Just one day after the US Court of Appeals the Trump Administration鈥檚 of between 10% and 50% on nearly every country in the world, tariffs on all US imports of steel and aluminium will increase from 25% to 50%.
He told the rally of steel workers in Pennsylvania the increase would come into effect Wednesday US time.
Trump said the increase 鈥渨ill even further secure the steel industry in the United States.鈥 But Australia鈥檚 trade and tourism minister, Don Farrell, called them 鈥渦njustified and not the act of a friend鈥 and 鈥渁n act of economic self-harm that will only hurt consumers and businesses who rely on free and fair trade.鈥
There was hope Australia would obtain an from the original tariffs introduced in February. But it now seems clear Trump is intent on applying the tariffs across the board. And, unlike the Liberation Day tariffs, these are unlikely to face significant legal challenges.
So, how will the steel tariffs affect Australians? To understand this, it is important to understand how it will affect the US and its other trading partners.
The direct effect will be small
, the direct effect on Australian steel and aluminium producers will not be profound.
Only about 10% of Australia鈥檚 steel and aluminium exports, and less than 1% of its overall production, goes to the US. Australia鈥檚 own BlueScope Steel鈥檚 North Star mill in Ohio is actually set to from the tariffs.
But most Australians will feel the effects of the tariffs through the indirect effects on US manufacturing and America鈥檚 trading partners.
Impact on the US
We know a lot about how US manufacturing will be affected because this has all happened before. In 2002, on steel products, before withdrawing them less than two years later. And Trump imposed tariffs of 25% on steel and 10% on aluminium in his first term.
Research has shown the tariffs did US metal production but at great cost. In addition to increasing prices for US consumers, , the Bush steel tariffs reduced overall employment, as manufacturers that use steel as an input .
Further, while these tariffs were only in place for a short time, the affected US industries , and many never have.
The same thing happened with the tariffs from Trump鈥檚 first term, where any gains in steel and aluminium production were by losses in metal-consuming industries.
For Australians, this means many products we buy from the US are going to get more expensive. This includes vehicles and aircraft as well as machinery and medical equipment used by Australian producers. And if the past is a guide, many products will simply become unavailable.
Effects on trading partners
While Australia does not export large amounts of steel and aluminium to US, other countries do. The higher tariffs will further depress the Canadian and Mexican metals industries, which can affect Australian industry in several ways.
First, if North American consumers are buying less of everything, that reduces demand for Australia鈥檚 exports, both directly and indirectly as the reduced spending makes is way down the supply chain.
Second, the affected metals manufacturers will look for other markets for their products. Canada is not likely to flood Australia with cheap aluminium, but it may, for example, displace some of our exports to South Korea. And this is happening as the of excess steel capacity, driven in part by China鈥檚 outsized steel subsidies.
But this is not all bad news for Australians. While local steel and aluminium producers will suffer from the diversion of supply from the US, a temporary fall in prices would offer some relief after the post-pandemic .
Retaliatory tariffs
On top of all these effects are the effects of retaliatory tariffs by other countries, as the . Like the US tariffs, these tariffs will make consumers on both sides poorer, reducing demand for Australian exports. But they will open new markets as well. For example, China鈥檚 retaliatory tariffs on US almonds have caused a boom in Australian exports.
The big question for Australia is how this will affect the price of iron ore, by far our largest export. So far, . But if the latest salvo in Trump鈥檚 trade war causes the global economy to slow significantly, or if China backs off its steel subsidies, this could change.
State of uncertainty
And perhaps the most significant impact of the latest change in US tariff policy is the effect of ongoing uncertainty over US and global trade policy. Trade policy uncertainty and chills business investment.
Whether a business is considering a venture dependent on an input that will be affected by tariffs or, like BlueScope鈥檚 Ohio steel mill, might stand to benefit from US tariffs, the uncertainty over what the policy will be tomorrow, let alone five years from now, will make any company hesitant to commit major funds.
A case in point is Whyalla Steelworks, which has received a and is .
With Donald Trump able to upend the global steel industry again at any moment, buyers will be thinking twice before investing billions of dollars, which is bad news for nearly everyone, not least of which the residents of Whyalla, who await the fate of a major local employer.
, Senior Lecturer in Economics,
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