Threat or a thought bubble, Trump's new tariff idea spells trouble for Australia

Australia Broadcast Center

29-07-2025

It could be a throw-away line or a massive blow to the Australian economy delivered by US President Donald Trump.
Australia thought it was relatively safe from Trump's tariff war. It turns out we could have been wrong. Once again, the US president seemed to be confirming a shift in his trade policy as an aside in a larger press conference.
Trump loves to boast about his freewheeling speaking style — his so-called "weave," where he jumps from topic to topic in a way that might make someone think he's lost his train of thought, though he insists it's always clear in the end.
He was holding court at his Turnberry Golf Course in Scotland. He was visiting a foreign country — the UK — but it was him playing host to British Prime Minister Keir Starmer and setting the terms of the interaction.
There were plenty of awkward moments for Sir Keir, who had to politely listen to Trump rail against the scourge of wind farms, which he claimed were ruining the views from his golf course, and how damaging he believed illegal immigration had been to Britain.
But the hardest part for the Australian prime minister to hear was likely when Trump began talking about the next stage of his one-man tariff offensive against the world.
Fresh off claiming an agreement had been reached with the European Union — although details remain elusive — Trump acknowledged that doing individual trade deals with other countries was quite time-consuming.
Who would've thought?
Once again, he remarked with seemingly genuine shock at how many countries exist in the world: "You have 200 countries — more. People don't get that."
Even though he'd previously boasted that countries were desperate to do deals with him, he now seemed resigned to the fact that he couldn't get them individually ticked off. So, he has a more efficient idea: "We're going to be setting a tariff for essentially the rest of the world. And that's what they're going to pay if they want to do business in the United States. Because you can't sit down and make 200 deals."
Sound familiar? Back in April, during his "Liberation Day" announcement, Trump said almost all countries would be hit with a 10 per cent "baseline" tariff. Many were also slapped with higher "reciprocal" rates, though most of those were subsequently put on hold. They're due to come into effect this week for countries that haven't struck deals with the US.
Australia only received the baseline rate, largely because it buys more from the US than it sells. But Trump clearly doesn't think that baseline rate cuts it anymore. He said it would likely be lifted to "somewhere in the 15 to 20 per cent range", an idea he had first floated during a phone interview with NBC earlier this month.
If this comes to pass — and it's a big "if", given Trump's tendency to announce policy one day and backtrack the next — it would be a massive economic blow to Australian businesses that export to the US.
While the current 10 per cent impost makes Australian products more expensive for US consumers and less competitive relative to American goods, it was thought to give Australian businesses a leg up compared to countries hit with reciprocal tariffs.
It had looked like 10 per cent was the floor rate, and no other country would receive a more favourable arrangement. It also gave Australia little incentive to negotiate a better deal with the US, since the Trump administration didn't seem willing to go lower than 10 per cent or drop it entirely.
But if Trump now imposes a 20 per cent baseline tariff, Australia will be disadvantaged compared to countries that have already struck better deals — or at least "frameworks" of deals. The UK, Japan, and now the EU have all said they've secured deals where their exports to the US are hit with a 15 per cent duty.
So, from being the least badly treated friend, Australia might now be getting worse treatment than many large economies.
It would also seem, on face value, to be clearly unfair, even based on Trump's own questionable tariff logic. Australia had a lower rate because the administration said it was allowing better access for US goods. But now it may well face a higher tariff than the EU, which Trump has previously bashed as one of the most egregious blockers of American trade ambitions.
Six months into his second term, it's difficult to know when Trump is clearly stating a new policy or just thinking out loud in front of the world's media.
But his words seem pretty clear on this occasion: he's planning to raise the baseline tariff, and that's going to hurt Australian businesses.
Trump's Commerce Secretary, Howard Lutnick, said last week that Trump wasn't planning to hike the baseline. But in the Trump administration, the only word that seems to matter is his.
Perhaps it's a negotiating tactic, though countries only facing the baseline tariff weren't even sent the recent letters Trump fired off, imploring leaders to do a deal.
Even if this is just a thought bubble, Australia's leaders will need to take it seriously — because when it comes to Trump, thought bubbles can be highly consequential.