The evolving United States (US) trade policy is set to create ripple effects for retailers and manufacturers worldwide, including Australia.
Global supply chains are experiencing heightened uncertainty due to the recent tariff restrictions implemented by the Trump administration. Whilst Mexico and Canada have been granted some respite, China and Hong Kong face the brunt of these measures without any relief. Initially targeting imports from these countries, the tariffs are expected to have global repercussions.
This strategic shift aims to promote domestic manufacturing in the US but is likely to increase cost pressures and disrupt supply chains for many manufacturers and retailers reliant on imported goods. The pace of change is accelerating, and businesses must be prepared to adapt.
Markets impacted so far
Despite opposition from the Chinese, Mexican, and Canadian governments, there is no indication that the Trump administration’s trade strategy will change. A key part of President Trump’s political agenda is to bolster domestic manufacturing in the US, with recent tariff escalations marking the first step in this direction. If these policies continue, economies like the European Union (EU) and Australia could face similar challenges.
For Australian businesses with supply chains linked to these regions and the US, these measures are likely to have a significant impact.
Impact on Australian retailers
For retailers, one of the biggest challenges will be rising costs across their supply chains. Although delayed, the impending suspension of the ‘de minimis’ trade exemption means that packages valued at less than $800 will no longer be duty-free when shipped to the US. This directly impacts e-commerce retailers who rely on low-cost fulfilment models, increasing their operational expenses.
The immediate impact of these tariffs will be felt across various aspects of business operations. Retailers may need to reconsider their pricing models, procurement strategies, and inventory management practices. The changes will have tax and duty implications, especially for retailers with complex supply chains. Additionally, operational strategies may need to be adjusted to manage the rising costs and potential disruptions. How businesses navigate these challenges will be crucial in determining their ability to adapt and thrive in this evolving trade landscape.
Another significant change is the removal of the duty drawback scheme for goods originating from China and Hong Kong. This exclusion will impact companies who have US-based distribution centres servicing countries like Canada. This change will add complexity to their cost structures and impact how retailers plan to remain flexible, which will reflect their ability to succeed in an increasingly turbulent trade economy.
Impact on Australian manufacturers
The additional 10 per cent tariff on goods originating from China and Hong Kong will drive up costs for Australian manufacturers who rely on imported materials or components from these markets. This can lead to increased production costs and potentially higher prices for consumers, ultimately risking that Australian-made or distributed goods become less competitive compared to US-based alternatives. This could impact export viability, supply chain costs, and broader market strategies.
In addition, the Trump administration has imposed a 25 per cent tariff on all steel and aluminium imports into the US, including those from Australia. As the sixth-largest producer of aluminium globally, Australia plays a significant role in the industry. These tariffs will create additional barriers to entry into the US market, a historically important trade partner for Australia. Last year, Australia exported 223,000 tonnes of steel and 83,000 tonnes of aluminium to the US. Although Australia has successfully negotiated exemptions in the past, there is no guarantee these will remain in place in 2025.
Impacts across industries
Beyond manufacturers and retailers, these tariffs will impact a wide range of other industries with supply chain running through China and into the US. The proposed tariffs will be applied in addition to the current Most Favoured Nation (MFN) duty rate, plus the Section 301 tariff. For example, a product previously subject to an 8 per cent duty, plus a 25 per cent Section 301 duty, may now face an additional 10 per cent tariff – bringing the effective duty rate to 43 per cent. This escalation will significantly affect pricing, sourcing decisions, and overall supply chain strategies for businesses reliant on US trade.
Preparing for change
For ongoing support in navigating these dynamic and constantly evolving trade orders, and to ensure your operations remain stable and competitive, please reach out to our professional advisors.
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