Be they imposed on an island of penguins, visualised in a 'liberation day' chart or already impacting on a crumbling United States stock market, Donald Trump tariffs are on everybody’s lips.
But the US President’s raft of tariffs could have a significant impact on the world economy, including Australia.
Trump has threatened to place tariffs on at least 10 per cent of foreign imports into the US, including those from Australia.
Trump put a pause on these tariffs — of 90 days — for all countries except China last week, ABC News reports. But this may again change over the next few days and weeks.
Meanwhile, China and the US have been intensifying their trade war, by imposing retaliatory tariffs back and forth.
For Trump, the trade war is about regaining control against China as the largest manufacturer, ABC News reports.
“All talks with China concerning their requested meetings with us will be terminated! Negotiations with other countries, which have also requested meetings, will begin taking place immediately," he announced on his social media platform, Truth Social.
So what exactly is a tariff and how will it affect Australia and its relationship with the US?
Tariffs are a tax on imports that are paid when commodities are sent from one country to another.
Tariffs are paid by the importer of the goods, usually a company, meaning they often have to increase their prices to compensate.
Trump is aiming to encourage American companies to manufacture their products in the US, by making imported goods more expensive for American consumers.
That move is sending shockwaves through the global market, but it’s the tariffs on China that may impact the Australian economy most.
Australia sends almost 40 per cent of its exports to China, which will also be attacked by Trump’s tariffs that are now more than 100 per cent on Chinese products, ABC News reports.
Monash University senior lecturer in economics Laura Puzzello explains the impact of the tariffs imposed on China, particularly given that it is Australia’s largest trading partner.
“There could be a slowing down of Chinese demand; if you are selling less, that slows down your economy, you're going to consume less, and that means China is also consuming less of Australian goods,” Puzzello says.
A month ago, Trump also placed 25 per cent tariffs on Australian steel and aluminium, and while this sector only makes up a small portion of the Australian economy, Monash University associate professor of economics Christis Tombazos suggests that its impact is not to be underestimated.
Puzzello agrees. “Whilst steel and aluminium only make up less than 0.2 per cent of our exports, maybe it's 100 per cent of a small sector, and all the people in that sector will lose jobs; if those jobs are concentrated in some place in Australia, there may be poverty,” she says.
The dangers to the Australian economy lie in the indirect effects of these tariffs and their ability to disrupt global supply chains.
“The reality is that steel and aluminium are connected to other sectors of the economies. And so, then it's harder to pin down exactly the effect."
Of all industries, the tariffs will hit the beef industry the hardest, as it is Australia’s biggest export to the US. As Tombazos points out, this would likely lead to a decline in the demand for Australian beef.
“Australian products are now more expensive in the United States," Tombazos says.
"Chances are Australian companies would have to scale down their production, and that means that they will not be able to employ as many people as they were able to employ prior to the imposition of the tariffs.”
Many of Australia's smaller trading partners in Asia and Europe have also been subjected to the proposed tariffs, which have impacted trade relations with 180 countries under the Trump administration.
Monash University senior lecturer in business law and taxation Nicola Charwat suggests it is not all doom and gloom: these markets may diversify, looking towards trade relations with Australia as a result.
“We might find that our relationship with the EU and the UK is going to improve as a consequence, and we'll start trading more with them,” Charwat says.
The Trump administration came up with its various tariffs based on dividing each trading partner's trade surplus with the US by the value of its exports to the US.
A trade surplus is the amount by which the value of a country's exports exceeds the costs of what it imports. Australia, however, has a trade deficit with the US of $19.9 billion — meaning that it only got slapped with the 10 per cent baseline tariff.
The naming of Trump's ‘reciprocal tariffs’ is therefore misleading, as Australia has not imposed tariffs on the US. As Prime Minister Anthony Albanese told a press conference earlier this month: "A reciprocal tariff would be zero, not 10 per cent."
Australia has entered free-trade agreements with the US since the General Agreement on Tariffs and Trade in 1947, and specifically the Australia-United States Free Trade Agreement in 2005, which advocated for the elimination of trade barriers including tariffs.
Trump’s tariffs not only jeopardise the neoliberal values of these agreements, but also sour the traditionally strong US-Australia relationship.
Charwat told MOJO News that Trump's behaviour is a part of a broader pattern of erratic decisions seen in his first term, including his withdrawal from the Trans-Pacific Partnership, an agreement designed to promote trade and economic growth.
Tombazos says the situation "makes no sense".
“We are America's closest ally, and they're destroying our relationship for no reason, no reason at all. It is insane,” Tombazos says.
“How can you have a good relationship with a country that, without any provocation, is affecting your economy adversely for no reason other than flexing its muscles for the world arena?”
How the Australian Government should respond, appropriately, is a highly debated topic, with some viewing retaliation as needed to set an example and others viewing that move as achieving nothing other than vengeance.
“Even though I believe that tariffs are a terrible policy," Tombazos says, "I do not think that Australia has a choice but imposing tariffs against the United States in retaliation.
"Why? Because, if Australia doesn't do that, then there is, in a sense, no penalty that the United States will be paying for their bad behaviour.”
On the other hand, as Puzzello points out, “small countries tend to lose when they impose their own tariffs, especially in retaliation”.
Albanese has said that Australia will not respond with retaliatory tariffs. Yet with the upcoming Federal Election, future responses remain uncertain.
