Could we show more restraint? Perhaps. Are we ‘killing’ the US aluminium market? No

President Donald Trump’s latest tariff war is a case of deja vu for Australia.

When Trump first roiled global markets in 2018 with an executive order commanding a 25 per cent tariff on steel and 10 per cent impost on aluminium, then-prime minister Malcolm Turnbull magicked a full exemption, a special deal only afforded to Australia.

President Donald Trump has unleashed the first tariff salvo that could hit Australia.Credit: AP

Now it’s Anthony Albanese’s turn to run the same playbook.

After Trump foreshadowed a new 25 per cent tariff on both steel and aluminium imports, the PM was quickly on the phone with him for a 40-minute conversation that raised hopes – only to find them dashed straight after.

Trump called him out as a “fine man” whose view of the trade relationship needed “great consideration,” before signing an executive order lambasting Australia as having “disregarded its verbal commitment to voluntarily restrain its [aluminium] exports to a reasonable level.”

Trump’s trade impresario Peter Navarro followed up with another salvo on Tuesday. “Australia is just killing our aluminum market,” he told CNN. “President Trump says ‘no, no, we’re not, we’re not doing that any more’.”

So, are we guilty of a lack of restraint? Perhaps. Are we “killing” the US market? Not at all.

Australia has two main aluminium players – resources giant Rio Tinto and American-owned Alcoa. Rio, the largest, has an integrated mine to metal supply chain extracting bauxite in Weipa and Gove, refining it in Gladstone, and smelting aluminium in Boyne (Queensland), Tomago (NSW) and Bell Bay (Tasmania). Alcoa has mines and refineries in WA and a smelter in Portland, Victoria.

Back in 2018, as Scott Morrison was wrangling the leadership from Turnbull, sales of Australian aluminium into the US started to ramp up. Before Trump’s tariffs, they made up 2 per cent of America’s imports. A little over a year after Australia had gained its exemption, they had surged to 6 per cent.

It was enough to rouse Trump’s wrath and prompted Morrison to quietly rein in Rio and Alcoa. Turnbull’s deal for an exemption was done on a clear verbal agreement there should be no surge. We are now reaping the ill will the ramp-up has caused.

‘We’re 2.5 per cent of their market. I don’t call that a flood. If you talk to North Queenslanders, that’s a very small flood.’

Australian aluminium industry source

The big aluminium players don’t like to talk about it. Instead, they put part of the surge down to restrictions on Russia’s aluminium output from the West’s sanctions as a result of the Ukraine war.

If by some miracle Albanese negotiates another exemption, he can’t force the producers to toe the line without running foul of competition laws. But common self-interest remains a strong motivator.

Navarro’s tough line on Australia’s output, however, doesn’t stick. As one aggrieved industry insider points out, “we’re 2.5 per cent of their market. I don’t call that a flood. If you talk to North Queenslanders, that’s a very small flood.”

Australia exports a relatively small $1 billion in steel and aluminium to the US each year.

Trump’s across-the-board tariffs, if applied equally to all, will raise prices in the US, but are unlikely to disadvantage Australia’s producers against their competitors. If Australia and Canada are singled out for adverse treatment, it’s a much more painful story.

If the new tariffs differ between Australia and Canada, some – like Rio – can massage the origin of their aluminium to wherever is more favourable. Rio’s Canadian hub accounts for close to half of its global aluminium production. Much of that goes to the US, which imports about 85 per cent of its aluminium needs.

But Rio will be sweating Trump’s 30-day pause as he reconsiders his “beautiful” tariffs on Canada and Mexico. Alcoa, being headquartered in America’s steel capital, Pittsburgh, and sending most of its Australian aluminium output to Asia, may remain relatively unscathed.

Trump’s response to Australia’s surge in aluminium exports takes a lead from Crocodile Dundee’s larrikin line when he was confronted by a mugger wielding a flick-knife in New York.

Dundee pulled out a huge hunting blade and, brandishing it, said: “That’s not a knife!”

Unfortunately for Australia and its aluminium industry, Trump has a much bigger tariff blade to wield.

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