Farmers warned to brace for 10 per cent tariffs as Trump targets $7b industry

Australia is tipped to incur a new round of American tariffs on exports, including $7 billion in farm produce, after the federal government rebuffed demands from US President Donald Trump to overhaul pharmaceutical subsidies and weaken biosecurity rules.

Farmers have been told to expect tariffs of 10 per cent or more on beef and other products after talks with the Trump administration reached an impasse, dimming the prospects for any exemptions for Australia.

Prime Minister Anthony Albanese ruled out a deal with Trump to adjust domestic policy in response to the US complaints, which include claims that American exporters cannot ship food to Australia due to biosecurity checks on pork and other products.

“Not on my watch – on my watch, our biosecurity system is essential,” Albanese said.

Opposition Leader Peter Dutton backed the government on the trade dispute and said he would not compromise on matters of national importance as voter concern rises about the risk to Australia from the startling shift in US policy under Trump.

The federal government expects the next round of tariffs to apply to most countries and industries and does not expect an exemption for Australia, although there is a chance the measures could be “walked back” in later weeks.

The Trump administration confirmed its complaints by issuing a formal trade review that listed concerns about Australian biosecurity, the Pharmaceutical Benefits Scheme and government support for publishers against tech giants in the News Media Bargaining Incentive.

White House press secretary Karoline Leavitt told this masthead she would leave the details to the president, but signalled changes for countries such as Australia due to the non-tariff barriers such as the PBS.

“I think any country that has treated the American people unfairly should expect to receive a tariff in return on Wednesday,” she said.

The federal government denies any “unfair” treatment of American companies under the three policies, which were the subject of behind-the-scenes negotiations for weeks before being confirmed in this week’s report from the US Trade Representative.

On Sunday, on board Air Force One, Trump said the tariffs would apply widely. “You’d start with all countries,” he said.

The imminent threat presents a challenge for Albanese and Dutton when the government is in caretaker mode during the election campaign, making it difficult to decide any policy response because it would normally require bipartisan consultation.

Senior government figures cautioned that the outcome was impossible to forecast, given the unpredictability of the president and his team, but played down the prospect of a formal trade policy response.

Albanese and Dutton have both ruled out using retaliatory tariffs against the United States, given this would increase prices for Australian consumers, and both have rejected the key demands from the White House.

Agriculture industry sources, speaking on the condition of anonymity due to the risk of drawing adverse attention, told this masthead they had been advised that the Trump administration would likely impose lower tariffs on agriculture than on steel and aluminium imports, which were set at 25 per cent in February.

Sources stress that while a 10 per cent tariff is the best guess, they are wary of the Trump administration’s unpredictability and are bracing for tariffs as high as the first round.

Last month, Trump put global agriculture on notice with a message to US farmers: “Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external product on April 2nd.”

Australia exported goods worth $US16.7 billion ($26.69 billion) to the US last year, according to the US International Trade Administration, while the US sent $US34.6 billion here – confirming the US had a trade surplus with Australia.

The United States Trade Representative report on foreign trade barriers heightened expectations for tariffs on Australia because it identified so-called non-tariff barriers on the US including restrictions on uncooked American beef, pork and poultry, as well as apples and pears.

One Australian government source said it would be untenable to relax the biosecurity checks on imported pork due to the risk of disease spreading to Australian pigs, or foot-and-mouth and mad cow disease spreading to livestock.

Australian farmers exported $7.1 billion in agricultural produce to the US, second behind China as the most important overseas market.

A 10 per cent tariff, depending on how much is absorbed by suppliers, would add more than $600 million to the price of Australian produce, to be paid by American consumers.

Red meat makes up most of the exports, with beef sales to the US worth more than $3.3 billion last year and sheep meat at $1.2 billion.

“We would defend Australia’s interests,” Albanese said on Tuesday when asked about the US trade report. “The idea that we would weaken biosecurity laws is, as my mum would say, cutting off your nose to spite your face.”

Dutton echoed Albanese’s position on biosecurity.

“I agree with the prime minister’s position,” he said. “I will stand up for our country’s interest.”

American drug companies are also urging the Trump administration to impose tariffs on Australia because the Pharmaceutical Benefits Scheme uses the Commonwealth’s bargaining power to bind companies on price, delivering benefits for consumers but curbing company profits.

The Trump administration’s tariff plans are making life more difficult for the Reserve Bank, which held official interest rates steady at 4.1 per cent on Tuesday while noting increasing uncertainty about the global outlook.

Governor Michele Bullock said the bank was war gaming the fallout from the “Trump tariff war” as it tried to determine its impact on domestic and global economic growth and inflation.

“A trade war with escalating tariffs and reciprocal tariffs is going to slow down growth in world trade,” she said.

“And Australia, as a small, open economy, has benefited massively from open trade. So, it’s not good for us, a world trading system that is fragmenting. That’s not good for us.”

Credit: Matt Golding

Bullock said the Reserve Bank could respond to the tariffs, but argued much would depend on China – Australia’s largest trading partner – and whether it sought to protect its economy by lifting government spending.

“There will be a bit of an impact on us in terms of growth, but it’s not going to be as big as some other countries might suffer,” she said.

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