What Trump tariffs could mean for South Australia
The indirect impact on South Australian export markets comes from primarily two channels, writes Susan Stone.
When Donald Trump was elected, the world braced for a period of policy chaos. But it’s fair to say that the past several weeks have surpassed the expectations of even the most ardent ‘disruption’ supporters.
Trump’s strategy of “flooding the zone” – raising so many issues that it is impossible for the media to adequately cover them all, seems to be working. From painting over a “wall of diversity” at the FBI, to the creation of a US sovereign wealth fund, to CBS News handing over the raw footage of a former Vice President Harris interview, the daily proclamations, executive orders and legally questionable policy moves coming from the White House has been truly overwhelming with many stories barely touched on by the media.
Tariffs, however, remain an exception.
Since Trump first announced tariffs on Mexico, Canada and China it has been non-stop threats, reprieves and retaliation.
Currently, the only tariffs that have gone into effect are the 10 per cent additional tariffs on all Chinese goods (tariffs from the first Trump and the Biden administration remain in effect). China has retaliated with 15 per cent tariffs on US liquid natural gas and coal and 10 per cent on oil, farm equipment and large automobiles.
The most recent announcement is not on particular countries but for 25 per cent tariffs on all imports of steel and aluminium. These follow-on from similar tariffs Trump imposed in his first administration which Australia, and quite a few other nations, were able to negotiate exemptions. This time, however, things are different.
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First, as background, Australia exports very little steel and aluminium products as a share of total exports.
Steel in its various forms accounts for less than 1 per cent of Australian exports and aluminium only about 1.2 per cent (based on average sales over the last 10 years). The same can be said for South Australian exports of these goods. However, depending on the variety of steel and aluminium products, the US market accounted for as little as 2 per cent or as much as 88 per cent of sales in 2023. So, for a small share of exporters, the US market is a big deal.
So what are the chances that Australia can get an exemption for these tariffs?
Trump has stated that the exemptions made for the 2018 tariffs on steel and aluminium made them less effective. He also believes that some countries allowed China to use them for transhipment, thus allowing China to circumvent the policy.
For Australia, White House officials have pointed to the increased sale of steel and aluminium into the US market as a result of the current exemption while at the same time, benefiting from China’s huge demand for our iron ore. So it could be that South Australian exporters will need to deal not only with tariffs in the US market but also with reactions in other countries across the globe.
The indirect impact on South Australian export markets comes from primarily two channels.
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The first is if the US tariffs cause slower growth in major SA markets. China is the obvious one and South Australia sells almost all of its iron ore to China, much of its wine and a good share of barley and meat. Iron ore sales are expected to remain weak due to current slower economic conditions in China which are expected to last through 2025.
SA also sells a lot of beef to Korea and Japan both of whom sell a lot of steel into the US market and have large trade surpluses with the US. They may find it more difficult to negotiate their way out of tariffs, affecting their domestic growth.
Finally, after China, the US is South Australia’s biggest export market. This is mainly in agricultural products like beef and meat. But South Australian businesses also rely on the US market almost exclusively for other products like glass, fertiliser and some textiles. Any further restrictions will affect these sectors as well.
The other indirect effect is the potential for increasing competition in third markets.
If other exporters lose access to the US market they will be looking to sell their goods elsewhere. This goes beyond steel and aluminium.
Trump’s new reciprocal tariff policy is likely to impact many countries, including many agriculture producers. They will be looking for other markets to sell their goods which may impact South Australian farmers. Current agriculture conditions in SA are already dire, with the current output of major winter crops expected to be 35 per cent below their five-year average. Any increased competition that puts downward pressure on prices will only further hurt an already ailing SA agriculture sector.
While the direct implications for steel and aluminium tariffs on South Australia are small, the indirect effects could be significant.
These tariffs are scheduled to go into effect on 12 March. So, while we have some time to secure an exemption, the main question for South Australian businesses is: who else will get one and how will that impact their demand for SA products?
Susan Stone is the Credit Union SA Chair of Economics at the University of South Australia.
