Donald Trump’s semicontinuous, unpredictable, unstable, frequently reversed tariff announcements will surely damage America’s economy, as well as its reputation. They could also hurt Australia in a variety of ways.
The latest Trump announcement, of potentially a huge tariff on pharmaceuticals, is much worse news for Australia than most of the other tariff measures Trump has taken or threatened. For pharmaceuticals are one of the very few areas of our economy, beyond mining, where we display mastery of complex technology that converts into commercial success.
It’s the high end of our tiny manufacturing sector and the $3bn of pharmaceutical exports we send to the US are an important beachhead.
The threatened US tariffs contain two urgent imperatives for Australia. One, we need the closest possible relationship with Trump so we can exercise whatever influence, whether at the margins of policy or at its base, available to any foreign government. With all our American connections this should be a gimme.
Second, we should be running a high-octane program of economic reform so we are diverse, resilient, and high growth in an international environment which will be full of challenges, and also opportunities.
The Albanese government is a dismal failure on both these measures. Famously, Anthony Albanese has not even met Trump, and doesn’t seem to want to go to Washington and perform in the Oval Office. Partly, this must be because Albanese simply has no attractive story – nothing positive to say to or offer Trump.
If Albanese had a good personal relationship with Trump, that wouldn’t guarantee a good outcome for Australia, although a personal relationship certainly worked well for Britain’s Keir Starmer. In any event, it would give us a chance. A failure to develop any relationship at all is akin to criminal negligence. It gives lackadaisical hubris and political complacency a bad name.
The lack of a pro-productivity, pro-growth economic reform program is even worse. Jim Chalmers may talk airily about a productivity summit, but all the big structural policies Labor is committed to are productivity killers: high taxes, heavy regulation, massive government spending, high energy costs, pervasive green tape and social and bureaucratic regulation of all kinds, re-regulated industrial relations, union centrality, job creation dominated by government funded payrolls.
Try this thought experiment – name one country with that mix of policies that is a manufacturing powerhouse or economic success.
Economically speaking, we are much more Saudi Arabia than Silicon Valley. Beyond resources, property and welfare, therefore, there’s not that much to get interested in. We have one of the smallest manufacturing sectors of any advanced economy and one of the least complex economies of any rich country, with the notable exception of our minerals sector.
Iron ore, coal and gas make us rich, and we campaign against them, and proclaim their ultimate death, every day.
Diversifying, transforming, the economy has proven utterly beyond us. We have plenty of talent and good ideas, but we’ve structured our economy to make sure these seldom succeed commercially. That’s why pharmaceuticals are so important to us, even though as part of our economy they’re pretty small.
They are one industry where, even with our insane cost structures, we can actually produce something internationally competitive in Australia.
If those exports are killed off in part by Trump’s tariffs, that would be another very sad day for Australia.
The country-specific tariff the US imposes on Australia, of 10 per cent, is no worse than anyone else gets. But the sector-specific tariffs Trump seems to like so much are often very high and have no out clause for Australia.
A good government would be pulling all the levers, using its high-quality, inside relationship with Trump, and making sure we are heading towards a match-fit, competitive economy.
Sadly, we don’t seem to do good government in Australia.
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