US President Donald Trump has claimed Australia broke a 2018 verbal agreement on restraining Australian aluminium exports to America. That deal, successfully negotiated by the Turnbull government, had provided Australia with an exemption from Trump’s global steel and aluminium import tariffs during his first term. As the United States prepares again to apply 25 per cent tariffs on both steel and aluminium imports from every country, including from Australia, the claim of a broken agreement may stand in the way of a second exemption.
There has been debate in Australian media over which prime minister, Malcolm Turnbull or Scott Morrison, verbally agreed to voluntary export constraints. What is clear is that the Trump administration believes they had an agreement with the Turnbull government to restrain exports, since on 31 May 2018 the White House issued the following official statement:
“The United States has agreed on a range of measures with Argentina and Australia, including reducing excess aluminium production and excess aluminium capacity, measures that will contribute to increased capacity utilisation in the United States, and measures to prevent the transshipment of aluminium articles and avoid import surges.”
These measures appear to be what Trump is referring to now when he claims Australia broke a verbal agreement “to voluntarily restrain its [aluminium] exports to a reasonable level”. In international trade these are called “voluntary export restraint” agreements, where the exporting country agrees to voluntarily restrict their exports at a certain level without the importing country having to create and administer a new law-based trade restriction.
A well-known voluntary export restraint agreement is Japan’s commitment to limit electrical goods and automobile exports to the United States as part of the 1985 Plaza Accord to address America’s trade deficit with Japan. These agreements, despite the potential negative impact on the domestic economy from restraints, help to smooth over trade irritants in bilateral relationships. Importing countries get a trade solution without breaching existing international trade liberalisation obligations. The exporter gets to maintain some exports while defusing trade-related tensions with their partner country.
In September 2019, having replaced Turnbull as prime minister, Morrison publicly warned domestic producers to rein in exports, while media reports of a senior government source acknowledged that “All of the players in the industry were aware that when the exemption was granted [in 2018], it was clear that there should be no surge”. This begs the question of how did exports trend during the period.
Criticism that Australia broke its verbal agreement to restrain exports at “reasonable levels”, rather than stating a clear-cut quantitative figure, leaves an interpretive gap that Trump, the negotiator, is sure to use for his own interests.
UN Comtrade data shows the following: US imports of Australian aluminium jumped significantly from a low base of US$64 million in 2016 to US$204 million in 2017, and US$400 million in 2018, crucially before the agreement was made. Australia’s exemption was announced by the White House in May 2018. However, 2019 saw exports rise further to US$452 million, before dropping back down to US$119 million in 2020.
The 2019 uptrend in exports likely reflects some portion of contracts locked-in during 2018 prior to the exemption agreement. This is because commodity traders use forward contracts to hedge against commodity and currency price volatility. Some US import orders from Australian suppliers were likely locked in before the May 2018 voluntary agreement was in place. Nonetheless, the 2019 export growth clearly created US pressure on the Australian government to act, leading to Morrison’s pressure on private firms to reduce exports. This in turn led to a 75 per cent drop by value in 2020, after Morrison had called for exporter restraint, but also during the first year of Covid supply chain disruption.
The period 2021-23, with Biden now in the White House, sees Australian aluminium exports grow, averaging around $US390 million. However, this additional supply was welcomed by the Biden administration to replace Russian aluminium that was heavily tariffed in response to the Ukraine invasion. The fact remains that although Australian aluminium exports have grown in percentage terms since 2016, this is from a low base, and they remain a small share of the US market.
There has not been a major surge relative to the total US import market or total Australian aluminium exports to the world, which in 2023 were valued at $US4.3 billion. The 2019 growth in exports was addressed by Morrison, leading to a drop in 2020. In 2024, Australia was a distant eighth-largest supplier of the metal, with 90,000 tonnes by volume in an import market of around 5 million tonnes in 2024.
These facts challenge Trump’s “breach of agreement” claim. Yet Trump’s recent criticism that Australia broke its verbal agreement to restrain exports at “reasonable levels”, rather than stating a clear-cut quantitative figure, leaves an interpretive gap that Trump, the negotiator, is sure to use for his own interests. Yet the above analysis shows that Australian exports remained a relatively minor share of US imports throughout the period, hence were “reasonable”, while the federal government responded to rising exports in 2019, as verbally agreed. Therefore, Trump’s position is built more on ambiguity than fact.
To head off Trump’s new tariffs the federal government must be relentless in pushing the above factual analysis, which only adds to Canberra’s uniquely strong argument for exemption. Australia is one of the few economies the United States has a regular trade surplus with, a country it has a deep military relationship with – which also depends on open trade for technology sharing – and Canberra is offering billions in new investment in America’s domestic submarine manufacturing as part of AUKUS.
Australia’s case must leverage Trump’s constant claim that America is being short-changed economically and militarily by the world. Clearly, Australia is not short-changing America, instead offering a model of the highly reciprocal and responsive relationship that Trump claims to desire. Playing fair with Australia is in America’s interest for that very reason.
