additional, the US producers needing our metal and aluminium will.
If Australia was the one nation Trump was concentrating on, then these producers would begin wanting elsewhere to purchase their metal and aluminium. They will’t do this now as a result of the tariff will apply to imports from each nation.
Some US producers would possibly as a substitute attempt to purchase metal from US makers, however the US truly imports about twice as a lot metal because it exports – it wants imported metal.
The US could be the largest importer of metal on the planet, however it’s hardly dominant. China imports nearly as a lot, Germany will not be far behind, and Italy and France mixed import extra. All up solely 7% of world metal imports go to the US:
If the graph doesn’t seem click on right here
Sure, the US is vital for metal exporters around the globe, however it isn’t so giant it could dictate the foundations. Trump is appearing like it’s 1950 and the US can inform everybody what to do.
This after all is a film we’ve all seen earlier than. Trump put the identical tariffs on again in 2018 and Australia on the time was in a position to get an exemption.
As all of us noticed with Trump’s tariff threats to Canada and Mexico, he’s principally all scorching air. Actually, Australia has loads of methods to make it appear as if he has obtained a concession from us. And our authorities has not proven any disinclination to genuflect earlier than the Orange autocrat.
Will Aukus be used as a option to keep away from a tariff? Will our obsequiousness to Trump’s utterances on Gaza assist our metal producers? Probably.
However what this all exhibits nevertheless is that we can not depend on our ally to do good by us. We don’t want to begin elevating tariffs, however the authorities ought to positively start supporting our native industries in a approach that we would haven’t when taking part in below the outdated guidelines of pretending that free commerce agreements have been sacrosanct.
Scraps of paper won’t save us.
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