Trump hits Australia with 10 per cent tariff on all exports to the US

Washington: America faces a recession and a global slowdown that could force the Reserve Bank into cutting Australian interest rates within weeks, after President Donald Trump upended 60 years of free trade by imposing sweeping tariffs.

In a move the president described as an “act of economic independence”, Trump’s long-awaited “Liberation Day” of tariffs spared no nation, prompting turmoil on global sharemarkets while interrupting Australia’s federal election campaign.

Trump announced the reciprocal tariff scheme in the White House Rose Garden.Credit: AP

From Saturday, tariffs of up to 50 per cent will be slapped on imports into the US with Australia – led by its $4.7 billion beef exports to America – one of few major economies to escape with the lowest hit.

Prime Minister Anthony Albanese, who announced a five-point response to the tariffs, labelled them as “unwarranted” with “no basis in logic” while warning they would disrupt the global economy and harm the American people most of all.

“This is not the act of a friend,” he said. “The Australian people have every right to view this action by the Trump administration as undermining our free and fair trading relationship, and counter [to] … our two nations’ long-standing friendship.”

Trump, after accusing many of nations of “looting”, “pillaging” and “raping” through their exports to the US, singled out Australian beef as a cause for concern for American ranchers.

“They’re wonderful people, wonderful everything, but they ban American beef,” he said. “They don’t want it because they don’t want it to affect their farmers. I don’t blame them, but we’re doing the same thing.”

Australia’s 10 per cent tariff is the lowest rate of those unveiled on Wednesday (Thursday AEDT) and matches that charged to the United Kingdom, Singapore, Chile, Turkey, Brazil and many others. Trump described this as the “baseline” rate.

By contrast, China was hit with a 34 per cent across-the-board tariff, the European Union 20 per cent, South Korea 25 per cent, Japan 24 per cent, and India 26 per cent. US ally Israel copped a 17 per cent tariff, as did the Philippines.

The announcement hit financial markets, which had not expected the size of some of the tariffs.

The ASX200 shed $48 billion on opening but recovered through the day to finish 0.9 per cent or $23 billion down. Overseas, the sharemarket in Japan lost 3.1 per cent, South Korea fell by 0.8 per cent while Hong Kong edged down by 1.6 per cent.

Global oil prices fell on fears of a slowdown in the American economy, while gold hit an all-time high of $US3192 on expectations the US will face higher inflation due to the tariffs.

Financial markets now expect the Reserve Bank to cut official interest rates three times by November, starting with its next meeting in mid-May. The RBA held the cash rate steady at 4.1 per cent at its meeting this week.

In its six-monthly review of the stability of the nation’a financial sector, the bank used the term 21 times, noting America’s tariff plans posed “substantial headwinds to the outlook for global economic activity”.

Commerce secretary Howard Lutnick holds up a chart showing tariffs of 10 per cent on Australia and other countries.Credit: AP

“Ongoing uncertainty about the United States’ international trade policies, and the reactions this may trigger, could have a chilling effect on business investment and household spending decisions,” it said.

Albanese said there were certain issues, including the Pharmaceutical Benefits Scheme and the country’s media rules, that the government would never negotiate.

“Very clearly our position is not up for negotiation, whether it be the news media bargaining code or whether it be the social media position, which is world-leading,” he said.

Trade Minister Don Farrell said there was now a chance to revisit free trade agreement negotiations with the EU which had stalled over key elements of its measures to protection European farmers and food producers.

Albanese’s five-point plan to deal with the tariffs includes an extra $5 million for the Anti-Dumping Commission to protect key industries such as steel and manufacturing, $50 million in trade support for companies to find new markets, and prioritisation of Australian firms in government procurement and local content.

Coalition leader Peter Dutton, who backed the measures on anti-dumping, extra trade support and government procurement, said he could have negotiated a better outcome with the Trump administration.

He said a deal with the Trump administration could be done “very quickly”, linking the issue to the defence relationship between the two nations.

“We have troops in the north of our country, we have the AUKUS deal, we have the ANZUS treaty,” Dutton said.

“This is a bad day for our country. I want to resolve the matter and the question for us now is: who is best able to deal with this relationship?” he said.

Greens leader Adam Bandt said Australia should end the $368 billion AUKUS submarine deal with the United States, arguing that Donald Trump was “dangerous”.

Former prime minister Paul Keating said the Trump tariffs were the effective death knell of NATO, while casting doubt over other diplomatic ties including the ANZUS treaty between the US and Australia.

“If NATO, America’s principal strategic alliance, is expendable, what credible rationale could underpin US fidelity to ANZUS and with it, to Australia?” he said.

“Australia’s clutch of Austral-Americans, that phalanx of American acolytes, must have choked on their breakfasts, as Donald Trump laid out his blitzkrieg on globalisation, with all its implications for the rupture of co-operation and goodwill among nations.”

AMP chief economist Shane Oliver said the chance of a United States recession was about 40 per cent, with America’s average tariff rate now higher than when it was pushed up during the Great Depression.

“[Trump’s] announcement will take the US average tariff rate to above levels seen in the 1930s, which will in turn add to the risk of a US recession – via a further blow to confidence and supply chain disruptions – and a bigger hit to global growth,” he said.

Renowned economic historian Douglas Irwin said Trump’s tariffs were “much bigger” than the infamous Smoot-Hawley tariffs imposed by the US in 1930 which exacerbated and prolonged the Great Depression.

British historian Simon Schama warned Trump’s actions, by driving up prices and reducing demand across the United States, would deliver a substantial blow to the global economy.

“Global economic crashes have historically been caused by a variety of problems, some more unavoidable than others, but this is the first one ever to have been brought about by sheer doltish stupidity,” he said on X.

Apart from the immediate economic fallout from the tariffs, Trump’s announcement sparked criticism around the globe.

China, which due to previous tariff increases faces effective tariff rates of up to 70 per cent, signalled it would respond forcefully to what it described as a “typical act of unilateral bullying”.

“China firmly opposes this and will take countermeasures to safeguard its own rights and interests,” the Chinese Commerce Ministry said in a statement.

President of the European Commission Ursula von der Leyen said the group of nations - which combined are the world’s third-largest economy - preferred to negotiate with the US, the commission’s members were prepared to respond.

“We are already finalising a first package of countermeasures in response to tariffs on steel,” she said on a trip to Uzbekistan. “We are now preparing for further countermeasures, to protect our interests and our businesses if negotiations fail.”

As part of its negotiation strategy ahead of the announcement, the Albanese government repeatedly noted that Australia had run a trade deficit with the United States since the Korean War wool boom of the early 1950s.

But figures from the Bureau of Statistics released on Thursday showed for a second successive month, Australia sold more to America than it received in imports.

The surplus of $1.1 billon in February was again driven by huge purchases of gold by American investors which has helped drive the price of the precious metal to all-time highs.

The Australian Industry Group warned that Trump’s tariffs will lead to dumping of manufactured goods across the rest of the world.

Group chief executive Innes Willox said with around 50 per cent of goods being intermediate goods – components of unfinished products – the tariffs would have a far-reaching impact beyond products they hit immediately.

“Goods destined for the US may likely need to find a new home, raising the prospect of an influx of displaced goods coming to Australia,” he said.

The Business Council of Australia, which represents the nation’s 100 biggest businesses, has warned Trump’s tariffs will hurt economic growth, while urging a “measured” response from the federal government.

“We don’t support retaliatory tariffs and strongly urge against them because there are no winners in a trade war, which would only risk making our situation worse by forcing Australians to pay more and reducing job security,” the council’s chief executive, Bran Black, said.

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