Already and this is this is the Daily Oh, this is the Daily oas Oh, now it makes sense. Good morning and welcome to the Daily OS. It's Friday, the fourth of April. I'm Sam Kozlowski.
I'm Zara Sidler.
Yesterday, US President Donald Trump officially announced his Liberation Day tariffs and reciprocal tariffs on all imports into America. This includes a blankert ten percent tax on all Australian goods entering America, ending twenty years of tariff free trade between
our nations under a free trade agreement. Now, all of this comes in the first week of Australia's federal election campaign period, with both the PM and the Opposition leader explaining to Australians how they would approach our changing relationship with the US. This is a pretty significant economic shift that is going to impact Australia's economy, with some industries to be hit harder than others, is based on how
much they actually export to America. In today's podcast, we're going to explain precisely what these tariffs actually are, why they're being introduced, and what they mean for Australia's economy, but more importantly, our relationship with the US SAM.
As you've already foreshadowed, this is a huge economics story. It's going to fundamentally change economies around the world. And before we go into what Donald Trump's announcement actually is and what it means, can we just take a step back, give me a high level definition. What are tariffs and what are they intended to do?
It's the TDA way, isn't it. To just get off the bat. Understand the term we're talking about. So, a tariff is a tax on imports. When foreign made goods are brought into a country, the importer of those goods has to pay at tax, and the tax is collected by officers at the border. So literally, picture somebody at a shipping dock in the US collecting a payment to allow a shipment of goods to come in from earlier. Now,
tariffs can serve a couple of purposes. They can make imported goods more expensive, and that encourages citizens and businesses to buy locally produced alternatives instead. They also, of course, generate a whole new stream of revenue for the governments that collect them.
Okay, And so there are a bunch of different reasons why tariffs might be imposed. There might be dear political reasons, there might be economic reasons. What is the justification here from Donald Trump as to why he is implementing these tariffs.
So, Trump has consistently campaigned on bringing manufacturing jobs back to America and reducing trade deficits with other countries, and the trade deficit essentially means that another country is making more from its trade relationship with America than America is with them. Now, in his own words during the Liberation Day announcement yesterday, Trump said, for decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike.
Wow.
Now. One phrase that was particularly powerful yesterday was Trump's description of the day as America's declaration of economic independence. Ultimately, the White House believes that they're going to have significant financial gains from this, and they're going to protect domestic industries and force other countries to lower their tariffs on American goods. Now. It's worth noting that many economists disagree
with this assessment. They argue that tariffs often lead to higher prices for consumers.
And American consumers.
There exactly, and also for everyone around the world. It could lead to trade wars that harm global economic growth.
But obviously that's not the way that Donald Trump sees it. He's really positioning this as an America first. You know, even the language of Liberation Day, the day that he announced these tariffs, all of that is very deliberate language. Can you talk me through the exact announcement that we had from Trump yesterday?
So we had a couple of weeks ago an announcement that there would be an announcement, and so there was a type of announcement. There was a foreshadowing of Liberation Day. We didn't really have details.
Day is a really fascinating term.
It's so interesting to think about the theater of it all. Even in the way that the ceremony was staged. It was a major event really at the White House. We didn't have many details. We knew it would be relating to tariffs. Countries all around the world were trying to almost preempt what these tariffs would be, arrange meetings with the White House to try and negotiate separate agreements in
case it was globally applied. Sure enough, in this big ceremony on the White House lawn, Trump officially signed an Executive Order implementing global tariffs. So not one country outside the US was given an exemption, and the baseline is ten percent tariffs on all imports into the US and that is going to affect Australia. And we'll talk through how in a minute.
So just quickly, if you're an Australian business and you're exporting let's say, beef from the country into America, that's now going to be hit with ten percent.
Tax exactly, okay, and in many respects, and we can talk through this a bit more in a sect. That's actually the lighter end of the deal because a lot of other countries have been hit by what Donald Trump is calling reciprocal tariffs.
Just explain quickly what you mean by reciprocal tariffs.
