Australia’s steel and aluminium industries are set to be on edge for the next month following American President Donald Trump’s recent announcement of his intention to introduce blanket tariffs on the materials from around the world.
Should these tariffs come into effect, importers will be forced to pay an added 25 per cent tax on the commodities. The intention is to increase manufacturing in the United States, but in reality, it could have wide-ranging effects on supply chains across the globe.
Australia will be far from immune to these ripples, which will be felt through the mining, transport, smelting and manufacturing industries – along with many more.
Although the United States is far from the biggest importer of Australian metals, it is by no means a small player in the game. The United Nations Comtrade database states Australia shipped roughly $237 million worth of steel and iron products to its ally in 2023, and $275 million worth of aluminium in 2024.
Compared to the nation’s overall $366 billion mining export trade though, it’s a drop in the ocean.
That being said, a potential $600 million hole in Australia’s economy is not a concept anybody wants to face, and with plans continuing to implement a live sheep export ban it could be another wave that rocks the boat and further knocks the transport sector off balance.
For better or for worse, we’ve been here before. Trump enacted a similar policy during his first presidency term, with then-Prime Minister Malcolm Turnbull and the Australian government able to secure an exemption from the tariffs.
In fact, this potential tariff also pales in comparison to the trade restrictions China – Australia’s biggest consumer of iron, steel and aluminium products – placed on the country in 2020 in response the Australian government’s inquiry into the origins of COVID-19.
Australia’s strong trade ties with China have even been further strengthened in recent days following the signing of a strategic agreement between logistics companies Team Global Express and SF Express to create a more transparent relationship between the nations.
Western Roads Federation CEO Cam Dumesny admits any introduced tariffs would be far from ideal for the Australian transport industry, but he believes the sector could successfully pivot into new and different markets should Australia’s export of the key metals to the United States dip.
“Iron ore underpins the bulk of the steel sector. Economically it equates to about 20 per cent of Australia’s exports,” Dumesny tells ATN.
“The iron ore will continue to ship out and go to different markets, and we’ve done this before with aluminium exports when China whacked big hits on us.
“Particularly in WA we found alternative markets to continue to supply. It may have caused some disruption, but in the big scheme of things companies found new markets for their products.
“When you look at the parallels when China brought in those trade restrictions, we survived that, and China is by far a larger economic trading partner than the US is these days.”
Any restriction on Australian trade into the United States would be a huge departure from the current status quo. The two nations currently enjoy a free-trade deal in which over 96 per cent of Australian exports to the United States are done so tariff free.
While Australian Prime Minister Anthony Albanese is pursuing a tariff exemption, similar to that in 2018, there is no guarantee Australia will receive any favour this time around, but there’s also no guarantee it is going to be slugged with the tariffs either.
Albanese fronted the Australian media on Tuesday morning following a 40-minute call with the US President, and stated “an exemption was under consideration”.
Prior to the announcement of the tariff plans, this meeting was likely not under consideration. It was a quickfire response to an unseen economic strongarm attempt.
Senior Strategic Advisor at supply chain innovator TMX Transform Bruce Herbert spent over 20 years as a key player in Coca-Cola’s supply chain and logistics operations.
He believes the quickfire announcement of the potential tariffs was made by President Trump to sow a feeling of uncertainty in international circles.
“The super objective Trump has here is to get everyone offset and on the edge of their seat,” Herbert says. “He’s achieved that.
“He wants everyone on edge waiting for his phone call because that puts him in a power seat. It’s about making people aware of him and afraid of economic instability.
“If the intention of the tariffs is to create uncertainty in global markets, then it’s going to be successful.
“If you’re in the boardroom of a big Australian metal producer, logic would say you’re going to be holding on to see what happens, and that will trickle down.
“Then, if I’m an industrial user in the US buying aluminium or steel, I’m sitting back and not signing any contracts until the immediate future becomes clearer.
“It gives American businesses a bargaining chip over their suppliers, whether they’re in Australia, Brazil or elsewhere.”
The United States currently enjoys are large surplus in the existing free trade relationship, and should the tariffs come into effect Dumesny says there could be impacts considerably further along the production line than basic commodities import and export.
“One key impact area could be agricultural machinery,” Dumesny continues. “The US makes a lot of ag machinery, and we import it, but if the cost of steel production and steel inputs into the United States rises 25 per cent then that’s going to increase the cost to make the farm machinery that is subsequently exported back to us.
“So ag producers and others are going to start looking around for alternative, cheaper sources of supply for their ag machinery.
“That’s something that could also trickle into the truck market.
“To be honest, when those steel tariffs were whacked on in 2018, they were quietly let go within 12 months. There was a bit of a spike in US steel production, but then it collapsed again.”
Any potential impacts, though, do have the potential to hit a broad range of Australians. It won’t just be the mining, transport and shipping companies. It could well be the everyday citizen.
“If the worst happens and you take out the smelter in Newcastle that works with aluminium, that accounts for about 10 per cent of New South Wales’ electricity consumption,” Herbert continues.
“If that were to close – and right now there is no suggestion it will, but it’s not super healthy – that could raise electricity prices.
“Big industrial users like aluminium smelters actually underpin a lower electricity price.
“These large industries were getting long-term contracts at really low rates because they were using a ton of electricity, and they used it consistently and 24/7. But now, US energy prices are already 30-40 per cent lower than Australia because the only thing they’re interested in is getting the cheapest energy they can possibly get.
“From an industrial point of view, this is another nail in the coffin. It’s another pressure to Australian high-consumption industries. If you add tariffs to these higher energy costs, in all probability it will flow back into a higher electricity crisis.”
In addition to the 25 per cent steel and aluminium tariffs, the United States is exploring the possibility of adding a blanket 10 per cent tariff on all goods being imported into the country.
There is plenty of water still to cross under the bridge until they come into effect on March 4, so until then it’s business as usual for the Australian transport and commodities sector but, according to Dumesny, many companies will have one eye on alternative arrangements should Australia fail to secure an exemption.
“The biggest threat is always going to be the threat to iron ore,” he says. “Iron ore underpins not just the Western Australian economy, but the Australian economy.
“China produces infinitely more steel than the United States and pretty much everyone else combined. How it impacts Chinese steel production is likely the biggest threat to us.
“We’ve got some really high-quality steel fabrication in Australia, particularly in WA, so our iron ore and steel markets will generally be able to find new markets relatively easily.
“Aluminium is also in demand for just about everything, so I’m pretty confident they’ll find new sources of supply for Western Australian produced aluminium, and that will flow back into transport companies.
“Transport will likely continue as normal, but the likely shift in where it’s being exported to is a reminder of how we need flexibility in all our freight systems, whether that be road, rail, sea or air.
“I think we just have to accept this is the new volatility in the US political scene. Transport companies, suppliers, customers, we all have to manage risk.
“If what the future of US tariffs is going to be is too uncertain, then you’ll look to move to alternative markets where there is greater certainty.
“Having a greater focus on our supply chain and logistics systems is what’s going to be needed to help us adjust to new market opportunities.”
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