Australia’s case for an exemption from Donald Trump’s next round of tariffs relies on the US president seeing reason, with the Albanese government unwilling to bargain its way out of tariffs it believes will have a modest impact.
Mr Trump’s so-called “liberation day” is set for late Wednesday or early Thursday, Australian time, with the president poised to impose sweeping “reciprocal” tariffs on anyone who tariffs American goods or otherwise penalises them, in his view.
Australian officials have argued the case that Australia should not be penalised because it has no tariffs on American goods, and because the US has long had a trade surplus with Australia (selling more than it buys), which Mr Trump prefers to trade deficits.
But the government is aware that this argument might fail, as it did in negotiation over steel and aluminium tariffs. It is also bracing for the possibility that the White House might consider Australia’s GST or discounted purchases it makes through the Pharmaceutical Benefits Scheme to be “tariffs” worthy of reciprocating.
Despite this, Australian negotiators are unwilling to offer their American counterparts any major concessions to strike the sort of “deal” Mr Trump has signalled he wants, with the government prepared to absorb tariffs rather than buy its way out of them if its case fails on its merits.
“Let me be clear, we will never trade away the things that make us the best country in the world,” Trade Minister Don Farrell said.
“We will always stand up for Australia, and we are prepared for any outcome on April 2.”
Don Farrell says Australia is still working hard for an exemption but will not “trade away” the PBS. (ABC News: Matt Roberts)
There is also no sign Prime Minister Anthony Albanese will speak directly to Mr Trump before the deadline, with a longstanding Australian request for a phone call still unanswered.
The PM told the ABC’s Insiders last Sunday a call would only take place at the highest level if an agreement had already been struck by officials. But the government is now alive to the possibility it may not even know whether there will be tariffs until they are publicly announced.
The lack of contact between leaders has been the main line of political attack for the Coalition, with Opposition Leader Peter Dutton calling it a sign of Mr Albanese’s “weakness” and suggesting he could strike a better deal if elected.
The opposition’s trade spokesperson Kevin Hogan told the ABC the PM was not “on the front foot … He seems to be letting officials and bureaucrats do the talking”.
Mr Hogan said Mr Albanese should be trying to strike a deal with the president.
“We know Trump’s transactional,” he said.
“He deals leader to leader … I think you’ve got to go and put your case.”
He added the PBS was “sacrosanct” and should not be involved in a deal.
Beef and pharmaceuticals in the firing line
It is unclear whether the Trump administration’s reciprocal tariffs would apply across the board to all goods from affected countries or target specific sectors.
Either way, the Australian goods most likely to be hit would be the two with the highest American sale volumes: beef and pharmaceuticals.
Of those, tariffs on beef are more likely to hurt Australian exporters because it is the more easily substitutable product — especially if Australian beef is tariffed but competitors are not.
By contrast, much of Australia’s pharmaceutical sales come from Australian chemical giant CSL’s role in the supply chain for blood products for American cancer patients. They are harder to substitute and so more likely to simply be absorbed by American patients.
Katie McRobert of the Australian Farm Institute said uncertainty was already hanging over the beef sector, which would find it hard to pivot quickly to other markets.
“It’s not easy to pivot when you’re talking about live animals, perishable goods,” she told the ABC. “You can stockpile steel but you can’t stockpile a steer.”
But modelling from both Treasury and the Reserve Bank has suggested the direct effect on Australia’s economy would be very small, as was the case when China imposed tariffs and trade bans during the pandemic, an episode which encouraged many exporters to diversify their sales.
Instead, the biggest economic consequences for Australia would be indirect, from broad uncertainty rocking financial markets, and from any hit to the Chinese economy in the event of a US-China trade war.
That context informs Labor’s unwillingness to barter with the Trump administration over direct tariffs, especially if the PBS is involved.
Mr Trump said in recent days exemptions would be rare and apply only “if people are willing to give us something of great value”, which the Australian government is not.
Ahead of this week’s decision, the Coalition has set the expectation that Australia should get an exemption, pointing to US Treasury Secretary Scott Bessent’s suggestion the administration is focused on the “dirty 15” countries with which the US had the largest trade deficits, a list which does not include Australia.
“We’re actually expecting an exemption,” Mr Hogan said. “With the way some of the officials are talking in the US, that’s what we’re hoping for … [But] it does appear the PM is hiding behind officials.”
John Kunkel, a former Morrison government adviser now at the University of Sydney’s US Studies Centre, said he did not expect Australia would escape.
“No doubt Kevin Rudd and his colleagues have been working very hard in Washington but it’s unlikely, I think, that Australia escapes scot-free,” he said.
“Pretty much every country is going to have the rule run over their tariffs, their non-tariff barriers, and their regulations …
“But I think we should be very calm about this. We don’t want to be putting on retaliatory tariffs or anything like that because that hurts our own consumers and our own industries.”
