Australian businesses bracing for volatile new world with Donald Trump’s tariffs set to impact

The business community is bracing for a new world order, as the Trump administration demonstrates that Australia can expect no favours when it comes to imposing tariffs.

With last-minute entreaties failing to dissuade President Trump from his protectionist path, companies are now grappling with how to navigate a far more volatile world. Chief among their concerns is the impact on Australia’s largest trading partner, China, and the potential consequences of Trump’s “fair and reciprocal trade” plan, set to take effect on April 2.

Business Council of Australia chief executive Bran Black said while the failure to gain an exemption was disappointing, the government should adopt a “cool-headed response” and press ahead with extensive engagement with the US Administration to communicate the destabilising impact of tariffs on Australia and the global economy.

“It’s important to remember that it took eight months for the Australian Government to secure tariff exemptions under the last Trump administration — what this tells us is that these discussions are complex and that patience and persistence are key,” Mr Black said.

“My primary concern is with the broader trade picture and the risk that lies ahead for our economy if a global contest of reciprocal tariffs were to escalate.”

The immediate fallout from the tariffs, would be relatively limited, experts say. In 2023, the combined value of aluminium and steel exports to the United States was less than $1 billion, and Australian aluminium makes up 2.5 per cent of US imports by volume and about one per cent of Australia’s total exports, with steel less than half that.

Mark Thirlwell, chief economist at the Australian Institute of Company Directors, said while the metals industry would be affected, at just one per cent of total exports, the impact would be “pretty small”.

“The bigger implications for us at the moment are the ramping of tariffs on China, what that means for Chinese economic growth, and therefore for demand for Australian resources, the price of our commodities, and therefore our terms of trade,” Mr Thirlwell said.

China takes a third of Australian exports, while Asia accounts for 85 per cent of total export volume.

Mr Thirlwell was also concerned that there could be fresh tariffs under the US government’s “fair and reciprocal trade” plan, that was due to come into effect on April 2.

While the details of that plan have not been released, it is possible that Australia’s GST could be seen as a reciprocal tax, meaning the US could ignore the tariff free relationship under the two country’s free trade agreement.

“We have a free trade agreement, and we can’t get a carve out for an exemption for steel and aluminium. That tells me something interesting about where we’re at,” he said.

“It’s just very hard to figure out what is going on and that is creating this really big uncertainty shock.”

Longer term impacts were still to be calculated by the country’s major banks, who are waiting on further information.

National Australia Bank economists anticipate that the direct impact is currently relatively minor, pointing to a Chinese slowdown as a larger concern.

“More important are exposures via our trade with Asia, as well as the consequences for Asian and global growth and other indirect channels via financial markets,” the bank said.

One factor of concern is the potential for ‘trade diversion’ in the event of a US-China tariff deal. Last time President Trump was in power, China agreed to import $US32 US agricultural products in a deal to reduce trade restrictions. A similar deal could “divert demand away from Australia”, NAB said.

President Trump has also pledged to support US farmers with tariffs which could affect the $7b in AUstralian agricultural exports to the US, including our largest single export to the US, beef.

The National Farmers Federation said it was “engaged with politicians from both sides, including the Trade and Agriculture ministers, and through diplomatic channels” to ensure trade remained tariff free.

“The NFF supports a considered and measured approach being taken as officials work through this and any future developments,” president David Jochinke said.

As the 25 per cent levy went on aluminium and steel exports today, business groups called on the government to safeguard the industry.

“Obviously, this is a disappointing decision for Australian business and for Australian exporters. It will have some direct impact on those exports,” Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry told reporters in Canberra.

The ACCI has called on the Government to consider potential safeguards including anti-dumping measures to shield companies from the indirect impact of the US decision on aluminium and steel tariffs.

“Affected countries, if they can’t access the US market in the same way that they would like to, will look for other markets,” he said.

“There’s a risk that we could see increased pressure from imports coming to Australia.”

The steel industry, which employs 100,000 people generating $30b in annual revenue, is already feeling the impact of trade pressure on China with 86 per cent of steel fabricators forced to reduce their profit margins to compete with imported steel that was up to 50 per cent cheaper.

Far from the aluminium smelters and steel mills, the country’s top board members were digesting the news at the Australian Institute of Company Directors annual conference.

The growing uncertainty of a Trump-influenced world was the talk of the sidelines.

Alison Watkins, former chief executive of Coca Cola Amatil and now a director of Wesfarmers and CSL, as well as a board member of the Reserve Bank of Australia, said the imposition of tariffs on Australian steel and aluminium was unfortunate but now the industry would know what it would be dealing with.

The bigger challenge Ms Watkins said, was what would come next.

“It is the uncertainty that is created from the secondary or tertiary effects that are going to be hard to quantify and therefore hard to plan against. And business doesn’t like uncertainty,” she said.

The Wesfarmers director, who oversees operations such as Kmart and Bunnings, was starting to focus on what impact it had on the global economy.

“If there is a global slowdown then that will flow through to Australia,” she warned.

Melanie Willis, the chair of insurer QBE, who also sits on the boards of Challenger, Pexa and PayPal Australia said directors were increasingly focused on uncertainty, with board members ‘role playing’ extreme scenarios now part of the practice.

“In terms of tariffs and things like that, in some boards we do war games. So you say, ‘well, what happens if China takes Taiwan? What are we going to do?’, and you have different players in the board playing different roles, and it forces you to really think differently,” Ms Willis said.

Sally Loane, chair of Destination NSW, director of insurer Chubb and former chief executive of the Financial Services Council, said boards need to be increasingly across global events if they are understand the “whipsawing situation”.

“Geo-politically at the moment, the markets are going crazy. Things are changing from one hour to the next, and I think we need to be calm about that,” she said.

“You need to have a nimble mindset. If you’re a chair you talk to your CEO constantly, you talk to your other directors, probably weekly, particularly in an environment at the moment. So it’s not a ‘every six months or every couple of months board meeting’, by any stretch.”