The Return of Tariff Wars

For many business owners, tariffs sound like something that only matters in Washington or Beijing. But the reality is that when the world’s biggest economy changes trade policy, it affects everyone – including Australian businesses.

President Trump’s administration has announced sweeping new tariffs for 2025. These include a 25% tariff on imports from Mexico and most Canadian goods, an extra 10% duty on many Chinese products, and a 25% tariff on all imported steel and aluminium – with no guaranteed exemptions for Australia this time around.

The White House says these measures will protect American jobs, bring manufacturing back onshore, and reduce reliance on Chinese supply chains. But here in Australia, industry leaders are warning businesses not to take a “wait and see” approach.

Innes Willox, CEO of the Australian Industry Group, put it bluntly:

“We should not think our country is immune from the impacts of this trade war… We narrowly avoided tariffs on our steel sector during the last Trump administration and the new approach seems even tougher with the potential to prolong our inflation and interest rate pain.”

Why Australian Businesses Should Pay Attention

Australia is one of the most trade-dependent economies in the world. Our prosperity is tied closely to global supply chains.

Even if our products aren’t directly targeted by these tariffs, the flow-on effects will reach us quickly. Higher shipping costs, changing demand in China, more red tape in the US, and volatile exchange rates are all possible outcomes.

For small businesses, these changes can show up in everyday operations. Importers may face higher costs for machinery or materials. Exporters could see tighter margins as foreign markets shift. Retailers may deal with shipping delays or extra customs duties on e-commerce parcels heading to the US.

In short, even if you don’t sell directly to America, your business may still feel the impact.

Steel and Aluminium: A Direct Hit

One of the clearest risks for Australia is in the steel and aluminium industries. These are sectors where the US has long been a key partner.

In 2024, Australia exported more than 223,000 tonnes of steel and 83,000 tonnes of aluminium to the United States. That’s a sizeable market, and any disruption matters.

Richard Nutt, a partner at Grant Thornton, highlights the danger:

“These tariffs will create additional barriers to entry into the US market, a historically important trade partner for Australia. Although Australia has successfully negotiated exemptions in the past, there is no guarantee these will remain in place in 2025.”

If exemptions lapse, our exporters could face serious challenges. Selling into the US would become more expensive, margins would shrink, and some producers might be forced to look for new markets.

The Supply Chain Domino Effect

The effects don’t end with metals. Tariffs on goods from China, Mexico and Canada will ripple through supply chains – and Australian businesses tied into those networks will feel it.

Manufacturers that rely on intermediate goods from North America could see costs climb. Retailers who depend on Chinese products may find delays and higher import duties.

PwC warns that e-commerce shipments into the US could also become slower and more expensive if the “de minimis” trade rule is scrapped. This rule currently allows goods under USD $800 to enter duty-free. Without it, Australian online sellers shipping to US customers may face higher costs and longer delivery times.

More Compliance and Red Tape

Another consequence of tariff wars is paperwork. When regulators are on the lookout for companies trying to dodge tariffs, the burden of proof shifts to businesses.

Exporters may need to provide detailed evidence of where their goods are sourced, adding time, cost, and complexity to the process.

For large corporations, this is inconvenient. For small and medium businesses, it can be overwhelming. What was once a simple shipment could turn into a compliance exercise.

Freight and Shipping Volatility

Tariffs also disrupt shipping patterns. When the US cuts back on imports from China, for example, shipping companies adjust their routes and capacity. That reshuffling creates volatility in freight prices.

For Australia – already one of the most geographically isolated markets in the world – this can be especially painful. Freight rates could swing sharply, while reliability may decline.

PwC’s report makes it clear:

“Given Australia’s geographical isolation from most of our trading partners, the volatility in cost and reliability of freight could become significant to supply chain cost and performance.”

Currency Risks and Inflation Pressures

Global trade disruptions don’t just affect physical goods. They also shake currency markets.

If tariffs slow down China’s already sluggish economy, demand for Australian iron ore and other resources may fall. That could put pressure on the Australian dollar.

A weaker dollar makes imports more expensive – which means higher prices for Australian consumers and businesses that rely on overseas products. At the same time, it can make our exports more competitive internationally.

The problem is the volatility. Businesses thrive on predictability, and sudden swings in exchange rates make planning harder.

Australia as a Dumping Ground

Another risk is that Australia becomes a dumping ground for goods other countries can’t sell to the US.

If producers in Europe, Asia, or South America suddenly find the US market blocked, they may look to offload excess stock here at cut prices.

While that might look like good news for consumers in the short term, it creates unfair competition for local industries. Domestic manufacturers may struggle to compete, and we could see an increase in anti-dumping measures from the government to protect jobs and industries at home.

China: The Big Unknown

Perhaps the single biggest factor is how China responds. Around 40% of Australia’s exports head there, mostly in the form of iron ore, coal, and minerals used in construction.

Scott French, an economics lecturer at UNSW, points out the risk:

“If Trump’s tariffs further slow the already sluggish Chinese economy, this will reduce demand for the goods it buys from Australia. If China’s demand for iron ore falls significantly, this will not only hurt the Australian mining sector, but it could trigger a fall in the Australian dollar.”

