‘Hard as we can’: How Australia can fight back against Donald Trump’s brutal tariffs
Donald Trump has hit us with a brutal tariff as he tries to tear down the global economy. We can accept the abuse. Or we can hit back.
Economy
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COMMENT
Australia has been hit with a 10 per cent tariff as Donald Trump’s chaotic “liberation day” tries to tear down the global economy.
Mr Trump held up a sign as he announced the tariff, a sign that accused Australia of putting a 10 per cent tariff on the US.
Of course, under our Free Trade Agreement with the United States of America, we can do no such thing.
He said tariffs were in response to running a trade surplus with America (selling them more than we buy). But we have a trade deficit with America.
“Do not retaliate,” said US Treasury Secretary Scott Bessent.
This is how abusers operate.
They attack you, they lie to you, and then if you respond, they blame you.
We face a choice as a nation.
We can accept the abuse.
Or we can fight back.
The retaliation menu
My first four ideas are as follows.
1. A $1-million-a-day charge on Facebook for operating in Australia.
2. A $50,000 tariff on every Tesla sold.
3. A ban on the Tom Cruise Mission Impossible movie that is scheduled to open soon.
4. A $1 million tariff on every RAM truck.
We need to hit the parts of the American economy that backed Mr Trump – Elon Musk and
Mark Zuckerberg.
We need to hit the culturally powerful parts – Hollywood and Silicon Valley.
And we should take the chance to hit the annoying parts – massive trucks and stupid sequels.
These are just a few ideas to get the ball rolling.
What’s really noticeable about Donald Trump’s trade war is he only focuses on goods. America does run a goods trade deficit. They import loads of oil and food to fuel their giant consumer economy.
But America runs a huge trade surplus in services.
Facebook, Google, Netflix, app stores, movies, hotel brands, Amazon, banks and more – all these services companies and industries make far more money from the rest of the world than the rest of the world makes from America.
Hitting America in the services sector is clever.
Yes, it would suck if the Australian government shut down Netflix before you finished watching Adolescence.
It would sting if Hilton Hotels had to pay a tax per room per night, Starbucks was stung per terrible coffee sold or Fitbit got pinged for every day an Australian counted their steps on their watch.
But this pain need only last as long as Mr Trump’s unprovoked tariff attack on us does.
What is Trump’s plan?
A tariff means any Australian export to America will have to pay a 10 per cent tax.
Some of our biggest exports to America are gold and meat.
So if, for example, you’re a cattle farmer, you will now have to pay a $100,000 tax on every million dollars of exports to the US.
That money goes to the US government.
The exporting company tries to make up for it by raising prices in America.
But of course raising prices reduces sales.
So in the end, a messy compromise is reached: Prices go up by less than 10 per cent, sales fall a bit, consumers pay higher prices and the company has lower revenue.
As a result of lower sales and higher taxes paid, profits fall.
American consumers suffer and Australian companies suffer, but the US collects a bit more tax.
Australia’s tariffs are comparatively light.
Other countries are getting hit far harder.
China is getting 34 per cent tariff on top of existing tariffs.
Malaysia is getting an extremely unpleasant 49 per cent.
Vietnam gets 46 per cent.
These are brutal figures for countries that depend on trade with the world’s biggest nation.
If we go into world recession, South East Asia will be at the epicentre.
And what’s the point?
A trickle of revenue for America?
The world has experimented with tariffs a lot.
We found they make everyone worse off.
It’s just a bad way of raising revenue.
That’s why the world worked so hard over half a century to dismantle them.
Work via the World Trade Organisation and via a lot of Free Trade Agreements.
Work that has now been undone.
Mr Trump’s liberation day is a day of destruction and we need to fight it as hard as we can.
Jason Murphy is an economist | @jasemurphy.bsky.social. He is the author of the book Incentivology
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