Living with Trump’s America
It’s about far more than trade
In Australia we are coming to see that tariffs on iron and steel are only a small aspect of Trump’s impact on the Australian economy.
In terms of merchandise trade, the US is not particularly important to Australia. Our exports are predominately to our own region: the graph below shows the destination of our exports, with exports to more distant countries marked in a different colour.
It’s difficult to predict the effects of particular tariffs, because countries can retaliate, and tariffs can simply prompt a redistribution of supply chains. The USA has threatened to impose tariffs on Australian meat, for example, but in the short term there is only so much meat produced in the world, and we may find new markets for our meat. Trade routes are not immutable. For example when China imposed tariffs on Australian products many firms managed to divert their supply.
But this traditional way of looking at trade, a mercantilist perspective in some regards, does not capture the depth of economic relationship between nations in a world where trade involves not only goods, but also services. For reasons to do with the nature of services (unlike factories, mines and farms, their production is not necessarily bound by location), it is hard for statisticians to pin down who does what where, but the table below, cobbled together from separate ABS goods and services data, gives some idea of the importance of services in our trade with the USA, such as tourism, software and business consulting.
As an example of how governments can meddle with services trade, Chennupati Jagadish of the Australian Academy of Science explains on Radio National how academics in eight universities working on joint research with US institutions have been asked to complete a questionnaireseeking to reveal their alignment with US domestic and foreign policy. (7 minutes) As we learned during the pandemic, changes in visa conditions can have strong effects in restricting or expanding trade in services.
Stephen Duckett speaks on Radio National about how Trump’s policies could affect pharmaceuticals. (7 minutes) Because we export pharmaceuticals to the US, tariffs could have an immediate effect. But we also import pharmaceuticals, from the US and other countries, and that’s where we could be disadvantaged.
As long as we have had the Pharmaceutical Benefits Scheme (established in 1948) our government has bargained with foreign firms to obtain pharmaceuticals at reasonable prices. Because the variable cost of producing pharmaceuticals is low (the big costs are sunk in R&D and in clinical trials) it is possible for our government to strike good deals with the pharmaceutical firms.
Pharmaceutical firms have never been enamoured with our PBS, but they go along with it because as long as they can get some mark-up on their variable costs they find it profitable to supply the Australian market. Since Duckett spoke on that Radio National program, American pharmaceutical firms have written to the Trump administration, urging it to consider our PBS as an unfair trade practice. Ian Verrender has a post – Behind America's decades-long fight to dismantle the PBS – explaining how the Australian government uses its power to control the price of pharmaceuticals, and explaining why US drug companies don’t like us for doing that.
It is credible that the US government could intervene and threaten to cut off supply to Australia unless we raise the price we pay US firms. For many pharmaceuticals it is not easy to switch supply, because for some low-volume (and expensive) medications there is only one supplier. The government and the opposition have both asserted their intention to defend our PBS.
The ABC’s Ian Verrender explains how, through the US-Australia Free Trade Agreement, negotiated in John Howard’s time, our trade-exposed industries have become so closely tied to the US that we have enjoyed no net benefit from that free trade agreement. Its various restrictions, such as those on intellectual property, have required us to forgo potential gains from a more open system in which we could trade more freely. Even though Trump’s tariffs violate the agreement, on our side it won’t be easy to untangle ourselves from those obligations: How America ripped off Australia with “free trade”.
Beyond these industry and sector-specific apprehensions, there is increasing concern about the growth of global uncertainty, as Lisa Toohey of the University of New South Wales points out in The Conversation: With Australian steel and aluminium set to incur US tariffs, global uncertainty will be our next challenge. In an uncertain environment businesses do not re-invest their profits or raise new funds for investment. Rather they return funds to shareholders. Or if they do invest, they take over other firms (resulting in no net investment economy-wide), or invest in safe assets, such as real-estate.
Gareth Hutchens in his post on the ABC site – Trade wars, strongmen, and economic chaos. This is a critical moment for Australia – warns that we are living through a major change in the global economic environment. It is not only the disintegration of the old rules-based order and of multilateral institutions. Even the “Washington consensus” that had set some rules and conventions around economic cooperation has gone. So too has any idea of a global agreement on climate change. Hutchens is not saying that we should yield to Trump’s bullying, or that we should give up on our energy transition – in fact Ross Garnaut is confident that the economics of Trump’s disruption to the energy market is in our favour. But we have to adapt, and not hope that something like the 2026 Congressional elections will make life easier.
Alan Kohler too refers to the disruption resulting from Trump’s decisions on climate change: Trump's America is abandoning climate action and the fight just got harder. Trump’s reversal of action of climate change is further confirmation that a 3 to 4 degree temperature rise before the end of this century is unavoidable. Kohler says that countries like Australia should do far more to adapt to the likely consequences of global heating that will make large parts of the planet unpleasant, dangerous and even uninhabitable.
Thirty years of talking, and earnest, good intentions have failed to prevent global warming, he writes:
Obviously, a big part of it is the fossil fuel industry’s success in turning climate change into a political issue instead of a scientific one, persuading the right side of politics that it’s all part of a left woke conspiracy, even a “religion”, with the right-wing media facilitating that project, led by Rupert Murdoch.
He also believes that the scientific community has been too scared to tell the truth: “if the true nightmare was revealed, politicians and everybody else would either refuse to believe it or just give up”.
Note that Kohler doesn’t suggest Australia should give up on its move to renewable energy. The continued reductions in the cost of renewable energy and storage mean that Australia is on the path towards a competitive advantage over countries that have to rely on expensive sources such as building new or replacement nuclear power plants.
