What Donald Trump’s tariff backflip means for Australia

Donald Trump has suspended higher tariffs for 90 days and he has lowered his reciprocal tariffs to 10 per cent, but what does this mean for Australia?

US President Donald Trump has suspended higher tariffs for 90 days and he has lowered his reciprocal tariffs to 10 per cent, but what does this mean for Australia?

Potentially, not a huge amount at face value.

President Trump’s announcement appeared to single out the higher tariffs for a 90 day suspension.

In the meantime, “a substantially lowered Reciprocal Tariff during this period of 10 per cent,” was “effective immediately”. That will apply to all nations, aside China. Mr Trump has upped China’s tariffs to 125 per cent.

The thing is, Australia’s tariff was at 10 per cent already – the lowest amount.

It looks like that 10 per cent tariff will remain in place pending negotiations.

So Australia is not better off now than it was when the tariffs came in overnight.

It comes a week after Donald Trump unveiled the sweeping new ‘Liberation Day’ tariffs. Picture: Brendan Smialowski/AFP

MORE: Aussies to get $5k back amid US tariffs

Indeed, Australia’s relative advantage, that it had a lower tariff rate, has now gone. That could be seen as a negative.

Economists have warned the real threat with tariffs to Australia was not the tariffs on Aussie products themselves, but the combined effect of a trade war sparking a global recession.

So ridding world markets of panic, while horse trading goes on, is no doubt a good thing.

Australian stocks are poised for a super surge today after Donald Trump’s tariff pause overnight.

The ASX 200 which tracks the 200 biggest companies in the nation is expected to rise by a whopping 6.6 per cent in what would be its biggest gain since March 2020.

Amid the global sighs of relief though there’s one thing worth noting.

If the US keeps in place global 10 per cent tariffs that’s still a high import tax.

And it means in the next 90 days, the US will be able to rake in billions of dollars in import taxes while – almost certainly – no nations dare reciprocate.

On a social media post on Wednesday afternoon, US time, Mr Trump said the fact 75 countries had contacted the US seeking to negotiate tariffs was the reason behind his volte face.

One of Mr Trump’s key financial world backers, Bill Ackman, suggested a 90 day pause on Sunday to give time for negotiations. Multiple other economists and billionaires had also urged Mr Trump to reign the import taxes.

“Based on the fact that more than 75 Countries have called Representatives of the United States … to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorised a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Mr Trump wrote.

Wall Street stocks rocketed to close solidly higher Wednesday, with dramatic advances on all three major indexes as Mr Trump delayed steep new tariffs hours after they took effect. Picture: Angela Weiss / AFP

MORE: $115bn wiped: Trump’s rich listers hefty fall

When speaking to reporters outside the White House, Mr Trump said when it came to tariffs he “had to do it”.

“People were getting yippy,” he said of the pause.

“They all want to make a deal – somebody had to do what we did, and I did a 90-day pause for the people that didn’t retaliate, because they told them, ‘If you retaliate, we double it’.

“And that’s what I did with China, because they did retaliate, so we’ll see how it all works out. I think it’s going to work out amazing.”

He insisted China wanted to make a deal.

But he defended his overall strategy, including at least some tariffs.

“What was happening to us on trade … not only with China, but China was by far the biggest abuser in history, and others also … somebody had to do it.

“They had to stop because it was not sustainable”.

Originally published as What Donald Trump’s tariff backflip means for Australia