Federal Treasurer Jim Chalmers has sought to play down the prospect of being directly targeted in US President Donald Trump’s trade wars, but has left open the prospect of retaliation should Australia face financial sanctions.
Governments globally are scrambling to respond to the breakneck speed that Mr Trump has moved to impose, and later pause, import tariffs on goods coming from Canada, Mexico and China.
Overnight, Mr Trump also threatened European nations with tariffs.
“These are big developments out of the US, but not surprising developments. We saw these tariffs flagged in one way or another during the recent presidential election campaign,” Mr Chalmers told reporters on Tuesday morning.
“So we’re not surprised, but we are confident that we can navigate these new policies coming out of the US.”
But when asked if Australia would retaliate with tariffs if the US imposed them on Australian imports, Mr Chalmers left his options open.
“That’s not our preference and that’s not something we’re considering or contemplating philosophically,” he said.
“We did a heap of work before the election to look at the possible consequences of trade tension and that has helped inform our approach.”
The threat of an escalating global trade war saw the Australian dollar and stock market drop on Monday.
US exports Australia could target in retaliation
Australia has a trade deficit with the United States.
Figures from the Department of Foreign Affairs and Trade (DFAT) show US imports to Australia are worth double the amount the country receives in return.
Beef, meat and pharmaceutical exports are the backbone of Australia’s almost $22 billion trade to the United States.
The US imported about $50 billion worth of goods last financial year.
Engineering equipment, vehicles and parts, telecommunication, computers, medical equipment and measuring and analysing instruments are among the biggest US imports to Australia.
Vehicles, machinery and engineering parts and items combined account for almost half of the overall value of US products.
Even without having tariffs directly being imposed on products from Australia, there is widespread concern Australia will be hit by financial sanctions imposed on China.
China is Australia’s largest export market. With the US China’s largest export market, analysts fear any hit to the Chinese economy would flow through to Australia’s.
Ahead of his return to the White House, Prime Minister Anthony Albanese used a meeting of world leaders in South America to promote Australia as a nation that supports free and fair trade.
Should he wish to defy that rhetoric and impose retaliatory tariffs on the US, the products likely targeted would be those that could impose financial pain back in the United States.
But making it more expensive for US exporters to send items like computers, vehicles and pharmaceuticals to Australia would risk fuelling inflation and raising costs for Australian consumers.
“Australia has nothing to gain from raising our own tariffs on imported goods,” former Productivity Commission chairman Michael Brennan wrote in The Australian.
“That would tax consumers and hurt the economy overall, and could not influence the policies of large countries such as the US or China.”
Australian Trade Minister Don Farrell is seeking to speak with his incoming US counterpart, Howard Lutnick, once the US Senate confirms him for that position.
Australia received an exemption from steel and aluminium tariffs when Mr Trump was last in power.
Exports of those commodities to the US were worth more than $800 million last financial year.
