The Trump administration has confirmed that Australia will not be granted an exemption from US tariffs on steel and aluminium, dealing a blow to diplomatic efforts by the Australian government.
The tariffs, which take effect Wednesday local time, impose a 25% duty on imported steel and aluminium as part of President Donald Trump’s “America First” trade policy. While Trump had initially indicated he would consider exempting Australia, White House spokeswoman Karoline Leavitt told reporters on Tuesday:
“He considered it, and considered against it. There will be no exemptions.”
When asked for further clarification, Leavitt said simply: “America First steel.”
Australia’s Case for an Exemption Rejected
The Australian government had lobbied intensively for an exemption, arguing that Australia—unlike most other countries—typically runs a trade surplus in favour of the US, meaning the US exports more to Australia than it imports.
However, despite a 40-minute phone call between Trump and Prime Minister Anthony Albanese in February and in-person efforts by Australian ambassador Kevin Rudd and Treasurer Jim Chalmers, Washington remained unmoved.
The push for an exemption was further complicated by Trump’s trade adviser, Peter Navarro, who claimed Australia was “killing American aluminium” by flooding the US market with exports.
A similar exemption was successfully negotiated by then-Prime Minister Malcolm Turnbull in 2018, but his recent public criticism of Trump appears to have hurt Australia’s case. Trump recently called Turnbull a “weak and ineffective leader” and dismissed his efforts.
Economic Impact and Global Trade Risks
The immediate economic impact of the tariffs on Australia is expected to be modest, as the US accounts for only about 10% of Australia’s aluminium exports.
However, wider concerns stem from the potential for a broader trade war. Richard Holden, an economics professor at UNSW, warned that the global economic shock from Trump’s aggressive trade policies could be far more damaging than the direct impact of the tariffs themselves.
“I think the market’s reaction is that this Trump administration does seem different from last time, and it doesn’t seem like it’s all just bluster,” Holden said.
The Australian Treasury and the Reserve Bank have both modelled scenarios showing that US tariffs and likely retaliatory measures from other nations could result in a moderate hit to Australia’s economic output.
Australian Steelmakers and Exporters React
While some Australian exporters, such as BlueScope Steel, may be partially shielded due to their existing manufacturing presence in the US, other producers will have to either absorb the tariffs or find alternative markets.
Australian steel and aluminium exports to the US were valued at around $A793 million last year, a fraction of Australia’s total export volume. However, the bigger risk for Australian industry is that other major exporters, such as China, could divert their tariff-hit products into the Australian market, undercutting local producers.
Australia Weighs Next Steps
Despite the setback, Foreign Minister Penny Wong has indicated Australia will continue pushing for an exemption, though she acknowledged it “may take longer” than it did in 2018.
However, some economic experts have cautioned against retaliatory tariffs on US imports. Treasury Secretary Steven Kennedy recently warned that Australia would “bear nearly all the cost” if it imposed reciprocal tariffs, as higher import prices would ultimately be passed on to Australian consumers.
Trump Expands Tariff War
The Australian setback comes as Trump ramps up his tariff war globally. Earlier on Tuesday, he announced a doubling of tariffs on Canadian steel and aluminium to 50%, escalating tensions between the two North American allies.
Trump has also vowed to expand tariffs to other industries, including agriculture and pharmaceuticals, further rattling global markets.
