Australia still in the dark on reprieve as Donald Trump trade taxes due to strike in two days

Just hours before Washington’s axe falls on Australian steel and aluminium companies, the Government is still in the dark about whether it can snatch a precious reprieve from punishing 25 per cent tariffs on imports.

“All the portents suggest the chances of getting something are less than 50:50,” said Arthur Sinodinos, former Ambassador to the US from 2020 to 2023, and one of the few senior Australian officials to have seen the inner workings of a Trump White House up close.

As the Albanese Government scrambles to make headway with the mercurial new Trump administration, the one-time Liberal Senator and long-running chief of staff for Prime Minister John Howard said major ideological obstacles were strewn across their path.

“Within the administration, there’s quite a strong group around people like Peter Navarro, the trade and manufacturing advisor, who don’t want any exceptions. It looks like the commerce secretary may be in that camp as well,” he told The Nightly.

An embassy-led push to shield Australian business interests and high-level talks between Treasurer Jim Chalmers and his counterpart Scott Bessent, the treasury secretary, have yielded nothing since hopes were raised in a friendly February phone call between Prime Minister Anthony Albanese and US President Donald Trump.

Mr Trump promised to give “great consideration” to an exemption based on Canberra’s persuasive arguments that Washington has a trade surplus with Australia, also a trusted security ally in the strategic Indo-Pacific region.

Four weeks on and Canberra has been unable to advance its cause.

“They’re convinced that they need high tariffs to promote manufacturing and industry in the US, that they’ll generate revenue out of the tariffs, and that last time, by having exceptions, they negated the effect of raising tariffs,” said Mr Sinodinos on the Trump team’s reasoning.

Overcoming this hurdle would be difficult if Mr Trump’s inner circle decided to “take a blanket approach,” he said.

Over time it may be possible to negotiate a carve out, “but I don’t know the Americans would be keen up front to say there have been exemptions,” he added.

“From their perspective, they want the maximum impact of what they’re doing.”

But the harsh reality of an emboldened Oval Office with fewer guardrails has not stopped the eruption of a domestic political stoush on the eve of the Federal election.

The Prime Minister last week accused the Liberals of “cheering against Australia’s interest” as they warned failure to secure an exemption would be on his head.

“Instead of squibbing it, the PM’s got to step up to the plate,” Opposition Leader Peter Dutton hit back on Sunrise on Tuesday.

“I just say to the Prime Minister, get your skates on and sort this out!” he said in a later press conference.

The Prime Minister, Treasurer, Foreign and Trade Ministers had to pick up the phone to their counterparts to protect Australian industries and jobs, he said.

“Don Farrell is a nice person, but he hasn’t done anything since he’s been a Trade Minister,” Mr Dutton claimed.

Mr Farrell has not personally gone to DC to speak with wealthy financier Howard Lutnick, after promising to hold talks with the former Cantor Fitzgeral CEO following his confirmation as commerce secretary on February 18.

The Nightly contacted his office for comment.

Last week Mr Farrell said there had been regular conversations between Ambassador Kevin Rudd and Mr Lutnick, who had also attended a DC-based Australian superannuation fund summit.

Mr Farrell has spoken with steel and aluminium companies and dispatched senior officials to Washington.

But his own trip was reportedly derailed by Senate estimates hearings, the Treasurer’s visit and by expectations of a now-delayed election campaign.

After Mr Rudd was unable to score a breakthrough with Mr Lutnick on Saturday morning, Mr Farrell told The Australian on Monday he would not be rushing to Washington to make an eleventh-hour plea for tariff relief.

“I certainly won’t be going in the next three days,” he said. “I’m watching intently what’s going to happen over the next three days and then we’ll make some decisions.”

Those decisions will most certainly consider what happens on April 2 when the White House is due to unveil recommendations for tailored “reciprocal” trade duties on countries around the world.

In Mr Sinodinos’ view, Mr Farrell would “definitely” get an audience with Mr Lutnick if he flew to Washington.

But Australia’s negotiating options are limited after the government already ruled out retaliation.

The advice from the Canberra bureaucracy had been that it “imposes more costs than benefits to retaliate, particularly as we’re a small trading country,” said Mr Sinodinos.

“I don’t think they want to make us look as if we’ve sullied our free trade credentials too much.”

Former Prime Minister Malcolm Turnbull, whose awkwardly-timed truth bombs that world leaders should not behave like a “conga line of sycophants” prompted a furious response from Mr Trump, said Labor would struggle to achieve the exemptions he achieved in office.

Circumstances had changed and “we have to face up to that”, he told ABC radio.

