Larger-than-expected reciprocal tariffs placed on Australia’s major trading partners by the US are expected to hurt the country’s growth, according to credit monitoring service CreditorWatch.
While Australia has been hit with a 10% reciprocal tariff, which is at the low end of the scale, it is unlikely to have a major direct impact on Australia’s exports to the US.
That is because Australia does not have a trade surplus with the US, according to CreditorWatch Chief Economist Ivan Colhoun.
“We are not big exporters to the US (around $15 billion last year), so this in isolation is not a big deal for the overall economy – for context, China’s tariffs hit around $30 billion of goods previously and did not de-rail growth – but is obviously important for industries affected,” he says.
Of greater concern for Australia is the flow-on effect it will have on Australia from its major trading partners that have been taxed at a much higher rate.
“More important for Australia were larger than expected reciprocal tariffs announced on other big countries, including Australia’s major Asian trading partners, which each received large reciprocal tariffs: China (34%), Japan (24%), South Korea (25%), and also for world growth, a 20% reciprocal tariff on Europe,” Colhoun says.
“That is where the impact on our growth will mainly come from, rather than through the direct impact on tariffed Australian goods.
“Note these reciprocal tariffs are on top of existing tariffs, so the total tariffs on Chinese goods into the US will be 54%.”
Colhoun adds that the degree of retaliatory tariff action by impacted countries will determine if this leads to an even larger economic shock.
“Interestingly, Europe has announced it is preparing a support package rather than imposing retaliatory tariffs,” he says.
‘Tit-for-tat’ not the answer
Australia has also ruled out introducing reciprocal tariffs, with Prime Minister Anthony Albanese saying the country will “not join a race to the bottom that leads to higher prices and slower growth”.
The Prime Minister instead outlined a five-point policy response to the tariffs, focused on bolstering economic resilience and supporting industry to develop new markets.
The Australian Workers’ Union commended Albanese’s pivot to a more “muscular policy” to defend Australian industry.
Albanese plans to tighten Australia’s anti-dumping measures to safeguard the steel and aluminium industries, including by committing an extra $5 million to the anti-dumping commission to reduce case times, and better monitor goods and high-risk activities from overseas.
Acting National Secretary Chris Donovan says the measures will help protect Australia from the fallout of escalating global trade tensions.
“Right now our leaders have a choice: act now or allow Australia to be punished by a global trade war being escalated by Trump,” Donovan says.
“Mr Albanese has shown that he understands Australia needs to be more muscular and independent in defence of our industries. Mr Dutton is still in free trade fantasy land.
“Tit-for-tat tariffs are not a constructive way for a country like Australia to respond and Labor understands that. Stronger anti-dumping laws, faster dumping investigations, and a procurement policy that puts Australian industry first — these are the essential building blocks of any serious national manufacturing strategy.”
Western Australian Premier Roger Cook also welcomed Albanese’s response to the Trump administration’s tariffs.
“I join with the Prime Minister in expressing profound disappointment in the Trump administration’s tariffs on Australia, and other countries around the world,” he says.
“My government will double down on our recent initiatives to diversify our economy and make more things in WA – policies we took to the election to protect Western Australian jobs by making our economy more resilient in globally uncertain times.
“The Trump Administration’s tariffs are not consistent with the close relationship Australia has enjoyed with the United States over many years.
“I join with the Prime Minister in calling for national unity, and strongly support his decision not to impose retaliatory tariffs, which would only serve to drive up prices for Australian consumers.”
Call to expand Critical Minerals list
The Australian Aluminium Council, meanwhile, has called for the inclusion of bauxite, alumina and aluminium to Australia’s Critical Minerals list.
“This alignment with key trading partners would send a clear signal that Australia is committed to safeguarding its vital role in the global supply chain,” CEO Marghanita Johnson says.
Aluminium is Australia’s top manufacturing export, contributing around $18 billion each year to the country’s GDP.
On average, Australia exports less than 10% of its 1.5 million tonnes of aluminium production to the US each year, accounting for about 2.5% of total US imports of aluminium by volume.
CreditorWatch’s Colhoun says the tariff news will not be good for business confidence, with one of the main transmission mechanisms initially being the equity market as it will take time for the tariff changes to begin to impact demand and trade flows.
ANZ Senior International Economist Tom Kenny says the effective tariff rate on US merchandise imports is likely to climb to the 20-25% range, the highest since the early 1900s.
“Yields on inflation-indexed bonds were higher and equities sold off after the announcement, suggesting the market thinks these tariffs will hurt growth and add to inflation,” he says.
“Market pricing of the federal funds rate points to cuts from the Federal Reserve coming sooner.”
The S&P/ASX 200 fell 74.8 points, or 0.94%, to 7,859.7 points on Thursday (3 April). The index has slipped 1.37% over the past five trading sessions and 0.99% over the past year.
Eight of 11 sectors ended the day in the red. Energy tumbled 2.62%, materials retreated 1.91%, industrials was down 1.03% and utilities edged back 0.07%.
The gold miners continued to enjoy the gains, with Ramelius Resources (ASX:RMS), Spartan Resources (ASX:SPR), De Grey Mining (ASX:DEG) and Westgold Resources (ASX:WGX) among the top movers today.
Meanwhile, lithium miner Liontown Resources (ASX:LTR) wiped off 12.5% to close at $0.49, diversified miner Mineral Resources (ASX:MIN) slumped 9.47% to $21.03 and Whitehaven Coal (ASX:CSC) dipped 7.61% to $4.86.
A class action was yesterday (2 April) launched in the Supreme Court of Victoria against Mineral Resources and its Managing Director Chris Ellison.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation.
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: ASX & iStock