So far, China has shown an ability to absorb tariffs. But if the slowdown deepens, the knock-on effect for Australian exporters could be significant.

Silver Linings for Some Sectors

Not all the news is bad. Tariffs can create opportunities for nimble businesses.

If the US raises tariffs on certain agricultural imports, for instance, Australian farmers could step in to fill the gap.

Similarly, if China retaliates against American wheat or beef, Australia may be able to boost its market share in Asia.

And a weaker dollar, while challenging for importers, could make Australian exports more attractive in global markets.

The key is for businesses to stay alert and ready to pivot.

Who Really Pays for Tariffs?

Tariffs are often sold politically as a way to punish other countries. But in reality, the costs usually land at home.

As Professor Bedassa Tadesse from the University of Minnesota explains:

“When tariffs are imposed, companies must either absorb the additional costs – cutting into profits and potentially threatening jobs – or pass these costs to consumers through higher prices. Small businesses operating on thin profit margins are particularly vulnerable.”

In short, tariffs act like a hidden tax – one that filters through every layer of the economy.

What Australian Businesses Can Do

So what’s the best strategy for Australian businesses in this environment? Here are some steps worth considering:

Keeping Cash Flow Stable

Periods of uncertainty are hardest on cash flow. Even businesses that remain profitable on paper can be stretched thin when costs rise and payments slow.

Fortunately, financial facilities are available to help. Options such as invoice finance, trade finance, business lines of credit, and asset finance can all give companies more flexibility.

With interest rates expected to ease, now is a good time to review your funding options and ensure your business has the stability it needs to weather volatility.

Final Thoughts

The return of US tariffs under President Trump is more than just a political story. It’s an economic shift with very real consequences for Australian businesses.

From steel and aluminium exports to freight costs, e-commerce delays, and shifts in Chinese demand, the ripple effects will be wide and varied. Some sectors will face new challenges, while others may see unexpected opportunities.

The best response is not to panic, but to plan. Diversify, stay agile, and build resilience into your operations. Businesses that adapt now will not only survive the turbulence – they may even come out stronger.

Frequently Asked Questions About US Tariffs and Australian Businesses

1. How could Trump’s tariffs affect Australian exporters?

Australian exporters in steel and aluminium are most at risk, as the US is a key buyer of these products. If exemptions are removed, it will become more expensive for Australian companies to sell into the US market, reducing competitiveness. Beyond metals, exporters tied to supply chains with China, Mexico or Canada may also see costs rise.

2. Will tariffs increase costs for Australian small businesses?

Yes, many small businesses may see higher costs. Importers relying on machinery, electronics, or intermediate goods from the US or China could face price hikes. Retailers selling online into the US may also face added duties and inspections. For SMEs operating on thin profit margins, these extra costs can put real pressure on cash flow.

3. Could tariffs create any opportunities for Australian businesses?

While tariffs often create challenges, they can also open new doors. If China retaliates against the US by blocking American agricultural products, Australia may step in to fill that gap. Similarly, a weaker Australian dollar could make our exports more competitive in international markets. Businesses that act quickly may benefit.

4. What happens if Australia becomes a “dumping ground” for foreign goods?

If overseas exporters can’t access the US, they may offload excess goods in Australia at lower prices. This benefits consumers in the short term but puts local industries under pressure. To counter this, the government may introduce anti-dumping measures to protect domestic businesses.

5. How do tariffs affect global shipping and freight costs?

Tariffs disrupt global trade flows, forcing shipping companies to change routes and capacity. This creates volatility in freight pricing and availability. For Australia, which already faces high transport costs due to distance, this volatility could become a major issue for importers and exporters alike.

6. Will tariffs impact the Australian dollar?

Yes, tariffs and trade tensions often trigger currency swings. If China’s economy slows because of US tariffs, demand for Australian minerals may drop, pushing the Australian dollar down. A weaker dollar makes imports more expensive, but it can make Australian exports more attractive internationally.

7. What steps can Australian businesses take to prepare?

Businesses can reduce their exposure by diversifying markets, reassessing supply chains, and using financial tools to hedge against currency risk. Reviewing freight contracts for flexibility and monitoring anti-dumping measures is also important. Most importantly, maintaining access to flexible finance facilities such as invoice finance or business credit lines can provide a buffer during uncertain times.

8. Are tariffs good or bad for consumers?

For US consumers, tariffs usually mean higher prices on goods. For Australian consumers, the effect is mixed. Some imported goods may rise in price due to shipping and currency volatility, while others may get cheaper if foreign exporters dump excess stock here. In the long term, however, price instability tends to hurt consumers.

Final Word on Tariffs and Your Business

The proposed US tariffs aren’t just a headline issue – they’re a shift in the global trade landscape. Australian businesses need to prepare for higher costs, changing markets, and possible new opportunities.

Those who adapt early, diversify their strategies, and secure financial resilience will be best placed to navigate the uncertainty.