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Getting time with Trump is the only currency on trade

Donald Trump’s latest trade snafu is further proof, if any were needed, that a personal relationship is the only currency that matters when dealing with an unpredictable and transactional US President. This is not to say Anthony Albanese would have got a better outcome on steel, aluminium or the 10 per cent baseline tariff being imposed on Australia had the Prime Minister been able to get a meeting with Mr Trump. But as tariff escalation mark two takes hold in Washington, Australia is exposed to the growing risk of collateral damage as Mr Trump punishes our closest trading partners and extends his imposts to copper and pharmaceuticals.

There still may be an element of bluff in what is going on with the theatrical release of letters and fresh demands while extending the tariff deadline beyond the July 9 expiry. Mr Trump wants major exporters, including the EU and India, to settle a deal before the new deadline of August 1. But the main message from Washington is that Mr Trump has taken personal control and favours making a unilateral decision, sometimes delivered via social media posts in capital letters.

Mr Trump told a rambling public cabinet meeting on Tuesday (US time) that he considered the letters advising governments of the tariff rate they would pay to be deals in themselves. Negotiations had become “mostly my deal to them”, he said. The letters set US tariff rates on imports at between 25 per cent and 40 per cent with an additional 10 per cent put on countries that have joined the China-inspired BRICS trading group.

Financial markets that had been lulled into a belief that Mr Trump was big on bluff with little follow-through are starting to pay attention again to the potential disruption ahead. This all makes the decision by the Reserve Bank of Australia board on Tuesday to hold fire on another rate cut more understandable. The Australian currency could quickly become more vulnerable despite a Productivity Commission report that says new modelling shows proposed US trade policy measures will have only a marginal direct impact on the Australian economy. In fact, the report says, US “Liberation Day” tariffs and tariffs on aluminium, steel and cars and parts could lead to an increase in Australian real GDP of 0.37 per cent. But the Productivity Commission also warns that further retaliatory escalation could spiral into a broader trade war that would have serious consequences for Australia and the world.

Mr Albanese is correct to say Australia is getting the best deal on offer from Mr Trump at 10 per cent. But Australia has a trade surplus and no reciprocal tariffs on the US. Tariffs on steel and aluminium put great pressure on domestic industries struggling because of high energy prices and looking to government for help. Expanding the tariff net to copper and pharmaceuticals introduces new challenges. Pharmaceutical products are our third biggest category of exports to the US, after beef and gold. According to the UN Comtrade database on international trade, pharmaceutical exports in 2024 were worth $US1.35bn. Australia’s major pharmaceutical company, CSL, already has big manufacturing facilities in the US. This has not stopped Big Pharma in the US lobbying Mr Trump to use tariffs to push back against the price bargaining power of Australia’s Pharmaceutical Benefits Scheme. Mr Albanese has sought to make the PBS a non-negotiable issue.

As things stand, when Australia is front of mind in Washington today it is for all the wrong reasons. Mr Albanese increasingly is being squeezed by both sides in the great power rivalry that is playing out in our region. We cannot afford to be a bystander in Mr Trump’s calculations. We must redouble our efforts to get into the room.

Read related topics:Anthony AlbaneseDonald Trump

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Original URL: https://www.theaustralian.com.au/commentary/editorials/getting-time-with-trump-is-the-only-currency-on-trade/news-story/c1c3f1d68ca7811cb450c365df3c940e