Axe the luxury car tax: lure for EU trade deal

An emboldened Anthony Albanese will launch a new trade diversification push to ride out Donald Trump’s tariffs chaos, offering to axe the $5.2bn luxury car tax to clinch a free-trade deal with Europe.

Anthony Albanese is set to travel to Washington in coming weeks for face-to-face talks with Donald Trump.

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An emboldened Anthony Albanese will launch a new trade ­diversification push to ride out Donald Trump’s tariffs chaos, ­offering to axe the $5.2bn luxury car tax to clinch a free-trade deal with Europe and prioritise critical minerals exports to India to secure an agreement with New Delhi.

Returning to Canberra on Monday with a large majority, ­delivered in part thanks to anti-Trump sentiment, the Prime ­Minister revealed he had spoken to the US President amid a flurry of congratulatory calls from world leaders.

As senior Liberals turned on each other following Saturday’s electoral bloodbath, Labor’s ­factions began closed-door ­negotiations on the make-up of Mr Albanese’s new ministry, which is likely to include more women and MPs from the Left.

The Prime Minister said he was “deeply humbled” by his thumping election victory and would “not get carried away” by implementing policies that were inconsistent with Labor’s election promises.

He said he conveyed Australia’s hopes for a tariff carve-out in his “warm and positive” conversation with Mr Trump, and raised the importance of the AUKUS submarine pact to both nations’ security.

“He was very generous in his personal warmth and praise towards myself,” Mr Albanese said.

“He was fully aware of the ­outcome and he expressed the ­desire to continue to work with me in the future.”

In earlier comments at the White House, Mr Trump hailed Mr Albanese’s “very good” election win. But in a further blow to a defeated and unseated Peter Dutton, he said he had no idea who the Prime Minister had beaten.

The presidential praise came as Mr Trump escalated his tariff war with the rest of the world – including Australia – by announcing a 100 per cent tariff on movies “produced in foreign lands”.

The government will move quickly to cushion the blow, capitalising on EU and Indian calls in recent days to “speed up” negotiations on new FTAs.

The EU is pushing for the ­luxury car tax to be abolished to help bolster the European car ­industry, which has been devastated by the Trump tariffs and cheap Chinese electric vehicles.

A source close to the Prime Minister said the government was prepared to dump the tax in ­return for better access for Australia’s agricultural exports to the bloc’s 450 million consumers, which was the sticking point when Australia-EU negotiations collapsed in 2023.

The offer would also resonate with the US, the source said, but was not a central plank in ­Australia’s proposal to the Trump administration, which was based on priority access to Australia’s critical minerals.

The government is offering a similar deal to India, along with greater labour market access, in return for tariff cuts for Australian farmers.

Mr Albanese is expected to raise the Australian proposal with Indian Prime Minister Narendra Modi in a scheduled phone call on Tuesday.

The Prime Minister is expected to travel to Washington DC next month, combining the trip with a visit to Canada for the G7 summit after an invitation from new leader Mark Carney.

Mr Albanese confirmed his first overseas trip of his second term would be to Jakarta. Indonesia’s President Prabowo Subianto declared in video footage of the leaders’ conversation that it would “be an honour” to host his Australian counterpart.

Hopes are fading for a swift exemption from Mr Trump’s ­tariff blow, with senior Australian officials saying the White House was “overwhelmed” by the global trade fallout, and it could take many months to negotiate a better deal for Australia.

The government is pushing for the resumption of free trade talks with the EU and India as soon as possible, and has been buoyed by word from the United Arab Emirates that it is set to ­ratify the countries’ recent deal giving Australia free trade access to “the warehouse of the Middle East”.

“Over the weekend we got calls from the Europeans saying, ‘speed things up’. We got calls from the Indians saying they want to keep going,” a source said. “And the UAE confirmed everything’s moving in the right direction to get all of our tariffs removed.”

EU negotiators had previously believed the government was going to axe the luxury car tax of its own accord, but the government said it would not do so without a better deal on agriculture.

The tax, which raises about $1.2bn a year, adds 33 per cent to the price of a car above $91,387 for fuel-efficient vehicles, and above $80,567 for other cars.

India is keen to secure guaranteed access to Australia’s critical minerals as the country prepares to challenge China’s dominance over high-end manufacturing.

“If the Americans aren’t careful, we’ll have signed away all of our critical minerals, and there’ll be nothing left for them,” the source said.

Mr Trump’s new movie tariff, aimed at punishing countries that offer perks to attract US productions, could hit Australia’s film sector hard.

Arts Minister Tony Burke told the ABC: “I’ve spoken to the CEO of Screen Australia and we’re monitoring this closely.”

Speaking at the White House on Monday (AEST), Mr Trump said he was “very friendly” with Mr Albanese. “I don’t know anything about the election other than the man that won, he’s very good,” the President said.

“I have no idea who the other person is that ran against him, and, you know, we’ve had a very good relationship.”

Amid fears his trade war will devastate the global economy, Mr Trump told US media his 145 per cent tariff on China would eventually be cut to a more reasonable level.

“At some point, I’m going to lower them because otherwise you could never do business with them,” he said in an interview with NBC.

“They want to do business very much … their economy is collapsing.”

China’s Commerce Ministry said last Friday that Beijing was “currently assessing” US proposals to begin trade talks, but warned that Mr Trump must “cancel” his “unilateral tariff hikes” first.

The EU’s top diplomat in ­Australia recently urged a ­resumption of negotiations, ­saying the hoped-for FTA was a “no-brainer”.

Drawing a contrast with the US under Mr Trump, EU ambassador to Australia, Gab­riele Visentin, said Europe was a ­reliable and predictable partner that respected the rule of law and knew how to keep a deal.