So basically, those are tariffs on top of tariffs only for countries that have existing limitations on what American goods can be imported into those countries. So I'll give you an example, please do so China. Yeah, there's currently a sixty seven percent tariff on US goods that enter China. So for US exporter is sending stuff to Beijing. So Trump has applied a reciprocal tariff of thirty four percent on all Chinese goods that come into the US, on
top of the twenty percent that he's already announced. So Chinese goods now will face a fifty four percent tariff. That's a huge markup for American importers who want to import stuff from China, where a lot of goods and services are made. They're not the only ones that EU will pay an extra twenty percent on top of the baseline. Countries like India and Japan are going to pay twenty six and twenty four percent. And Trump said these reciprocal
tariffs were flexible, but not in the good way. He said that should countries that have reciprocal tariffs applied to them increase their tariffs on US goods in return to match it, he's going to raise US tariffs. And that quite simply is the beginning of a trade war.
Okay, So my understanding reciprocal tariffs is tit for TAD.
That's my comprehension. That's essentially the way it's going to work.
Yeah, it's really interesting, But I think it's also interesting to remember that certain countries, you know, their whole economies are based on their exports. That you know, this will have different implications for different countries. I do want to just bring this domestically though, because, as you said at the top, we are affected. Every single country is affected. Does Australia currently have any tariffs on US goods? Like, are we in this kind of reciprocal relationship here?
We don't have any tariffs on US goods. However, we do have some restrictions on importing certain products from America. And one example that you mentioned already is beef. So Australia has a policy that doesn't allow beef imports from the US. But that's because of strict Australian biosecurity laws, not necessarily.
Because those ads on the plane when you're landing.
Exactly think of the ad on the plane. So Australia is going to get still that ten percent baseline tariff even though we don't reciprocate that the other way, and.
We don't reciprocate that the other way, or we haven't traditionally, because we've had a free trade agreement which has meant that we don't have tariffs.
Exactly, and that's been in place since two thousand and five, and that's really important in terms of how we understand what this will change in the relationship between Australia and the US. I mean, this is a relationship that, sure there's that free trade agreement, but there's also a lot of shared defense goals and projects orcus the Quad. So there's some really interesting days and weeks ahead in terms of these two friends in the Australia in the US.
Now there's a bit of a strain on that relationship.
Yeah, and we know that Anthony Alberzi unsuccessfully reached out to Donald Trump for a meeting before the tariffs were announced, as I'm sure many other world leaders did, but Australia did actually get a mention in the Liberation Day speech. Yeah, it's not since Joe Biden forgot the name of Scott Morrison that we were this front and center in a kind of global news event. Talk to me about it.
Well, it was interesting because there wasn't sort of paperwork released by the White House before the announcement. There was one moment where Trump brought out a big placard that had the tariffs being applied to certain countries. I actually started zooming in on my screen to figure out how Australia would be impacted, and it wasn't on that board, but he did mention us by name. He mentioned us in relation to beef. Yeah, he said, they, being Australia,
won't take any of our beef. They don't want it because they don't want it to affect their farmers. And you know, I don't blame them, because we're doing the same thing right now.
Now.
There was a bit of confusion about whether this meant Trump would impose a reciprocal ban on Australian beef. Remember I said we ban American beef. The government has since confirmed the Australian meat is going to be subject to that ten percent tariff, not a full ban, okay, but that is still very concerning for our beef industry. The US is one of our major export markets there and Australian beef, as you mentioned, has been tariff free in
the US since two thousand and five. So this is a significant change.
Yeah, And we've spoken about beef now FA a few times on this podcast because it is going to be one of the hardest hit industries. What are some of the other industries that we can expect to feel the impact the most from this tariff announcement?
So beef is the top export to the US. Then you've got metals, including gold, where a big exporter of metals used for coins from American coins. You've got pharmaceuticals and you've got medical equipment, and those sectors are all going to be hit by that ten percent tariff. And it is worth noting on top of the ten percent that steel and aluminium were already hit by a twenty five percent tariff earlier this year, so there's going to
be now a bit of a compounding factor there. I think pharmaceuticals and medical equipment is going to be an interesting one because they're quite sensitive to price changes, and so it's going to be interesting to see if there's Australian pharmaceutical companies that are really impacted if American customers start not ordering their products.
