Trump’s latest tariff bid shows the old rules of trade no longer apply. Scraps of paper will not save us | Greg Jericho
News that the US president, Donald Trump, was going to place a 25% tariff on all steel and aluminium imports in to the US came as it generally does with such things – out of the blue, with no reasoning, and little to no understanding of whether Trump even knows what he is doing.Speaking to reporters on Air Force One on the way to the Super Bowl, Trump talked about “reciprocal” tariffs.As an aside he said that “we’ll also be announcing steel tariffs on Monday” and when asked who they would affect he said “everyone”.When further asked about aluminium he replied “aluminium too” (because hey why bother to mention that upfront?).The headlines went crazy and we saw reports here of how $15bn was “wiped from the Australian share market” in the first hour of trading.
That sounds like a lot until you realise it meant only about a 0,5% fall and most of it was recovered soon after,At this point I would like to pour out a long one to the USAFTA – that glorious free trade agreement the Howard government signed with the USA, which at the time John Howard said was “an historic agreement” and that “it will add enormous long-term benefits to the Australian economy”,“Long-term” was less than 20 years,The Australian government might ponder such things when it rushes to talk up Aukus which the defence minister, Richard Marles, suggests “provides significant, long-term strategic benefits for all three countries”.
If a free-trade agreement is able to be ignored as a mere scrap of paper, how rock solid are agreements to deliver submarines at some vague point in the future and only when the US has decided it does not have any need for them?The government might also ponder that given in 2023 we exported a touch over $800m in steel and aluminium to the US and last week the defence minister graciously delivered that amount to the US as part of our instalment payment for the $360bn Aukus agreement (only 450 payments to go!).So maybe the USAFTA wasn’t a “long-term” thing, but what about the benefits? Well Howard told journalists at the time that he thought the FTA would reduce our trade deficit with the US.In reality it increased:If the graph does not display click hereGoing into a trade war with Australia is a pretty dumb thing for the US to do, given it is already “winning” the war.In 2024 we exported about $23.8bn worth of goods to the US and imported $50.
6bn,Most of what we export is not steel or aluminium either,If the graph does not display click hereWe send as much wine, beer and spirits to the US as we do steel,The US is the fifth biggest destination of Australia exports, but that rather overstates its importance,In 2023 all of Australia’s exports to the US was equivalent to less than 20% of the value of just our iron ore exports to China.
The US hasn’t accounted for more than 5% of all of Australia exports for nearly a decade:If the graph does not display click hereThat does not mean it is not important – especially for steel exports,As the first graph shows, around a third of our steel exports go to the US,But here’s where Trump’s actual policy (and that might be a generous use of the term) starts to become less of an issue,Tariffs are paid by the importers,So Australian exporters don’t pay anything extra, the US manufacturers needing our steel and aluminium will.
If Australia was the only country Trump was targeting, then those manufacturers would start looking elsewhere to buy their steel and aluminium.They can’t do that now because the tariff will apply to imports from every country.Some US manufacturers might instead try to buy steel from US makers, but the US actually imports about twice as much steel as it exports – it needs imported steel.The US might be the biggest importer of steel in the world, but it is hardly dominant.China imports almost as much, Germany is not far behind, and Italy and France combined import more.
All up only 7% of global steel imports go to the US:If the graph does not appear click hereYes, the US is important for steel exporters around the world, but it is not so large it can dictate the rules.Trump is acting like it is 1950 and the US can tell everyone what to do.This of course is a movie we’ve all seen before.Trump put the same tariffs on back in 2018 and Australia at the time was able to get an exemption.As we all saw with Trump’s tariff threats to Canada and Mexico, he is mostly all hot air.
Certainly, Australia has plenty of ways to make it seem as if he has got a concession from us.And our government has not shown any disinclination to genuflect before the Orange autocrat.Will Aukus be used as a way to avoid a tariff? Will our obsequiousness to Trump’s utterances on Gaza help our steel manufacturers? Possibly.But what this all shows however is that we cannot rely on our ally to do good by us.We don’t need to start raising tariffs, but the government should definitely begin supporting our local industries in a way that we might have not when playing under the old rules of pretending that free trade agreements were sacrosanct.
Scraps of paper will not save us,Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
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