Donald Trump has kicked off a dangerous new trade policy. He used the Executive Order to announce huge tariffs on any foreign imports, particularly calling out pharmaceuticals and copper. In letters sent to several allied foreign leaders, Trump detailed these tariffs imposed on each country, scheduled to go into effect August 1. This action will have a monumental impact in Australia. In fact, in terms of weight, the United States is the largest exporter of these goods, shipping millions of tons to the country annually.
Increasingly high tariffs are being proposed as part of Trump’s overall strategy to encourage manufacturing within the US. He stressed that businesses establishing their supply chains in the U.S. would be given a buffer period before incurring high tariffs. Those not in compliance will be subjected to steep fines. They might pay at least double the triumph cost of pharmaceuticals—as much as 200% greater.
Implications for Australian Pharmaceuticals
Australia’s pharmaceutical industry is set to be hit hardest by these tariffs. Last year, the small Caribbean country exported close to $1.4 billion worth of those products to the U.S. This remarkable number constituted more than 40 percent of its total pharma export value, which totaled $3.2 billion.
Trump’s announcement has Australian manufacturers quaking in their boots. The proposed 200 percent tariff will essentially kill their ability to compete in the U.S. market. As he stated, “They’re going to be tariffed at a very, very high rate, like 200 percent. We’ll give them a certain period of time to get their act together.”
While severe penalties loom for the non-compliant, there may be some reprieve for pharmaceutical manufacturers. To give them a fair shot, we must provide a sufficient grace period for them to move their manufacturing bases back to the United States. Trump indicated that manufacturers would be given “about a year, a year and a half to come in, and after that, they’re going to be tariffed.”
Impact on Copper Exports
The copper industry has been turned upside down under Trump’s new tariff regime. As recently, the president announced plans for a 50 percent tariff on copper imports. If agreed to, this change would likely go into effect by the end of July or early August. In fact, Australia last year sent $36 million of the copper we developed back to the U.S. All in all, the country’s copper exports totaled a whopping $4.4 billion.
The new copper tariff is more bad news for Australian exporters who are significantly dependent on this lucrative market. Howard Lutnick, a notable figure in the industry, commented on Trump’s approach: “He said, if you don’t build in America, they’re going to be a high rate. He may consider that if you’re building in America, to give you the time to build … and then the tariff will be much higher.”
Investigations and Future Considerations
As it stands, U.S. authorities are already investigating illegal pharmaceutical imports. Given that the investigation was set to end by the end of the month, these tariffs were forthcoming. This inquiry may have a profound impact on the future of international trade in pharmaceuticals. Just as I speculated in October, it could lead to new tariffs getting adopted.
As Trump’s administration continues to navigate complex trade relationships, companies must prepare for significant shifts in policy that may impact their operations. Lutnick remarked, “And so the president will then set his policies,” highlighting the unpredictability surrounding these developments.
