Australian companies are grappling with the complexities of the ongoing US-China trade war, as evidenced by the experience of HeyDoodle, a local toy manufacturer. The company, which has been planning its expansion into the US for almost a year, finds itself navigating a rapidly shifting tariff landscape. US President Donald Trump has praised the tariff for Australia as a “good” 10 percent. As it turns out, the story is not so simple.
In recent weeks, the US tariffs have swung wildly. The US government initially floated the idea of increasing rates even more, but has now settled on a uniform 10 percent tariff. This new rate will be temporary. This temporary pause won’t shield Australian enterprises from the vastly more significant effects of the trade war. The impact of the rapidly rising tariffs on China is still set to be quite massive.
The Impact of Tariffs and Trade Policies
HeyDoodle’s silicone coloring mats, which retail for $29.99, are produced in China. Tariffs might make the costs in the US prohibitively expensive. The company’s co-founder, Beatrice Toh, underscored her company’s concerns about the pricing pressures they would face in the American market.
“They said we don’t have the inks necessary here to do it,” – Beatrice Toh
The threat of the “Shein and Temu tax” hangs over any businesses who ship directly from China to US consumers. This new tax is an additional hurdle that Australian brands must jump. KPMG’s Mr. Rynne underscored the substantial impacts of this tax. It will affect more than HeyDoodle, but all Australian businesses that want to reach online buyers in the United States.
The promise from Trade Minister Don Farrell that the Australian government will be there to support local businesses facing these unknowns is reassuring.
“We always stand up for Australia and support local businesses and Australian jobs,” – Trade Minister Don Farrell
He emphasized that the government is doing this in close coordination with the United States. Their overarching aim is to remove tariffs on Australian goods and to promote more diversified trade.
Currency Fluctuations and Economic Considerations
Dramatic collapse of the A dollar against all major currencies, creating a new international competitive advantage on trade. Last week, it touched US 60 cents for a short time, making Australian exports cheaper for foreign buyers. The unreasonable and unprecedented economic shift not only creates obstacles to businesses such as HeyDoodle. They can’t keep their prices competitive if they are forced to use all imported materials.
Steve Philpott, a representative from HeyDoodle, described the financial strain associated with configuring their toy range for the American market.
“It’s been a bit of a roller-coaster,” – Steve Philpott
He pointed out that relocating production out of China isn’t a realistic solution because of supply chain constraints.
“They don’t have the same supply chain and same ability as China does,” – Steve Philpott
Therefore, pumping the brakes on a disruptive tariff storm and keeping their manufacturing home base is critical to continue being profitable in an ever-competitive marketplace.
Government Support and Small Business Advocacy
Considering these hurdles, small businesses – like HeyDoodle – are urging the government to step up. Beatrice Toh underscored the urgency for increased support as businesses adapt to a new trading landscape.
“It would be great to get some [government] support, especially for small businesses,” – Beatrice Toh
The Australian government has put itself at the heart of these negotiations, and indeed is still actively involved in discussions with US authorities. Their goal is to shield Australian products from high tariffs. Trade Minister Farrell struck a similar note on the necessity of standing up for positive trade outcomes, while cultivating a more diversified economic environment.
The “de minimis exemption” is set to expire. This exemption previously allowed lots valued below $800 to come into the US duty-free, now it just adds more confusion on top of that. Ending this exemption has a direct effect on Chinese goods shipped to American consumers. This change will likely be felt by Australian companies that rely on the same supply chains.
