Global interest in tariffs surged at the start of 2025, with Google searches for the term jumping more than 900% between 30 January and 2 February. But what do tariffs actually mean for trade, and how might they impact Australian businesses?
What Are Tariffs and Who Pays for Them?
Tariffs are taxes placed on imported goods. They raise the cost of those goods, reduce trade flows, and are often used to protect domestic industries from foreign competition.
For example, during his first term, President Trump imposed global tariffs of 25% on steel and 10% on aluminium. Australia secured an exemption from these tariffs, instead agreeing to supply limits. Despite the exemptions, domestic US prices still increased—aluminium by 2.4% and steel by 1.6%.
Importantly, tariffs aren’t paid by foreign exporters. They’re borne by domestic consumers and businesses in the form of higher prices. The broader economic impact depends on how heavily a country relies on trade. In the US, trade represents around 24% of GDP. By contrast, Canada’s economy is more exposed, with trade accounting for 67% of its GDP.
Trump’s 2025 Tariff Agenda: An Overview
During his campaign, Donald Trump said, “this country can become rich with the proper use of tariffs.” In his second week back in office, he began using emergency powers to address issues such as illegal immigration and drug trafficking by imposing new tariffs.
Canada
- Tariff: 25% on most imports (10% on energy resources)
- Canada’s response: 25% tariffs on agricultural and household products
- Impact: Significant, as 77% of Canada’s exports go to the US
Mexico
- Tariff: 25% on imports
- Response: Reciprocal 25% tariff on US goods
China
- Tariff: 20% on imports
- Response: Targeted tariffs on US agricultural products (10–15%) and export controls on critical minerals. A WTO complaint has also been filed.
Some exceptions apply—for instance, postal shipments from China under USD $800 are currently exempt while the US postal system updates its collection process.
Industry-Specific Developments
- Steel: The original 25% tariff resumes 12 March 2025, removing exemptions for countries like Australia.
- Copper: A national security investigation is underway, but no tariff has been applied yet.
- Timber & Paper Products: Under review for potential tariffs, pending a security investigation.
- US Tech Giants: Trump has criticised Digital Services Taxes (DSTs) targeting US firms and threatened retaliatory measures. Australia currently follows OECD-led digital tax reforms and does not impose a DST.
Could Australia Be Targeted?
While Australia runs a trade surplus with the US, making blanket tariffs unlikely, industry-specific tariffs (e.g. on steel or aluminium) could still apply.
Key Australia–US Trade Stats:
- Top US imports to Australia: Financial services, travel, telecom/information services, royalties, trucks
- Top Australian exports to the US: Financial services, gold, meat (sheep/goat), transport services, vaccines
The Ripple Effect on Australian Business
Australia is particularly vulnerable to shifts in global demand, especially from China, our largest trading partner, accounting for 26% of total trade in 2023. If US-China tensions suppress Chinese demand, Australian exporters may feel the pinch.
Historically, Trump’s aggressive trade policies are often rolled back or softened after initial negotiation posturing. However, that doesn’t eliminate the risk for Australian businesses, especially if China agrees to boost imports from the US at the expense of Australian suppliers.
What Should Businesses Watch For?
- Supply chain disruptions: If you import from or rely on Chinese manufacturers, rising costs and delays may follow.
Increased competition: Should other countries lose access to US markets, they may look to ‘dump’ products elsewhere, including Australia. - Ongoing uncertainty: Policy volatility can delay investment, slow revenue growth, and raise costs across industries.
Final Thoughts
For Australian businesses, particularly those involved in international trade, the key takeaway is clear: uncertainty is the biggest threat. Stay informed, diversify supply chains where possible, and seek professional advice to manage potential cost impacts or shifts in market demand.
If you’d like tailored insights on how global trade policy could affect your business’s bottom line, feel free to contact our team on 07 3367 3155 or at support@walkerhill.com.au.
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