“Albanese and Kevin Rudd in particular, in Washington, have done ... as a good a job as they can in making the case. But I think on this occasion, they’re very, very unlikely to be successful,” he said.

Australian Industry Group chief executive Innes Willox said it was a “very different situation to the last time we faced US tariffs” and advised the government “step carefully through this. Any perceived slight or antagonism will not help our cause,” noting Mr Trump’s reaction to Mr Turnbull’s comments.

He warned carving out an exemption would “not be straightforward.”

“Last time we did not get a country exemption but the product lines were limited which had the same effect. This time the proposed tariffs are more expansive and complex,” he said.

Mr Willox said it would “crazy to navigate” the percentages of steel or aluminium that make up a proportion of a product.

“Think of the amount of aluminium in a fishing rod, whatever percentage that is, it will incur the tariff increase.”

Former Obama administration Under Secretary of Defense Michèle Flournoy said that Australia was in a better position on tariffs than other nations.

Speaking at the Australian Industry of Company Directors conference, Ms Flournoy, who co-founded strategic advisory firm WestExec Advisors told attendees that Australia’s long standing trade deficit with Australia would work in its favour.

The first question Trump asks, is ‘what is the trade balance?’. When the answer is deficits, then you are in the crosshairs. That is not the case for Australia.

“You’re not going to be a target for that reason. And you’re doing extraordinary things for defence. You are in very positive situation. It’s not a guarantee but it reduces the likelihood you’ll be directly a point of focus.

“That said you’ll be affected by all the second and third order effects on the global economy,” she said.

Australia’s steel and aluminium sectors were nervously awaiting news on how the tariffs were likely to fall, with representatives keeping their cards close to their chests for fear of upsetting any last minute negotiations.

“We know the Australian Government is working with the Trump administration to ensure the best-possible outcome for Australian steel,” an Australian Steel Institute spokesman said.

The steel industry, which exports approximately one per cent of its output to the US was particularly worried about the second or third order effects of tariffs on China, pointing out that additional tariffs might lead to dumping below cost steel in Australia.

Last year, a survey of Australian steel fabricators found 86 per cent were forced to reduce their profit margins to compete with imported steel that was up to 50 per cent cheaper.

Locally produced steel generates more than 100,000 jobs and $30b in annual revenue in Australia.

Aluminium, which is Australia’s top manufacturing export, was also at risk from the 25 per cent tariff.

According to the Australian Aluminium Council, Australia exports approximately 10 per cent, or 150,000 tonnes of production to the US, accounting for 2.5 per cent of total aluminium imports by volume. At the current price of $US463 per tonne, that would equate to $1.1 billion dollars.

According to Marghanita Johnson, CEO, Australian Aluminium Council, the industry will “we are still working to understand the impact of tariffs on Australia’s aluminium trade…(and) will continue working with the Australian government and its representatives on this important issue.”

The agricultural sector is also in the potential firing line with Donald Trump turning to Truth Social on 3 March.

“To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States,” Trump wrote.

“Tariffs will go on external product on April 2nd. Have fun!”

That would severely impact Australian agriculture, which exported almost $7 billion in products to the US in 2023-24. Thirty per cent of Australia’s beef and sheep exports go to America, an export market worth more than $2 billion in 2024.

The tariff impact will be felt disproportionately across the industry, with the US accounting to 80 of Tasmanian beef exports, compared to just 14 per cent of Western Australia’s.

The US takes almost 50 per cent of South Australia’s Sheep meat exports, whereas it is just 10 per cent of WA’s.

Matt Dalgleish, market analyst at Episode3 said that a potential 25 per cent tariff on agricultural imports would be borne by the US consumer, who may decide to switch to cheaper meats like chicken of pork. The US cattle industry has been in a long-term cyclical downtrend due to poor weather, with the national herd at its lowest level since 1959. That has supported Australian exports to the US.

The National Farmers’ Federation said that Australia must remain an open trading nation with 70 of farm output destined for overseas markets.

“The NFF has for decades advocated for policies that facilitate free and fair trade, recognising that such an environment supports not only Australian agriculture but the global economy at large. We will continue to do so in tandem with the Australian Government and our member organisations,” NFF president David Jochinke said.

The grain industry said there would be significant global ramifications, and with up to 75 per cent of grain going to exports, the sector was heavily exposed to external shocks.

“Protectionist policies threaten to disrupt international trade flows and place additional pressure on Australian grain exports, which are already exposed to the impacts of global market volatility,” GrainGrowers General Manager, Policy and Advocacy, Zach Whale said.

“Rather than waiting for a market disruption to occur, proactive investment and action by the Australian Government can help mitigate risk and deliver real long-term returns to the industry.”