World Trade Organisation, explained.
The Office of the US Trade Representative identified Australia’s restrictions on beef as high priority trade barriers (Getty Images)
With tariff threats against both friend and foe, regional trade agreements will assume greater importance.
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Trump’s trade policy: Risks for AustraliaTrump’s trade policy: Risks for Australia
There is little comfort for Australia in President Donald Trump’s early trade policy moves. His tariff threats against friend and foe have intensified. And an array of separate tariffs and other trade measures is in the pipeline. Even if Australia avoids US tariffs, our exports to third countries face potentially serious discrimination from opaque bilateral deals.
Trump’s trade hubris is being fuelled by compliant advisers and little questioning from business or Congress. Without domestic consequences, there’s no reason to expect Trump to moderate his positions. The main pushback he faces will come from in-kind trade retaliation and, should he overreach, the cold calculations of financial markets.
Behind Trump’s bluster are the foundations of a coherent trade strategy.
Since the election, Trump has doubled down on his threat to impose a 25 per cent tariff on all goods from Canada and Mexico, announcing a deadline of 1 February. This could be aimed at curbing illegal migration and illicit drugs. Or it may have more to do with dismantling the free trade agreement that has covered North America for more than three decades. Either way, it is a brutal way for the United States to force concessions from its closest neighbours and biggest economic partners.
Behind Trump’s bluster are the foundations of a coherent trade strategy. On 20 January, Trump issued an America First Trade Policy memorandum, which orders 23 separate reviews and investigations into various aspects of US international commerce. The clear message in the memo is that the United States is being treated unfairly, and responses are needed. Findings and recommendations are to be delivered to Trump by 1 April.
The memo includes a trigger for his campaign threat to impose a tariff on all imports and a directive to establish a Department of External Revenue to collect higher tariff revenues. Trump’s main economic advisers have expressed support. Treasury Secretary Scott Bessent defended a universal tariff of 10 per cent in his confirmation hearing. And Trump’s nominee to head the Council of Economic Advisors (a White House role) recently wrote a report arguing that an average tariff rate of 20 per cent (it was 3.3 per cent in 2023) would make the United States more prosperous.
President Trump’s America First Trade Policy memorandum orders 23 separate reviews and investigations into various aspects of US international commerce (Venti Views/Unsplash)
A universal tariff would not discriminate against Australia’s exports, except in the unlikely case that our competitors in the US market were granted exemptions, but we were not. And there would be little need to seek an exemption if the tariff was set so low as not to spook financial markets. If the United States were to set the tariff so high that imports from all countries were seriously damaged, the tariff would be a much greater problem than one of bilateral market access.
A hidden risk for Australia’s exports is that of discrimination resulting from US trade deals with other countries. Trump’s memo directed the Office of the United States Trade Representative (USTR) to identify prospective countries with which the United States could negotiate bilateral or sectoral deals with the aim of securing market access for US exporters. These deals will not be free trade agreements. We should be under no illusion that any “dirty deals” would be World Trade Organisation-compliant or that our free trade agreements would prevent them.
It isn’t possible to assess economic impacts until we know the extent of US trade measures and any retaliation.
Some countries are likely to reach out to USTR before they are asked, hoping that promising to buy more US goods could help them avoid trade penalties. Such arrangements are likely to be opaque, particularly those involving large or single buyers. Those Australian commodity exports that compete directly with US suppliers — food products and some minerals — are vulnerable.
Another possible risk to Australia is that we are directly targeted with tariffs over our few barriers against US goods and services. Trump’s memo orders a review of other countries’ unfair trade practices. In its latest annual report on foreign trade barriers, the Office of the USTR identified Australia’s restrictions on beef, pork, cooked turkey meat, apples and pears as high priority trade barriers. USTR also expressed concerns about aspects of our patent protection for pharmaceuticals and Australian content requirements for streaming platforms.
Still, it’s unlikely that USTR would target Australia, and highly unlikely it would do so ahead of the many countries which have more extensive barriers to US exports. Our status as one of the few countries with which the United States runs a significant trade surplus should help our case.
The biggest economic impacts on Australia will likely arise from the effects of US trade penalties on our major trading partners. China is targeted directly by several investigations in Trump’s 20 January memo and indirectly by several others. So, from 1 April, Trump will have numerous triggers to apply trade penalties on China and on Chinese-owned exports from third countries, such as Vietnam and Mexico.
It isn’t possible to assess economic impacts until we know the extent of US trade measures and any retaliation. There will be few winners, at least in the short term. The systemic effects for the World Trade Organisation and global trade architecture are likely to be profound. Regional trade agreements — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership — will assume greater importance.
About the author
Stephen Moran
Stephen Moran is an independent trade analyst.
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