Okay, so just to summarize what you've just said, our top import to the US is beef. That's going to be hit by the ten percent tariff, the same as everything else. The other industries are metals, pharmaceuticals, and medical equipment.
Is that right exactly?
And then on top of that we know that there are already existing tariffs, that twenty five percent tariff on aluminium and steal exports. Yeah, that we've spoken about before on this part, So it's going to be widespread, Okay, I understand, and clearly that will have an impact on our local economy. How have Australian leaders respond to the news.
Well, all of this is coming in the first week of the campaign trail and it's been a really interesting exercise where journalists in the press gallery, but also I think all voting Australians could look at these two leaders to see how they would respond to a significant curve ball. Why don't we start with what everybody had in common? So both Prime minist anth and the Auberneazy and Opposition
Leader Peter Dutton expressed concern about the tariffs. The PM said quite directly he was critical and said this is not the act of a friend and pointed out that the reciprocal tariff would be zero, not ten percent, given Australia's free trade agreement with the US. Then we heard from Opposition leader Peter Dudden. He said this is not
the treatment Australians deserve. He said the Coalition could have achieved a different outcome on tariffs had they been in government now, and he was particularly critical of the fact as you mentioned that the PM has failed to secure a phone call with President Trump within the past two weeks.
Yeah, I mean, probably not what they wanted on their bingo cards for this election campaign, but a really interesting one to keep an eye on. We've obviously focused here a lot on trade because that's the kind of clear area that will be most affected, but we do have partnerships outside of trade. Of course, we have defense partnerships We've mentioned Orcus for one. What impacts will this have on those sorts of relationships.
Well, it's going to be hard to tell until we get a real response from the government on if they would like to use the fact that America has defense bases in Australia or use the fact that you know, we are a close ally for them in terms of America keeping an eye on China as leverage to trying
to get those tariffs reduced. And you have to remember that this is a broad relationship, and in fact, America's got multifacted relationships with most countries around the world, And you're right, trade is just one aspect of this, and I wouldn't be surprised to see countries retaliating in ways that are not about trade. Could be about shared defense resources,
it could be about technology and intelligence. But the most important thing I think to take out of this is the signal from the US government that even close security partners aren't exempt from these sorts of penalties.
Sam, I do just want to end by asking, and you might not know the answer to this, but what sort of options does Australia have in its back pocket, no matter who the leader, no matter who the government of the day is, what sort of options do we have when responding to tariff announcements like this?
Well, I guess, to use your phrasing earlier, Zara, in the tit for tat kind of battle here, we could hit them back with what they've hit us with and do our own retaliatory tariffs. The Prime Minister was asked about that yesterday. He said that he would not do that and that it would create what he called a race to the bottom. He pointed out that Australia's trade with the US only accounts for about five percent of our exports overall, and that the strength of Australia's economy
is in the fact that we have diverse trading relationships. Now, what that ignores is the fact that it could be the weakening of other economies that we're much more reliant on, think China, India, Vietnam. If they become weaker because of a damaged relationship with us, we're going to feel that indirectly.
The biggest option available for the government is to try and solve this diplomatically, and they're going to try and negotiate exemptions based on the things that we've talked about, the strong relationships economically, but also in terms of defense.
The Trade Minister Don Farrell he already indicated he'll be reaching out to his American counterparts, and Australia's ambassador to the US, former Prime Minister Kevin Rudd, is definitely going to be working the phone to try and figure out how to get a negotiation meeting at the White House.
In the diary, so interesting, Sam, Thank you for taking us through that, so explaining everything we need to know, and thank you for joining us on this episode of The Daily OS that wraps up another week of Deep Dives. We love giving you the news. We hope you love this listening to it. We'll be back later today with the headlines, but until then, have a great Friday.
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