Navigating US tariff barriers

For decades, Australia and the United States have enjoyed a strong trade partnership, strengthened by the Australia-United States Free Trade Agreement (AUSFTA). In 2024, the United States imported approximately $16.57 billion worth of goods from Australia, while Australia exported about $12.59 billion to the US. Among these exports, Steel and Aluminium have played a crucial role, with around 10% of Australia’s production heading to the US market. However, Trump’s refusal to revoke the 25% tariff on Steel and Aluminium imports, including those from Australia, poses both risks and opportunities for Australian industries.

The risks: Rising costs, shrinking markets, and job losses

The implications of the tariff extension are significant. For Australian producers, the increased costs make their products less attractive to U.S. buyers, eroding their competitive edge. Companies that have long relied on stable trade flows with the U.S. now find themselves at a disadvantage, as American businesses look for cheaper alternatives elsewhere.

Beyond immediate price pressures, the tariff threatens Australia’s Steel and Aluminium supply chains. US firms that previously sourced from Australia may establish new supplier relationships, making it difficult for Australian producers to regain lost ground even if tariffs are removed in the future. The loss of market share could have long-term consequences, reducing overall exports and forcing businesses to scale back production. This, in turn, risks job losses, particularly for those working in industries that are heavily dependent on US demand.

The disruption to supply chains goes beyond lost sales; it also affects logistics networks, contract agreements, and investment decisions within the industry. Australian Steel and Aluminium producers have built integrated supply chains that rely on consistent demand from US buyers. With the tariffs in place, some firms may struggle to sustain production levels, while others might be forced to explore costlier and less efficient logistical routes to maintain trade relationships. The potential reduction in long-term contracts further exacerbates the instability, making it harder for Australian firms to plan and invest confidently in their future operations.

The opportunities: Resilience, diversification, and innovation

Despite these challenges, Australia has the chance to turn adversity into opportunity. The tariffs highlight the need for Australian producers to innovate, focusing on high value, differentiated products that justify higher costs. By investing in advanced technology and refining manufacturing processes, businesses can improve efficiency and remain globally competitive.

Another pathway forward is trade diversification. Australia can reduce its reliance on the US market by expanding exports to other key partners such as China, Japan, South Korea, and the European Union. Strengthening relationships in these regions can mitigate the risks posed by unpredictable US trade policies.

Moreover, this moment presents an opportunity for strategic government intervention. With the right mix of subsidies, tax incentives, and trade facilitation measures, Australian businesses can weather the storm and emerge stronger. In parallel, diplomatic efforts must continue to push for more favourable trade terms with the US, advocating for the removal or reduction of tariffs.

Strengthening domestic supply chains is another crucial step forward. If Australian producers can develop stronger trade relationships within Asia and Europe while enhancing domestic manufacturing capabilities, they may reduce dependence on any single market, including the US This could also lead to strategic investments in new trade corridors and logistics hubs to streamline exports to a broader range of countries.

What resilience looks like for Australian industry

Resilience is more than just surviving a difficult trade landscape—it’s about adapting and thriving in response to external shocks. For Australian Steel and Aluminium producers, resilience means forging a new path by transforming challenges into strategic opportunities. It means adopting a mindset that prioritizes long-term stability over short-term setbacks.

One aspect of resilience involves investing in smarter, more efficient production. With higher tariffs increasing costs, Australian manufacturers can look to automation and advanced manufacturing techniques to reduce waste and improve productivity. By embracing new technologies, such as AI-driven quality control and precision engineering, producers can make Australian Steel and Aluminium more attractive to high-value markets that demand premium materials.

Another crucial element is diversifying export markets. If the U.S. is no longer a viable trade partner for these industries, then businesses must seek out new customers in Asia, Europe, and the Middle East. This requires Australian producers to foster relationships with alternative trading partners, ensuring that no single country holds disproportionate influence over the industry’s success.

Resilience also means rethinking supply chains. Australian firms can no longer afford to rely on a single, stable trade route. Instead, they must cultivate a flexible, responsive supply chain that can shift gears as trade policies change. This could mean establishing secondary logistics hubs, strengthening local supply chains, and developing strong relationships with a broader range of international buyers.

Perhaps most importantly, resilience depends on collaboration between industry and government. The Australian government has a role to play in supporting industries through policy measures such as tax breaks for exporters, investment in infrastructure, and the development of new trade agreements. By working together, businesses and policymakers can create a stronger, more adaptable Steel and Aluminium sector that can weather any economic storm.

A resilient future for Australian industry

While Trump’s tariff stance presents immediate economic hurdles, it also serves as a catalyst for strategic adaptation. Australian Steel and Aluminium producers must embrace resilience, whether through market diversification, technological innovation, or strengthened supply chain relationships. The path forward may be challenging, but with a proactive approach, Australia can not only withstand the impact of tariffs but also position itself for long-term economic strength in an increasingly uncertain global trade environment.

Associate Professor Maruf Chowdhury is the Program Director of the Master of Strategic Supply Chain Management. His research interests are in sustainability, decarbonisation and supply chain resilience.