US Imposes 12.5% Tariff on Australian Exports, Citing Forced Labor Law Enforcement

Businesses say a new tariff on Australian exports to the United States will make it harder to compete and could reduce investment.

The Trump administration has confirmed a 12.5 per cent tariff has been imposed on Australian exports to the US, which it says is due to Australia's failure to enforce laws banning goods made by forced labour.

A temporary 10 per cent "global tariff" on the US's trading partners has now expired. That replaced the "liberation day" tariff regime, announced last year, which was scuppered earlier this year by the US Supreme Court.

Legal analysts suspect this approach, applying a fee imposed on foreign countries that engage in unreasonable trade practices, will be more enduring.

The US is Australia's largest two-way investment partner, with total investment exceeding $2 trillion.

"It's just another punch to roll with, to be honest," said swimwear retailer Tom Wilson.

The founder of Nashie told the ABC the rollercoaster of fees for exporting goods to the US made business more difficult.

"Changing prices is a really big deal," he said.

Tariff could reduce Australian goods going to the US

Australian businesses are worried.

Jeffrey Grosset is the owner and founder of Grosset Wines in the Clare Valley, South Australia.

He told the ABC's Isabella Kelly that the local wine industry will lose its presence in the massive US market.

"If America decides to become more isolationist, which it appears to be doing through this … then regrettably, it might hurt American consumers because they don't get to see us, but it will hurt us more. That's the reality," he said.

Disappointment reigns

Trade Minister Don Farrell says Australia is disappointed in the US's decision to raise tariffs on Australia's exports.

Speaking at a press conference in Adelaide, Mr Farrell says the tariffs are "completely unjustified".

He has defended Australia's anti-modern slavery regime, which he says is taken seriously.

"We continue to maintain that these tariffs are unjustified. Australia is a country that deals with the issue of modern slavery seriously," Mr Farrell said.

"And from my point of view, the government's point of view, we will continue to argue very strongly for the removal of these tariffs."

Defence Minister Richard Marles added that the federal government is arguing "very forcefully" against US tariffs on Australian goods.

The Business Council of Australia made submissions to the process that eventually determined the tariffs. Chief executive Bran Black said today he was disappointed by the decision, which was made for "no justifiable reason".

"The United States Trade Representative's finding rests on the narrow claim that Australia lacks a US-style ban on importing goods made with forced labour, despite our already strong Modern Slavery Act, and without identifying a single company, enforcement failure, or quantified trade impact," he said in a statement.

"The Business Council supports free and open trade, and we see no basis for these new tariffs.

"This decision will make it harder for Australian businesses to compete and sell their products into the US market, hurting investment and our jobs."

More to come

Australia is not the only affected country. Tariffs of 10 and 12.5 per cent will be on imports from 59 other economies, which represent all of the US's major trading partners.

As the economics team at Westpac wrote in a note to investors, it probably does not change things. But the injection of uncertainty could slow the US economy.

"That said, it maintains pressure on US households and businesses at a particularly inopportune time and so is a threat to sentiment."

That's something Thomas Foods International chief sales officer Jonathan Bayes sees happening.

The company sells meat and seafood globally and sees particular impact on Australian sheep meat exports.

"It's [prior tariffs] had a significant impact on the sheep meat in particular," he says.

"We've seen demand soften a little bit."

Mr Bayes expects the tariff cost to be passed onto American consumers.

"In uncertain economic terms in the US, people are watching their spend," he says.

"Ultimately it's going to have a major impact on the consumers and that it could lead to further softening given the US is such a large partner of our sheep meat trade."