Chalmers rules out using PBS as bargaining chip in face of Trump’s pharma tariffs

Australian officials are rushing to learn the details of Donald Trump’s threatened 200 per cent tariff on pharmaceutical imports, which could hit more than $2 billion of Australian goods each year in a major escalation of the US president’s global trade war.

But Treasurer Jim Chalmers ruled out changes to Australia’s prized Pharmaceutical Benefits Scheme in response, despite American drugmakers lobbying the Trump administration to use its economic clout to force changes to the scheme they view as “discriminatory”.

US President Donald Trump during a cabinet meeting at the White House.Credit: Bloomberg

Trump said at a cabinet meeting on Tuesday, Washington time, that he planned to implement a 50 per cent duty on US copper imports alongside the crippling impost on pharmaceuticals, which he suggested could be imposed after a year’s grace period.

“They’re going to be tariffed at a very, very high rate, like 200 per cent,” Trump said. “We’ll give them a certain period of time to get their act together.”

Pharmaceutical products are the third-biggest category in Australia’s exports to the United States, after beef and gold. The category was worth $2.2 billion last year and includes plasma exports from biotech giant CSL, a company that also has large US operations.

Chalmers said on Wednesday that Australian copper exports to the US were less than 1 per cent of total trade, but pharmaceuticals were worth much more.

“Our pharmaceuticals industry is much more exposed to the US market, and that’s why we’re seeking, urgently seeking, some more detail on what’s been announced,” he told ABC Radio National.

“I want to make it really clear once again … our Pharmaceutical Benefits Scheme is not something that we’re willing to trade away or do deals on.”

Coalition spokesman for trade Kevin Hogan said the threat to the pharmaceutical industry was proof Prime Minister Anthony Albanese was “failing”.

“I don’t believe the prime minister has done everything he can to advance this important relationship,” Hogan said in a statement.

Treasurer Jim Chalmers said the Pharmaceutical Benefits Scheme would not be changed.Credit: AAP

“Australia’s economic and security relationship with the United States is one of our most important. However, Australian exporters are facing uncertainty with no resolution since tariffs were imposed earlier this year and no voice at the table fighting for them.”

Hogan said the Coalition would work with Albanese to support Australia’s economic and strategic interests with the US.

Former Australian ambassador to the US, Arthur Sinodinos, said the latest comment by Trump proved there was a need for a strong relationship between the countries.

“This recent pronouncement from the president underlines the need for representations in Washington about Australia’s trade position given that the US has a trade surplus with Australia and that we are a very strong ally,” said Sinodinos, who was also a Liberal politician.

In March, American medical giants slammed the PBS in a plea to Trump to impose punitive tariffs on Australia because the scheme subsidises medicines for millions of patients.

The PBS means Australians can buy life-saving drugs worth thousands of dollars for as little as $31.60 a script, after the government has negotiated with the drug company to secure the best deal for taxpayers.

The US industry’s lobby group, Pharmaceutical Research and Manufacturers of America, described the PBS as “egregious and discriminatory”, claiming it threatens market competitiveness. And some drugmakers have threatened to stop conducting clinical trials in Australia.

Credit: Matt Golding

Labor MP and former science minister Ed Husic said that was “absolutely bonkers” and would backfire on the companies because Australia was an ideal place for the companies to conduct trials.

“It sounds to me some of their executives have been squishing too many cans of Budweiser on the forehead and have lost perspective,” he told ABC TV.

A CSL spokesman said the company would “monitor the situation closely.” The consequences of tariffs for CSL are particularly complex because it collects blood for its products in the US and processes some of it in Australia, but also has major facilities in North America.

Meanwhile, Trump said the tariff on copper, which Australian companies BHP and Rio Tinto produce in several countries, could be 50 per cent. It is likely to be in place on August 1, Commerce Secretary Howard Lutnick said.

Reserve Bank of Australia deputy governor Andrew Hauser – who joined the RBA from the Bank of England last year – said the Trump administration’s trade war would reshape the global economy in a similar vein to Brexit.

“The day after Brexit happened, everyone thought the world would end, and it didn’t,” Hauser told the Australia Conference of Economists on Wednesday. “But 10 years on, you’re seeing the profound effects of some of those changes for sustainable growth rates and for fundamental things in the economy.”

Rio Tinto said it was assessing the proposed tariff. Its Kennecott copper operation outside Salt Lake City in Utah supplies about 20 per cent of America’s mined copper production, and it is pursuing a joint venture with BHP to open another mine in Arizona.

BHP also said it was still assessing Trump’s copper tariff proposal. Only 3 per cent of the resources giant’s revenues come from the US, including sales from its vast copper operations in Chile. None of its Australian copper was exported to America, the company confirmed.

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