US President Donald Trump may have paused his plans to impose tariffs on goods imported from Canada and Mexico, but there are lingering concerns about what his protectionist strategies could mean for Australia.
We are a nation that exports more than a quarter of its gross national product.
Iron, coal and natural gas dominate the list, but there are also lucrative overseas markets for beef, lamb, wheat, canola and cotton.
The imposition of tariffs on other countries might make our produce relatively cheap in the US, but they could also increase competition in other markets and dampen demand for some of our biggest commodities.
So even if Australia is spared direct tariffs, the flow-on effects from the Trump strategy could be significant.
The US tariffs could push Canada to compete with Australia in key grain markets, according to Pat O’Shannassy. (Supplied)
Grain prices may fall
Grain Trade Australia Ltd chief executive Pat O’Shannassy said wheat and canola prices could fall as Canada cuts prices to shift grain it can no longer sell in the US.
“If you’re sitting on a couple of million tonnes of grain and you need to move that, you need to get aggressive with your price and that’s the concern,” he said.
Australian grain exports hit record levels in 2023 and generated $16 billion.
Mr O’Shannassy said any move towards protectionism would be bad for trade.
“One thing grain markets don’t like is volatility and uncertainty, so we’re in for choppy seas ahead,” he said.
US tariffs could increase competition with Canada in key markets and push global grain prices down. (ABC News: Jo Prendergast)
The China connection
Australian exports were worth $80b overall last year.
Two thirds of those commodities and products went to Asia.
China was the biggest buyer.
A 10 per cent tariff on Chinese goods in the US would likely dampen the Chinese economy and potentially reduce demand for Australian iron ore and grains.
China has said it would respond to the US tariffs, which could lead to a global rise in protectionism.
Tim Harcourt says a trade war could force the price of goods up and depress the global economy. (ABC News: John Gunn)
Trade war fears
University of Technology chief economist Tim Harcourt said many in his field feared US tariffs would trigger a trade war.
That would force the price of goods up and depress the global economy.
The potential for retaliation is already clear as Canada vows to impose tariffs on US products if Trump follows through with his threat.
Canada is preparing for a second round of tariffs in three weeks that would target passenger vehicles, trucks and steel and aluminium products, as well as certain fruits and vegetables, beef, pork and dairy products.
Tariffs on both sides would harm consumers in those countries.
“Ultimately, as the British economist James Robinson said, it’s like putting rocks in your own harbour,” Professor Harcourt said.
“Canada’s tariffs will hurt Canadian workers, Canadian consumers, Canadian farmers in the same way that US tariffs will hurt Americans.”
Donald Trump displays a freshly inked executive order. (Reuters: Elizabeth Frantz)
Negotiating tactics
Professor Harcourt said a trade war would be a very bad outcome for Australia.
“We’ve got so much to sell to the world as an open economy [with] a great comparative advantage in agriculture and mining and services,” he said.
“Protectionism is the worst thing that could happen to Australia.”
But Professor Harcourt said it was possible the tariffs would be rescinded quickly.
“There is a view that Trump’s negotiating style is to put something on the table and then take it off,” he said.
Tariffs on Colombian coffee were dropped as soon as the South American nation accepted Trump’s demand to accept deportees from the US.
Sheep meat exporter Roger Fletcher says dealing with changing market conditions is nothing out of the ordinary. (ABC Rural: Kath Sullivan)
Business as usual
Fletcher International Exports owner Roger Fletcher is not worried about tariffs being imposed.
“We work around these things all the time — in the end it all balances out,” he said.
“I’m confident they won’t put tariffs on us … but it will affect us in China.”
Mr Fletcher believes the global red meat trade will continue to boom.
“You talk about protectionism, but in the last 10 years we’ve opened up a lot of free-trade markets that we didn’t have before, including America, Korea, Japan we’ve improved on, China, India, UK,” he said.
Andrew Phillips of the Toronto Star says Canadians are dismayed by the disintegrating relationship with the US. (Supplied
Supplied)
Canadian warning
Many Australians may be hoping the nation’s status as a close ally to the US will ensure some sort of special treatment, but that has no been the experience elsewhere.
Canadian journalist Andrew Phillips said there was a strong feeling of disappointment about the situation in his country.
About 80 per cent of Canadians live within 100 kilometres of the US border and 80 per cent of the country’s exports go to the US.
“The idea that the US government is now openly hostile to Canada is a psychological blow as well as an economic one,” Mr Phillips said.
“Americans have gone from being those cooperative partners we were used to to being hostile under Trump.”
The big question for Australian exporters is whether Trump will follow through on a 10 per cent global tax on all imports.
