Albanese should consider tweaks to PBS to avoid Trump tariff: CSL chair

Donald Trump’s move to ramp up tariffs on medicines and copper has sparked alarm among government and business leaders, amid fears the trade war will smash the local drug industry, stripping nearly $3bn from the economy.

US President Donald Trump holds a cabinet meeting at the White House on Wednesday (AEST). Picture: Getty Images

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Donald Trump’s move to ramp up tariffs on medicines and copper has sparked alarm among government and business leaders, amid fears the US President’s latest trade war will smash the local drug industry, stripping nearly $3bn from the economy.

But the chairman of the country’s biggest drugs manufacturer says the White House’s concerns over the nation’s Pharmaceuticals Benefits Scheme are not ­unreasonable and the Albanese government has room to negotiate with Mr Trump.

Mr Trump warned on Wednesday (AEST) there would be no more extensions on tariffs past a new August 1 deadline as he ­unveiled a 50 per cent hit on copper imports and threatened a 200 per cent duty on pharmaceuticals after a grace period of a year to 18 months.

Reserve Bank deputy governor Andrew Hauser said staff at the central bank were watching Mr Trump’s tariff manoeuvres like “hawks” and that the effects on Australia could be profound.

“How worried are we about it? We are very, very focused on it. The level of uncertainty is clearly elevated and the implications … for a global trading economy like Australia, of these fundamental changes, are very profound,” he told a conference in Sydney.

CSL Limited chairman Brian McNamee. Picture: AAP

Mr Trump’s proposed tariff on pharmaceuticals is estimated by analysts at investment bank ­Barclays to likely cost Australia $2.8bn through both direct impacts on economic activity, ­exports to the US and via intermediate goods exports to countries that use them in production of drugs also hit by the tariffs.

“We’re going to give (drug manufacturers) about a year, a year and a half, to come in, and after that they’re going to be ­tariffed,” Mr Trump said in the Oval Office.

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

Jim Chalmers expressed alarm, saying the government was urgently seeking further ­details from the US. “These are obviously very concerning developments,” the Treasurer said.

He said Australia’s pharmaceutical sector was “much more exposed” to the US market, but reiterated the government would not sacrifice the nation’s PBS to do a deal with the Trump administration. “We see the PBS as a fundamental part of healthcare in Australia. We’re not willing to compromise the PBS,” Dr ­Chalmers said.

But CSL chairman Brian McNamee urged the Albanese government to make the PBS more efficient and allow innovative American drugs into Australia faster, saying the nation benefits as much from US innovation in medicines as it does from the protection the nation gets from the Pentagon’s defence spending in the Indo-Pacific.

“I don’t think America’s ­demand is an unreasonable ­demand. I don’t think the US is trying to tear the PBS down,” Mr McNamee said.

“Americans have allowed their companies to maximise drug ­innovation and sell to other countries. Other countries benefit from that and are using the free-rider system. I think this is the same as defence.

“I think Australia could accelerate the system for approvals and the mechanism for pricing of ­innovative new drugs, but it does come at a cost. You need to make a contribution.”

The US is Australia’s biggest pharmaceutical export market, accounting for 38 per cent of total Australian pharmaceutical exports. Blood products make up about 90 per cent of the trade.

Australia’s pharmaceutical exports to the US were valued at $2.06bn in 2024, accounting for 9 per cent of the nation’s total goods sold into the American market.

US lobbyists at the Pharmaceutical Research and Manufacturers of America (PhRMA) have urged Mr Trump to “leverage ongoing trade negotiations” as a tool for reworking the PBS and raising Australian drug prices.

Medicines Australia chief executive Liz de Somer — representing Australia’s pharmaceutical producers — opposed the institution of tariffs and any threat by the Trump administration to the PBS.

An untested executive order by Mr Trump, dubbed the “Most Favoured Nation” order, also leaves open the threat that international producers could hike up Australian prices or pull their products. Under the proposal, the US would refuse to accept medicine prices higher than those overseas, forcing companies to either give Americans their best rate or bring foreign prices in line.

“We don’t want to overreact to the announcement, but being very clear, the industry in Australia opposes tariffs being applied to pharmaceutical manufacturing,” Ms de Somer said.

Sussan Ley said the tariff announcement was “yet another warning signal for the Prime Minister to step up his engagement with the President”, who Anthony Albanese is yet to meet in person. “Given we are going to see more global trade shocks we need the Albanese government to step up its efforts to find new international markets for Australian exports, like we did in government,” the Opposition Leader said. “In our first term alone we ratified major free-trade agreements with China, Japan and Korea. These markets underpin Aussie jobs.”

Economists and miners said the copper tariff could put upward pressure on prices, jeopardising the rollout of renewable energy, for which copper is a critical component, but it could also help some projects in America and Australia proceed and build self-reliance away from a dependence on Chinese production.

Dr Chalmers said Australia’s copper exports to the US were relatively small, accounting for 1 per cent of the nation’s total exports of the commodity. Benchmark Minerals puts Australia’s exports of copper to the US at just $75m out of $11bn total exports.

The head of macro and strategy at fund manager Yarra Capital Management, Tim Toohey, said the move by the US was part of Trump administration’s efforts to build self-reliance on critical minerals, but that higher prices could hurt the speed of the renewable energy rollout in the short to medium term.

“The knee-jerk reaction from the tariff on copper is that it will increase the price of carbon reduction and it would slow the progress towards net zero,” Mr Toohey said. “And that’s for the same in Australia too.

“But the aim is to make sure the US is self-reliant. They want to make more production in the US and have more control over it and if that increases inflation in the short term then so be it.”

The Minerals Council of Australia said the copper tariff would disrupt global trade, undermine investment confidence, and increase costs for consumers, including those in the US.

“While Australia’s direct copper exports to the US are limited, trade restrictions imposed on other key trading partners have the potential of disrupting global supply chains, increasing costs, and creating uncertainty for Australian exporters,” MCA chief executive Tania Constable said.

She said as a stable and secure supplier of minerals, Australia had an opportunity to deepen mineral supplies through trade partnerships, expanding export markets, and reinforcing its position in global supply chains.

“That means continuing to position Australia as a trusted, low-risk partner for critical minerals and resources,” Ms Constable said.

The latest developments come amid a sense of resignation among senior government figures that Australian exporters are likely to continue to face a 10 per cent “reciprocal” tariff when Mr Trump finalises his new rates on Thursday. Senior government figures have been told by the US that Australia is unlikely to do any better than the baseline tariff, which will be the minimum applied to any country and would leave Australia no worse off than its trading rivals.

It’s unclear what ongoing ­duties Australian steel and aluminium producers will face, with metals exporters currently enduring a 50 per cent tariff for exports to the US. Policymakers are more concerned Australia could be caught up in any wider economic fallout from the reciprocal tariff decision, with the higher rates set to take effect on August 1.

“There has been no change to this date, and there will be no change,” Mr Trump said on social media, a day after signing an executive order that changed the date from July 9.

Dr Chalmers said: “These escalating trade tensions around the world in recent months are a substantial concern to us and for two reasons: one, the direct impact on our industries, our workers, our businesses.”