Tariffs - taxes on imported goods - have long been a blunt instrument in global trade, wielded to protect domestic industries or punish geopolitical rivals.
President Donald Trump’s “Liberation Day” tariffs, however, mark an unprecedented escalation.
Announced this week, the latest measures impose a 10% baseline tariff on all Australian goods with “reciprocal” levies as high as 49% (Cambodia) targeted at 185 countries.
Even poor old Heard Island near Antarctica, which is only inhabited by penguins, was slapped with a 10% tariff - who knew the US was such a big market for penguin manufactured exports?
Though Australia was spared the bigger end of the tariff stick, the fallout was immediate.
In early trade on Thursday, the ASX 200 slumped 2% wiping billions from market value, while sectors like tech and financials tumbled over 2.5%.
What’s the beef with Aussie beef?
Australia faces a 10% baseline tariff on billions of dollars worth of annual exports to the US spanning critical industries including meat ($4B), pearls, precious stones and metals ($2B) and pharmaceutical products ($1.4B) amongst others.
Steel and aluminium tariffs have already been applied, affecting local exporters.
Whilst Aussie pharmaceutical exports have avoided punishment so far, the sector has been flagged as a future target along with copper.
It appears though that the main source of US beef is with, well, Aussie beef.
The president has taken aim, querying why Australia can export billions of dollars of beef into the US market each year, yet won’t take any from the US.
Insert historical context here - Australia introduced a ban on US beef in 2003 to shield the local industry from mad cow disease.
But the president, as well as US farming groups, now want greater support after our local beef, desired for its high quality, has carved out (pardon the pun) a $3 billion market niche.
Both the Australian government and the opposition have said the ban on US beef imports would stay in place to protect our agriculture industry.
Retaliatory measures loom?
For Australia, the tariffs amplify existing vulnerabilities.
Consumers face higher inflation, while exporters grapple with squeezed margins.
Goldman Sachs has warned of “modest” direct impacts but cautions that global recession risks could derail Australia’s commodity-dependent economy.
The Albanese government has vowed to lobby the US government, rather than apply retaliatory measures, but could resort to other ‘sweeteners’ such as providing greater access to our mineral resources should diplomacy fail.
The EU and China on the other hand, have already vowed retaliation, threatening $600 billion in tit-for-tat measures.
As ING’s James Knightley notes, reshoring US production is a “long-term dream” — but the immediate reality is inflation.
The US itself risks a 2.5% price surge, while lower-income nations face destabilising capital flight.
Trump’s gamble assumes a strong dollar will offset costs, but with the currency weakening, the burden falls on US importers and, ultimately, consumers.
Pathways through the storm
Australia’s survival hinges on diversification.
Accelerating trade pacts with India and ASEAN nations could help offset US losses.
When China banned Australian lobster imports after the Australian government demanded an inquiry into the origins of Covid-19, Australia pivoted to India.
Domestic industries could adapt: larger miners could pivot to processing critical minerals locally, adding value before export.
Yet challenges abound.
Cheap imports, diverted from tariff-burdened markets, may flood Australia, undercutting local manufacturers.
The EU’s surplus steel or China’s excess electronics could depress prices, straining industries already battling high energy costs.
Policymakers must balance open markets with safeguards to prevent dumping.
For Australia, the path forward demands agility: nurturing new markets, investing in value-added exports, and shielding vulnerable sectors.