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US President Donald Trump’s latest trade drama has seen him alienate close allies with 25 per cent tariffs on all goods from Mexico and almost all from Canada. China copped some similar tariffs with 10 per cent imposed on all goods.
The Australian government is concerned around 25 per cent tariffs on steel and aluminium imports that are supposed to come into effect from 12 March.
“It’s 25 per cent, no exemptions, no exceptions. All countries, no matter where it comes from,” said Trump.
However, Prime Minister Anthony Albanese announced not long after that Trump was considering an exemption for Australia.
Further, Trump has indicated intentions to impose tariffs across the board of 10–20 per cent on all goods from other countries.
The decision is still up in the air, but if the US goes through with the tariffs, the impact on Aussie business could be severe.
Not knowing is an issue in itself, with CreditorWatch chief economist Ivan Colhoun, saying: “Australian businesses have been doing it tough for a long time now, so we hope that the impacts of this week’s rate cut and the easing in inflation will quickly flow through to them. The big unknown, of course, is the impact of the Trump administration’s tariff regime.”
This comes as disappointing news as the same report revealed that businesses are having a more positive outlook than felt throughout much of 2024.
“After tough conditions during much of 2024, during which insolvencies, late payment times and trade payment defaults all rose, the data suggests Australian businesses had a slightly better end to the year,” said Colhoun.
“Positive developments in recent months include a strengthening in retail sales and consumer confidence, likely reflecting the continuing flow-through of the 1 July 2024 tax cuts to the economy, cost of living support and an ongoing strong labour market.”
The report said these positive trends could be ‘short lived’ amid the tariff drama, with Trump’s reforms “expected to hinder growth, particularly for export-reliant sectors such as manufacturing and transport.”
According to PwC, some of the potential impacts include:
- Cost of operations in the US to increase.
- Indirect impact through global supply chains.
- E-commerce shipments direct to US customers may slow and costs may increase.
- Compliance burden and cost to increase.
- Freight in a potential state of flux (again).
- Currency fluctuations.
- Australian-made an attractive alternative for US consumers.
- Australia could become a ‘dumping ground’ for excess stock.
Adding further trouble for Aussie businesses is the impact of the 10 per cent tariff placed on China. Grant Thornton said it will drive up costs for Australian manufacturers that rely on imported materials or components from these markets.
The flow-on effects could impact consumers, adding further strain on the economy that has only recently shown signs of a bounce back.
To prepare for potential impacts, PwC advised businesses to:
- Assess impact.
- Explore tactical customs strategies to combat rising costs.
- Review pricing and cost management.
- Consider freight contracting strategy.
- Manage currency fluctuations.
- Monitor latest developments and geopolitical shifts.
- Manage complexity through technology.
- Engage in policy advocacy.
