Treasurer Jim Chalmers faces delicate call as he attempts sway US policy to protect Aussie super accounts

Jim Chalmers is looking for a win for Australian superannuation investors, with Donald Trump’s controversial revenge tax on foreign investment the key talking point of his meeting with US Treasury Secretary Scott Bessent.

Given it’s highly unlikely the President will give up on his obsession with tariffs, protecting returns for Australian retirement may be the best Dr Chalmers can hope for.

Donald Trump’s Big, Beautiful Bill, before US Congress, is laden with Budget-busting tax cuts that would pump the US debt to over 100 per cent of GDP.

Tariffs are one of the tools Trump hopes will claw back the loss of revenue, while another is the so-called Section 899 — a policy that has also been called the “revenge tax”.

The US is justifying the tax by saying it compensates for Australia and Europe putting in minimum tax rules for multinationals in a bid to stop big firms from shifting profits to tax havens.

Australia’s News Media Bargaining Code, which required tech firms such as Alphabet (Google) and Meta to compensate publishers for displaying their content, is also in Section 899’s crosshairs.

As the largest, most liquid market, the US is “the cornerstone” of the $4.7 trillion super industry’s international exposure, according to the Association of Superannuation Funds of Australia.

ASFA estimates the imposition of the revenge tax could significantly reduce returns — 0.1 per cent per year in the base case scenario of the tax rising from 15 to 35 per cent, or as much as 0.26 per cent if the tax is raised to 50 per cent.

The 0.1 per cent might seem like small beer, but could add up to tens of billions of dollars of lost returns per year for Australian investors.

Dr Chalmers thinks he has convinced Mr Bessent that the tax is a bad idea.

“We do not want to see our investors and our funds unfairly treated or disadvantaged when it comes to developments out of the US,” he said.

“I’m very grateful to Scott Bessent for hearing me out and for also undertaking to make what progress he can to try and resolve these issues. I’m confident he understands these issues. We hope for some good developments on this front in the coming days — if not the coming days, then certainly the coming weeks.”

The Financial Services Council welcomed news of a resolution, saying the tax would discourage superannuation funds from investing in US markets.

“This is an urgent priority that requires immediate and ongoing engagement,” FSC chief executive Blake Briggs said.

But extracting a concession on behalf of Australian investors might obviate the Government’s other big sell to get off the tariff hook.

Ambassador Kevin Rudd has been trying to convince the administration that Australia is a major investor in the US via super and should be seen as an economic partner that deserves tariff relief.

That didn’t help the UK, which invested £1 trillion in the US in 2022, and whose trade concessions still left it with the same 10 per cent flat tariff rate that Australia is subject to.

They did extract concessions on steel, which Australia would also be hoping for.

Britain has also refused to eliminate its tax on top tech firms such as Alphabet, Amazon and Meta — a tax the US called “discriminatory (and) unjustified.”

The other bargaining chip Australia is trying to play is our critical minerals. With China withdrawing access to these essential building blocks for advanced technologies, Australian resources could be a concession winner, and came up for discussion.

Based on Dr Chalmers’ press conference, however, it doesn’t look like there’s any wriggle room to escape tariffs.

While Australia’s exports to the US are a fraction of those going to China, we still exported $37 billion worth of goods there last financial year. In Dr Chalmers’ 1200-word opening statement, the “T” word only came up twice.

“I made our case once again when it comes to trade and tariffs and these escalating trade tensions around the world,” he said, before pivoting to the Middle East and growing global economic instability.

With a meeting between the Prime Minister and Donald Trump nowhere in sight, the Treasurer might find himself wedged between the all-powerful super funds with their ties to the union movement, and the media he craves.

Australia was a world leader in implementing a levy on tech companies, raking in $200 million in annual payments from Alphabet and Meta that supported newsrooms across the country via the News Media Bargaining Code. Meta has already pulled out of the code, while Google has said it will halt payments to 24 smaller publishers in July.

So far, the Government’s new mechanism — a “news bargaining incentive” — is still under consideration, firmly in the “to-do” pile of Assistant Treasurer Dan Mulino.

But if Mr Bessent tells the Treasurer he can choose between $200 million for publishers and tens of billions for super balances, Dr Chalmers might find himself painted into a corner in the Art of this Deal.

Australian investors have already been wary of putting cash into America on the basis of Section 899, but the slowing US economy may also be playing a part.

Trouble at home for Trump

While Mr Trump looks likely to keep the screws on Australia, his own consumers are becoming increasingly squeezed.

While Australia continues to press the US for ways to better integrate economically, America’s act of economic self-harm appears to be deepening.

Overnight, economic data from the US all pointed in the wrong direction.

Consumer confidence took an unexpected downward turn in June, as concerns about a slowing economy and a weakening job market as a result of tariffs started to weigh.

Expectations about the next six months fell by the most in two years, according to the US Conference Board, while the gauge of present conditions also fell sharply.

Consumer sentiment had rebounded from a six-month decline in May on hopes the tariff pause would stick.

The impact of tariffs may finally be starting to filter through, with recent manufacturing surveys showing higher input costs are being passed through to consumers.

Nervousness meant consumers were less inclined to buy big-ticket items, something that is already being reflected in falling retail sales in May.

Consumer expectations about the job market are also down, with just 30 per cent of survey respondents saying jobs were plentiful — the lowest level in more than four years.

The pain of economic uncertainty also appears to be weighing on mortgage holders. With interest rates stuck at their peak as the US Federal Reserve chairman holds off on cuts for fear of compounding the inflationary effect of tariffs, mortgage holders are increasingly underwater.

According to The Wall Street Journal, the number of homeowners whose homes are worth less than their mortgages passed half a million — the highest April reading in five years. Areas most affected include Trump-voting states Texas and Florida.

Perhaps the only person with leverage over Mr Trump right now is Fed Chair Jerome Powell. Overnight, he told Congress he was not prepared to cut rates until he sees where inflation-boosting tariffs will settle — although he is prepared to cut as soon as the picture is clearer.

Dr Chalmers can at least be happy with Australia’s inflation on two fronts. A reading well within the Reserve Bank’s range has increased the chance of a rate cut next month and gives breathing room for bolder action on the back of August’s “economic reform” roundtable. Note the change in language — just two days ago the focus was productivity; now it has broadened.

Australia will need all the economic resilience it can find as the US keeps the world on its toes.