The Coalition to the rescue
Trump’s tariffs have given Dutton a chance to talk about the Coalition’s economic credentials.
But although the Coalition ascribes every imaginable domestic economic problem to a supposed incompetent “Labor” government, it has no coherent economic plans of its own, other than an idea to subsidize people in small business to waste money on corporate entertainment, and to allow a few rich spivs to jump our immigration queue.
But now has come an opportunity for Dutton to claim he can strike a tariff deal with Trump, as Laura Tingle points out. Former Coalition Treasurer and ambassador to the US, Joe Hockey, has gone on Radio National, suggesting that people on his side of politics have a particular affinity with Trump and those with whom he surrounds himself. If we want to be exempted from Trump’s tariffs, and if we want to be reassured about the future of AUKUS, the Coalition can do it in a way that Labor cannot. (9 minutes).
The proposition is absurd: Trump has no time for “mateship” and sentimentality writes the ABC’s Jacob Greber. Greber writes not only about tariffs, but also about Dutton’s deliberate decision to differentiate his party from the government, by speaking against the offer to send soldiers to join a peacekeeping coalition of the willing to Ukraine, should the need arise. Dutton’s stance, writes Greber,
… threatens to leave the opposition leader looking increasingly isolated and offside with a growing list of world leaders, led by Keir Starmer of the UK, the new Canadian prime minister, Mark Carney, and the centre-right German chancellor-in-waiting, Friederich Merz.
Patricia Karvelas suggests that Dutton, in the way he blames the government for being unable to negotiate a tariff break for steel and aluminium, and in the way he has failed to criticize the Trump administration for its action, has misread public opinion, but has little opportunity to change his line. She reports on survey data revealing that Australians don’t think much of Trump, and even the low support he enjoyed when elected has fallen. But while only 37 percent of Australian voters approve of the job Trump is doing, 48 percent of Coalition voters approve.
The most recent Essential poll reveals significant partisan differences among voters over sending troops to Ukraine. Similarly the same round of polling finds large differences between Coalition and Labor voters on their assessment of the impact of Trump’s presidency. Coalition voters are much more likely than Labor voters to believe Trump’s administration will have positive impacts on the US, Australian and global economies, world peace and even climate change. Dutton seems to have placed himself inside a Trumpian echo chamber.
Dutton, in his attempt to grab seats off Labor, has succeeded in picking up support from those Australians who would be voting for Trump if they were living in the US, but it is not the winning constituency that it was for Trump. And that 48 percent support among Coalition voters may be as good as it gets, as Americans and Australians alike witness the consequences of Trump’s policies – not just his tariff policy, which Dutton does not support, but also his “small government” policy, which Dutton supports strongly with his own DOGE proposal.
But Dutton is not to be deterred from following in Trump’s footsteps. Apparently encouraged by Trump’s (illegal) deportation of 137 Venezuelans who he claims are associated with a criminal gang, Dutton has put forward the idea of holding a referendum to give the Commonwealth the power to deport dual nationality citizens if they engage in certain conduct, despite having called the Voice referendum a waste of money and having said Australians are “over the referendum process”.
The ABC’s Maani Tuu fills us in with some history of this proposal, which goes back to Tony Abbott’s 2015 attempt to strip dual nationals of their citizenship.
The ABC’s Jacob Greber and Olivia Caisley report that Dutton’s idea has taken many Liberals by surprise: Dutton citizenship referendum proposal leaves some Liberals fuming. They want Dutton to focus on cost-of-living concerns. (But how can he when the party has no economic policy?) The Guardian’s Josh Butler reports that Coalition attorney-general spokesperson Michaelia Cash has distanced herself from the proposal.
Former Liberal Party Attorney General George Brandis, writing in the Sydney Morning Herald, calls Dutton’s idea “as mad an idea as I have heard in a long time”, and calls for the Coalition to drop it.
Dutton, like Trump, has little respect for the law. As Laura Tingle explains on the 730 program, he is trying to transfer power to inflict punishment on citizens from the judiciary to executive government, blurring the foundational democratic idea of the separation of powers.
In the last couple of days Dutton seems to have backed away from the idea of a referendum.
Living without Trump’s America
United States Republic, July 4 1776 – June 20 2025, loved by many in its time
Are we better off without America? is the theme of last week’s Global Roaming on the ABC. Geraldine Doogue and Hamish Macdonald put that question to Latika Bourke of ANU’s National Security College and Sam Roggeveen of the Lowy Institute.
As an analogy, in December 1941 Australia learned that it was living in a world without our assumed protector, when Britain’s hold on Singapore suddenly collapsed.
Something very similar is happening now. Trump’s manner is a shock, and his specific policies are disjointed and contradictory, but the path he is taking the country is not an aberration: MAGA is a retreat from the west, economically and militarily.
In any event we have relied too heavily on the US alliance, believing it to be akin to the NATO alliance, but it is much weaker, and in fact even the NATO agreement is less binding on the US than many believe. We have to ensure we can defend ourselves.
A similar message about America’s retreat from the world comes from economist Satyajit Das, interviewed on Late Night Live on How Australia should respond to Trump’s re-shaping the global economy, and he puts it all in a wider context. Australia is already having to adjust to a world where there will be more competition and therefore lower prices for our commodity exports, and where climate change is hurting our agricultural exports.
Now we have Trump, and we shouldn’t be fooled by the sloganl. His agenda is not about making America great again. Rather it’s about presiding over a collapsing empire, as he and his cronies loot the state’s assets.
A new economic order, independent of the US, will emerge. The transition will be messy, and Australia has to make sure it is positioned as well as it can be.