PM books urgent call with Trump to spare Australia from new tariffs

Prime Minister Anthony Albanese will set out an economic and strategic case to persuade United States President Donald Trump to spare Australia from punishing tariffs on steel and aluminium, as the two leaders schedule a crucial phone call on the looming trade crisis.

Albanese will cite the defence alliance with America and the economic damage to American workers in a dual-themed argument to exempt Australia from the 25 per cent tariffs, amid fears of a damaging hit to jobs and exports.

Donald Trump speaks to reporters aboard Air Force One.Credit: AP

But the economy is exposed to slower growth even if Trump grants the carve-out, with experts warning that Australia could suffer from the hit to Chinese industry from the US trade barriers.

In a sign of the risks, the Reserve Bank found that weaker Chinese growth from widespread tariffs would lead to “strong negative implications” for Australia, in a confidential forecast in the weeks before Trump won the presidential election last November.

The Coalition called on Albanese to shield Australia from the new tariffs and prepared the ground for an election fight by suggesting the prime minister might need to replace the ambassador in Washington DC, Kevin Rudd, because he has criticised Trump in the past.

The prime minister’s office said on Monday afternoon that Albanese was due to speak to the US president within 24 hours on a call that was arranged before the news of the tariffs.

Prime Minister Anthony Albanese faces a tough job convincing Trump not to impose tariffs on Australian metals.Credit: James Brickwood

Albanese told parliament that he would update MPs on the phone call and had used his first call with Trump, two days after the US election, to make the case for fair trade.

“Tariffs don’t tax us; they tax the purchasers of our products,” Albanese said. He has pointed to the fact that the US sells more to Australia than it buys in return, generating a trade surplus.

Deputy Prime Minister and Defence Minister Richard Marles, who met his US counterpart Pete Hegseth in Washington DC on Friday, US time, said he had argued to spare Australia from tariffs because open trade was part of the AUKUS alliance on submarines and defence industries.

“It has seen an opening up of trade and a removal of barriers, specifically, in relation to defence industry, and that is very much to the benefit of both countries,” he said.

Trump aired his plan on Sunday in the US when he told reporters he would target countries with matching tariffs if they tried to protect their industries, heightening the prospect of a trade war.

“We’ll also be announcing steel tariffs on Monday,” he said while flying to the Super Bowl in New Orleans. “Any steel coming into the United States is going to have a 25 per cent tariff.”

Asked if this would apply to aluminium as well, he said: “Aluminum, too.”

While the US president did not reveal any details of his tariff plan, his move echoes the trade policy from his first administration, when he imposed tariffs of 25 per cent on steel and 10 per cent on aluminium.

Australia gained a carve-out from those tariffs when then-prime minister Malcolm Turnbull negotiated the exemption directly with Trump at the G20 summit in Germany. The ambassador at the time, Joe Hockey, often emphasised the strength of the security alliance with the US.

But Turnbull said on Monday it was wrong to claim the special treatment secured in 2017 was based on the security alliance because he had negotiated with Trump on the economic case for exempting Australia.

“We discussed the issue directly on many occasions, and it took some time to change his mind, but he listened to the detailed economic arguments that I made,” Turnbull said.

A key argument, Turnbull said, was that the Australian steel shipped to America was almost exclusively from Bluescope for Colorbond roofing material in California. Turnbull said the US tariffs on this steel would not produce any additional American steel because the cost of shipping it from Australia was lower than the cost of transporting steel from the US east coast. He said Trump accepted this argument.

“The only impact would be to make Colorbond more expensive in California which would hurt Americans and their construction sector,” he said.

BlueScope, a listed company based at Port Kembla in NSW, has spent about $2 billion on acquisitions in the US and has about 4000 employees in the country. Shares in BlueScope rose 1.8 per cent to $21.90 on Monday.

Australian Industry Group chief executive Innes Willox said the government had to get an Australian exemption because other industries could be at risk.

“If we don’t, there are significant costs for Australian industry, and the big question then is: who’s next, what’s next? That’s the great unknown,” he said.

“This has got to be a national priority to turn this around.”

Australia China Business Council president David Olsson said the long-term implications needed a lot more work because of the impact on global trade, given China was Australia’s biggest trading partner.

The Reserve Bank modelling last year, released under Freedom of Information law, analysed “moderate” and “extreme” scenarios from Trump’s election pledges to increase tariffs.

“Australian exports to the US account for a very small portion of overall GDP, so tariffs imposed under either the extreme or moderate scenario are unlikely to significantly impact growth through this channel,” it said.

“However, weaker Chinese growth will have relatively strong negative implications for Australia given the strength of export trade links.”

In the extreme scenario, it said, weaker exports to China would lead to slower growth and lower inflation in Australia, putting downward pressure on interest rates expectations and the Australian dollar.

Business Council of Australia chief Bran Black urged the government to do “everything possible” to stop the tariffs, while Minerals Council chief Tania Constable said the trade threat highlighted the need for other reforms to remove barriers to investment in mining.

“Governments can’t control global trade, but they can control how competitive we are,” she said.

The nation’s four aluminium smelters employ 21,000 workers and about 10 per cent of the nation’s Australian aluminium is exported to the US each year.

Australia potentially has more than $1 billion worth of export revenue exposed to Trump’s proposed tariffs, having exported $640 million worth of steel and $440 million of aluminium last year, according to US trade data.

The government actions so far include a phone call between Albanese and Trump in November, a visit by Foreign Minister Penny Wong to the president’s inauguration in January and her talks with US Secretary of State Marco Rubio – when she emphasised the US jobs created by Australian steelmakers like BlueScope.

Government officials noted that it took one year for the first Trump administration to finalise its tariffs after announcing them in April 2017.

NSW Premier Chris Minns said the tariffs would be a “massive” challenge for the national economy.

“Trade wars are in no one’s interest, particularly not Australia’s,” he said.

Nationals leader David Littleproud said the government might have to replace Rudd as US ambassador to ensure Australia had the best response to the tariffs.

Ambassador Kevin Rudd had a rocky relationship with Trump’s team during the US election campaign.Credit: Alex Ellinghausen

“If there is a decision to be made and that Kevin Rudd’s not the right person to have these discussions, then we should be mature enough as a country to send someone who can have those discussions to get that carve-out,” Littleproud told reporters in Parliament House.

Two former Australian ambassadors to the US, Hockey and Arthur Sinodinos, have warned against dropping Rudd, while Turnbull has said it would send the “worst possible signal” to the Trump administration.

With AP, Reuters, Bloomberg

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