Australia cannot take 10 per cent tariff for granted

Australian industry leaders are braced for a bigger hit following the US president’s ominous warning he will double baseline tariffs rate in the wake of EU and Japan deals. Odds are, it won’t be temporary.

US President Donald Trump gestures as he and British Prime Minister Keir Starmer board Air Force One at Prestwick Airport ahead of a flight to northeast Scotland. Picture: Getty Images

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Australian industry leaders are already bracing for the prospect of an increase in Australia’s ten per cent tariff rate, with Donald Trump’s recent trade deals with the EU and Japan sending an ominous message to Canberra.

Australia cannot take its ten per cent tariff rate as a given, despite the fact that Canberra has offered a key concession to the Trump administration by lifting biosecurity restrictions to allow in US beef after more than a two decade freeze.

If Australia’s baseline tariff rate goes up, don’t count on it being temporary. The more likely scenario is that it becomes the new normal.

Speaking alongside British Prime Minister Keir Starmer after travelling to his Turnberry resort on the west coast of Scotland, Trump suggested that his new baseline tariff rate that would apply to the rest of the world could double.

“I would say it’ll be somewhere in the 15 to 20 per cent range,” he said. “I sort of know. I just want to be nice. I would say in the range of 15 to 20 per cent – only one of those two numbers.”

This is borne out by the latest evidence.

The deal secured by Trump and EU Commission President Ursula von der Leyen imposes a 15 per cent tariff rate on exports to America.

It has already drawn criticism from German Chancellor Friedrich Merz and French Prime Minister Francois Bayro who say it amounts to a damaging submission from Europe.

BEST ‘BAD DEAL’ AVAILABLE

The 15 per cent tariff rate is lower than the 30 per cent threatened by Trump, but it still marks a major increase in the cost of trade even if the agreement averts a damaging Trans-Atlantic trade war.

For the Europeans, this was the best bad deal available.

Under the agreement, about 70 per cent of European exports will be tariffed at 15 per cent but US imports will not face any higher tariffs. In addition, the 50 per cent US tariffs on steel and aluminium will remain in place.

Free trade will be allowed for a grab bag of goods including aircraft parts, some agricultural products, select chemicals and critical raw materials. In addition, the EU will buy $750bn of US energy over the next three years and invest a further $600bn into the US economy.

President of the European Commission Ursula von der Leyen shakes hands with U.S. President Donald Trump during a meeting at Trump Turnberry golf club on July 27, 2025 in Turnberry, Scotland. Picture: Andrew Harnik/Getty Images)

Japan — a major United States ally in the Pacific — will also face a 15 per cent tariff rather than the higher 25 per cent rate that was initially threatened.

In addition, Japan too will cop the higher 50 per cent steel and aluminium tariffs, and has also agreed to plough $550bn in investment into the US economy while purchasing $100bn in US energy,

Australian Industry Group chief executive Innes Willox told The Australian that “the biggest risk in all of this is not that we are going to get a reduction (in tariffs). By far the risk is that we are going to see an increase in our baseline tariff.”

“The longer it goes, the more likely that scenario becomes. And ten per cent I think now is accepted as the absolute minimum. Nobody is going to get away with anything less than ten per cent,” he said. “I think there’s real concern that we’ll get lumped in with a range of others and get hit with 15 to 20 per cent across the board tariffs and whatever happens to specific sectors under section 232 tariffs.”

Innes Willox says ten per cent tariffs will be “the absolute minimum”. Picture: Aaron Francis/The Australian

While the ten per cent tariff for Australian businesses is more of an irritant than anything else, Willox said that tariffs of 15 to 20 per cent would start to have a “real impact.”

“The trend line is definitely towards a larger tariff, plus whatever happens in different sectors – pharmaceuticals, steel and car parts,” Willox said “History has told us that whoever becomes President in 2029 is unlikely to change that stance. We think this becomes the new normal.”

“Japan is a very strong ally of the United States and a very strong economic partner. It has been very heavily involved in negotiations with the administration – and this is the deal reached.”

“There’s no logical reason to think we are any different.”

The Albanese government is not taking its ten per cent tariff rate for granted. Nobody knows where the worldwide tariffs will land or what they will mean for Australia – including the Trump administration itself.