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In this insightful interview, Dr. Susan Stone, Credit Union SA Chair of Economics at the University of South Australia, analyzes the recent implementation of a 25% tariff on Australian steel and aluminum exports to the United States by President Donald Trump.
While Prime Minister Albanese noted these exports represent only 0.2% of Australia's total export value, Dr. Stone explains the broader economic concerns, including potential global price increases and spillover effects on domestic industries.
Unlike Canada and Mexico, Australia has chosen not to implement retaliatory measures, focusing instead on a "buy Australian" campaign. Dr. Stone suggests this measured approach reflects Australia's strategic positioning for upcoming agricultural tariff negotiations, which could have a significantly larger impact on the Australian economy than the steel tariffs.
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In this episode, we cover:
Limited Direct Impact: Australian steel and aluminum exports to the US represent only 0.2% of Australia's total export value, making the direct economic impact relatively small compared to countries like Canada and Mexico.
Global Price Effects: Despite the small direct impact, the tariff could trigger increased steel and aluminum prices globally, affecting Australian exporters in other markets through spillover effects.
Strategic Restraint: Unlike other affected nations, Australia has chosen not to implement retaliatory tariffs, preserving negotiating leverage for potentially more damaging agricultural tariffs expected in April.
Critical Minerals Leverage: Australia's reserves of critical minerals desired by the US could provide important negotiating leverage in future trade discussions.
WTO Options: Australia could signal seriousness by filing a World Trade Organization complaint, which would allow for authorized retaliatory measures without immediately escalating trade tensions.
About the Guest:
I am an economist with a keen interest in how things work - especially when trying to juggle competing interests like growth and sustainability. I undertake research and outreach on issues of importance to South Australians, notably that deal with the economy. I believe firmly in a few things including:
An education is a useful thing;
Prices are an imperfect mechanism to reflect value;
One needs to give back to the community.
Prior to joining UniSA Business I headed the Emerging Policy Issues Division at the OECD. That work focused on issues relating trade and the environment, the digital economy and subsidies. I also led the team that developed the OECD METRO model, a computable general equilibrium trade model. I spent two years at the UN Economic and Social Commission for Asia and the Pacific (ESCAP) as Director, Trade, Investment and Innovation Division where I worked with governments to support trade, trade facilitation, foreign direct investment, SME development, technology and technology transfer, and innovation.
My curisoity has led me to opportunities across the globe including as a Senior Research Fellow at the Asian Development Bank Institute in Tokyo, a Research Manager at the Productivity Commission in Melbourne and a Senior Analyst at the US Environmental Protection Agency in Washington DC. Way back in the beginning I worked as a Financial Valuation Analyst in the private sector.
A dual United-States/Australian citizen, I received my PhD in International Economics and a Master’s Degree in Business and Finance, from Drexel University in Philadelphia.
Resources and links mentioned in this episode:
Connect with Dr. Susan Stone through University of SA
Detailed Synopsis
The interview begins with Miko Santos welcoming Dr. Susan Stone to discuss the recent announcement that Australia would not be exempted from the 25% tariff on steel and aluminum imposed by US President Donald Trump.
Dr. Stone immediately contextualizes the issue by acknowledging that while these exports represent a small percentage of Australia's overall trade, certain regions with concentrated steel and aluminum production will feel significant employment impacts. More concerning is the potential for global price increases in these commodities, creating spillover effects that could impact Australian producers even in markets where they have substantial presence.
When asked about potential government support measures similar to JobKeeper during COVID-19, Dr. Stone notes several mitigating factors: the limited size of the US market for Australian producers, and the fact that some Australian steel producers already have operations within the United States, allowing them to continue servicing the US market through domestic production.
The discussion turns to the Australian government's proposed "buy Australian" campaign. Dr. Stone explains the practical challenges in implementing such an initiative, particularly the difficulty in identifying products with Australian-sourced steel and aluminum inputs. However, she suggests this could create marketing opportunities for companies willing to verify and promote their use of Australian-sourced materials.
A significant portion of the interview addresses why Australia has not implemented retaliatory tariffs like Canada and Mexico. Dr. Stone explains this strategic restraint stems from Australia's different trade relationship with the US—Australia's trade volume with the US is substantially smaller than North American countries, where some sectors have 100% of their sales directed to the US market. More importantly, Australia is preserving negotiating capital for potential agricultural tariffs Trump has mentioned implementing in April, which would have a more substantial impact on Australia's beef and meat exports to the US.
Dr. Stone provides expert analysis on the counterproductive nature of protectionist trade policies, explaining that empirical evidence shows tariffs raise costs, increase prices, and create uncertainty that dampens business investment—ultimately undermining the stated goals of increasing manufacturing and jobs. This economic framework supports Australia's decision to maintain its current tariff structure to prevent price increases for Australian businesses and consumers.
The interview explores how the current Trump administration's approach differs from the previous implementation in 2018, when Australia and other allies received exemptions. Dr. Stone explains that the earlier tariffs primarily targeted China, while the current policy aims to boost domestic US production, leading to a blanket application without exemptions. Additionally, the implementation timeline was significantly accelerated, limiting opportunities for negotiation.
In addressing Australia's economic leverage, Dr. Stone critiques the Trump administration's narrow focus on goods trade surpluses, explaining that this overlooks critical aspects like investment flows and services. She highlights that Australia's strategic value extends beyond trade balances to critical minerals resources and regional security partnership, especially given US concerns about China's influence in the Indo-Pacific region.
The interview concludes with a discussion of Australia's policy options, including domestic "buy Australian" campaigns, leveraging critical mineral resources as a reliable partner, and potentially filing a WTO complaint to establish a legal basis for proportional retaliatory measures without immediately implementing them—signaling seriousness while preserving diplomatic relations.
What Readers Will Learn
Economic Context: Readers will gain insight into the complex economic implications of international tariffs beyond simple export percentages, including global price effects and supply chain impacts.
Strategic Trade Diplomacy: The interview provides a masterclass in how smaller economies navigate trade disputes with major powers, balancing immediate economic interests against longer-term strategic considerations.
Policy Mechanisms: Readers will understand the range of economic policy levers available to governments responding to tariffs, from domestic consumer campaigns to WTO dispute mechanisms.
Trade Theory Application: The discussion connects academic economic theory on protectionism with real-world policy outcomes, illustrating why most economists view tariffs as counterproductive.
Critical Industry Analysis: The interview offers valuable perspective on Australia's strategic resources and export sectors, highlighting which industries are most vulnerable to trade disputes.
Negotiation Strategy: Readers will learn about the strategic calculation behind Australia's measured response, preserving leverage for more economically significant agricultural tariff negotiations.
Global Trade Interconnections: The discussion illuminates how tariff decisions create ripple effects throughout international markets, affecting even countries and industries not directly targeted.
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