An overwhelming majority of Australians (81%) disagree with Trump’s tariff policies, according to the latest Lowy Institute Poll. But despite the media infatuation with Australia “getting a better deal” on tariffs from the United States, most Australians (61%) see the US tariffs on Australian exports as an important, but not a critical threat to Australia’s vital interests over the next ten years.
The public has this right – it is not the direct tariffs that pose the biggest threat. Rather, it is the rebound effects of the on again/off again/on again tariffs that threaten the global economy.
Australia’s dependence on commodity exports means that what happens in global markets is far more important than the bilateral trade relationship. The strength of Australia’s commodity exports has also left the economy more dependent on imports for a wide range of products. The public support shown for industry policies reflects valid concerns about Australia’s vulnerability to supply chain disruptions. But while the broad sentiment is supportive, the government should be careful about taking the public’s support for granted. Just like the clamour to “do something” about tariffs on Australia, the public will want to see results from industry policy.
The tariff policy agenda is clear – Australia does not benefit from trying to retaliate. But that does not mean that we should not be supporting other countries’ efforts to push back where they have market power as a means of raising the cost to the US economy. Only US businesses have the influence to change Trump’s tariff agenda.
A coordinated approach to isolate retaliation to the United States and China will be essential to avoid a domino effect increasing tariff and non-tariff barriers across the board.
Petitioning for special treatment for Australia on the basis of our trade deficit with the US and security relationship (AUKUS and US “bases”) is unlikely to be successful and buys Australia into the role of supplicant. A cooperative front with other countries will reduce the options for the Trump administration, and strengthen the hand of US businesses that are harmed by the tariffs.
Cooperation is also critical in pushing back against China’s export policies. The risks of a global trade war are rising as China seeks alternative markets for its exports. This trade diversion impact of the US tariffs on China has been made more difficult for countries to manage by the Chinese government’s expansion of its export subsidies to offset declining demand in China in the wake of the property market collapse. The size of China’s manufacturing base and its breadth (expanding high tech exports adding to rather than replacing low tech exports) pose real risks to manufacturing industries in a host of countries, particularly in Asia.
A rise in anti-dumping tariffs in response could well achieve Trump’s stated goal of countries raising tariffs on Chinese goods. A coordinated approach to isolate retaliation to the United States and China will be essential to avoid a domino effect increasing tariff and non-tariff barriers across the board. The Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP) is a good place to start to keep protectionism at bay as countries react to the changing trade environment.
The CPTPP is also a good place to start when designing industry policy. While the Lowy Institute Poll found that 83% of Australians supported making more goods in Australia even if it cost more, reality is that few, if any, supply chains can be fully Australian. We will continue to rely on trade partners for inputs into production, even if the final product is made in Australia. Strengthening trade relationships to diversify sources is a much lower cost strategy than on-shoring production.
Targeting clean energy, critical minerals, green metals and fuels plays to Australia’s potential strengths as a land of sun and wind, with good mineral resources. These industries also play to security needs as fuel imports are highly vulnerable to shipping disruptions, and transport is essential for food security. Whether critical minerals will provide us with leverage with the United States on security is less clear, as is the premium on green metals if the world abandons attempts to reduce carbon emissions. While the targets are well selected, a much more comprehensive approach addressing barriers and more money, including R&D, will be needed to achieve results. While most Australians (82%) still support subsidising the development of renewable technologies, the downward trajectory (from a high of 91% in 2021) suggests support is conditional on the delivery of promised outcomes, not least lower electricity prices.
The Lowy Institute Poll provides a great snapshot of Australian attitudes on a wide range of areas where Australia’s interests intersect with the world. While the Australian government can take heart from general support for its approach on the economic intersects, it should not take this support for granted. The much harder task involves delivery – on trade partnerships and on the promise of industry policy. More honest conversations are required with the Australian public about the costs and compromises needed.
