No, Australia isn’t immune to Trump trade war pain
In a hectic 24 hours of trade diplomacy, US President Donald Trump has paused his threatened 25% tariffs on US imports from Canada and Mexico, while keeping 10% tariffs on imports from China.
Australian companies with operations in Canada or Mexico, such as Rio Tinto, whose Canadian operations export billions of dollars of aluminum to the US, have won a temporary reprieve. But the risk of weaker economic growth in China will weigh heavily on companies that export to our largest trading partner.
And Trump has hinted all US imports of aluminum and copper, including from Australia, may be his next target. The Treasurer Jim Chalmers said on Tuesday (February 4) that although Australia is not immune when there are escalating trade tensions, “we are pretty well-placed to navigate them.”
However, even if Australia manages to stay out of Trump’s sights, Australians cannot expect to come out of a trade war unscathed. Due to the complexity of global supply chains, it is difficult to predict exactly how Australia would be affected, but here are a few key factors that would likely come into play.
About 40% of Australia’s exports go to China, making it the biggest destination by far, according to data for 2023 from UN Comtrade. Most of this is Australian iron ore and other minerals that are used in China’s construction and manufacturing sectors.
If Trump’s tariffs further slow the already sluggish Chinese economy, this will reduce demand for the goods it buys from Australia.
If China’s demand for iron ore falls significantly, this will not only hurt the Australian mining sector, but it also could trigger a fall in the Australian dollar, making the things Australians buy from abroad more expensive.
But the size of the impact of the