The Australian Productivity Commission has recommended removing Australia’s tariffs and not retaliating against U.S. President Donald Trump’s measures in the United States.
“The benefits of embracing free trade, such as by taking no retaliatory action, would outweigh any benefits from imposing retaliatory tariffs,” the Productivity Commission said.
“Indeed, going further by removing Australia’s remaining tariffs would lead to even greater benefits for Australia.”
The report commended the government’s action to abolish 457 tariffs from this year.
However, it also earmarked 300 more tariffs that could be removed.
“There remain many more ‘nuisance tariffs’ which generate little revenue and impose high costs on business,” the report said.
“We estimate that, in 2023-24, the tariff regime imposed compliance costs of between $1.3 billion and $4 billion, while collecting $2 billion in revenue.”
While not a direct tariff, it noted that poorly designed, budget assistance could also form a type of trade protection. It specifically points to the government’s Future Made in Australia scheme, which has committed $22.7 billion towards facilitating the country’s renewable energy transition.
The report suggested that if Australia removed its tariffs in reaction to Trump’s measures, its Gross Domestic Product (GDP) could increase.
“In another modelled scenario where Australia eliminated its remaining tariffs in response to a 10 percent import tariff levied by the U.S., while the rest of the world retaliated, Australian GDP could increase by 0.35 percent, or 0.06 percentage points more than if Australia took no action,” the report added.
The report noted that economic uncertainty in Australia and around the world was now at COVID-19 levels.
‘Nothing Has Changed for Australia’: Minister
Trump has recently handed out letters announcing new tariffs on multiple countries from Aug. 1, however, they do not appear to include Australia at this stage.When asked if Australia had received a letter, Employment Minister Amanda Rishworth said, “Nothing has changed for Australia.”
Rishworth noted some of the letters had suggested 25 percent reciprocal tariffs.
“We are already at the lowest level, but of course, we will keep putting forward the case to say that we don’t think any tariffs are justified and we'll take every opportunity to do that,” she said.
However, Shadow Finance Minister James Paterson raised concerns and said Prime Minister Anthony Albanese needs to meet with Trump.
“The only fair tariff on Australia would be 0 percent, and I hope that’s what we get. But we haven’t given ourselves the best chance of securing that from the Trump administration because the prime minister has not even met President Trump now seven months after he was elected,” Paterson said.
This was in contrast with the UK prime minister, who secured an exemption from steel and aluminium tariffs, he said.
Albanese recently defended his decision not to meet with Trump, arguing his priority has been delivering for Australians. He indicated he would meet with Trump in the “coming months.”
