Despite being asked to consider granting an exemption, the Trump administration will proceed with its 25% tariffs on aluminium and steel imports from Australia.
US President Donald Trump had previously said he would consider excluding Australia from the 25% tariffs, which take effect today.
Australia’s case for an exemption was based on the premise that unlike most countries, it typically imports more from the U.S. than it exports from there.
This contrasts with the trade deficit the U.S. has with most other countries, which has been a constant point of contention for Trump.
The same argument was successfully mounted by former Prime Minister Malcolm Turnbull during the first Trump administration.
Exemptions weren't expected
However, this time around expectations of an Australian exemption were low with recent Washington meetings involving ambassador Kevin Rudd and treasurer Jim Chalmers yielding little evidence of progress.
Foreign Minister Penny Wong also admitted two weeks ago that Australia had a "hill to climb".
When asked why President Trump decided not to grant Australia an extension, White House spokeswoman Karoline Leavitt said, "if they want to be exempted, they should consider moving steel manufacturing here.”
Further probing of the decision to deny Australia’s exemption request - following a warm conversation between Australia's Prime Minister Anthony Albanese and Trump - revealed underlying resentment towards Australia’s steel-related trade practices in the U.S.
While a future exemption may still be possible, Trump's trade adviser Peter Navarro told local media that Australia was "killing" American aluminium.
Navarro suggested Australia had engaged in the practice of dumping cheap, government-subsidised aluminium into the U.S. in breach of an agreement reached during Trump's first term, when Australia was exempted from similar tariffs.
"It's because when we were kind enough as a country to make those kinds of gestures to our friends, they bit the hand that fed them, and that's not going to happen again,” Navarro said.
Meanwhile, Housing Minister Clare O'Neil has vowed to continue discussions with her U.S. counterparts about future exemptions.
"So I'm not going to accept this as the situation yet. We still have a little bit of time and lots of discussions continuing to happen."
Modest negative impact
Meantime, while Opposition Leader Peter Dutton maintains "a bipartisan position in relation to tariffs" he accused the government of being "scared" of Mr Trump and failing to "pick up the phone".
Added to Australia’s optimism about future exemptions was the Trump administration’s decision today not to impose 50% tariffs on Canadian steel and aluminium.
However, the White House said in a statement that a 25% tariff on steel and aluminium would still come into effect for Canada and all U.S. trading partners today.
Based on recent Treasury and Reserve Bank modelling scenarios, U.S. tariffs only have a modest negative impact on economic output.
Richard Holden, a UNSW economics professor, expects steel and aluminium tariffs to be even smaller.
"If you work in an aluminium smelter in Australia it's bad, and I'm not insensitive to that, but as a share of GDP, our aluminium and steel exports to the US are not huge,” Holden said.
In the last financial year, Australia exported around half a billion U.S. dollars ($793 million) worth of steel and aluminium to the U.S., only a small fraction of the total.
It’s understood that U.S. sales only account for 10% of aluminium exports, with most heading to Japan and South Korea.
Meanwhile, Australia's major steel exporter BlueScope is partly sheltered [from tariffs] due to a large American steelmaking workforce.
