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The relief of 10% tariffs

 
 

16 April 2025

Entering 2025, it was hard to imagine anyone breathing a sigh of relief over a 10% tariff applied to most goods entering the United States. But that is just what President Trump’s most recent reversal achieved. Last week, President Trump announced a 90-day pause on most of the 2 April tariffs. However, rather than no tariffs for 90 days, he lowered the level to a 10% baseline for most countries globally.

Stock markets rose sharply with the announcement and bond markets started returning to their previous level, but a 10% tariff on goods imported to the United States and an escalating trade war with China could both have seismic impacts on the global economy.

This was the first major showdown between Commerce Secretary Lutnick and Treasury Secretary Bessent. It looks like Bessent's push for negotiations, rather than tariffs, won the day. However, in spite of Bessent's claim that this was Trump’s “strategy all along,” Trump himself said he reversed course due to the market reaction.

 

Mari Koeck
Director, Engagement and Impact

 

"You are going into that room. You are not going to come out until you have got a `yes' from the meeting. I don't care if you've got blood all over you you will not come out of there until you get that agreement."

Former US Deputy Secretary of State Richard Armitage in negotiations for the Australia-US Free Trade Agreement |  2001

 
 

CEO message on Richard Armitage

Vale Richard Armitage

This week America’s allies in Asia lost one of the best friends they ever had. From single-handedly evacuating the entire South Vietnamese Navy as Saigon fell in 1975 to standing by Shinzo Abe as he transformed Japan’s global security role four decades later — Rich Armitage left an indelible mark on the geopolitics of Asia. He was a mentor and hero to many of us on both sides of the Pacific and both sides of politics.

Nothing could match travelling to Asia with Rich—the beers and war stories upon arrival and the mandatory 0600 gym workout the next morning when he often had to ask the hotel staff to bring extra weights for his bench presses. He was capable of incredible toughness, humour, and compassion. When he was Deputy Secretary of State, Japan’s Asahi Shimbun printed a cartoon that argued no country would dare attack Japan if the government just built statues of Rich Armitage along the coastline.

Every one of his friends in Australia will have a “Rich” story…salty for sure and often about how he helped them out of a tough patch in Washington or gave them unvarnished advice on a hard policy question at home. Alliances depend on trust and Rich built it from the ground up. Others will too…but not like he did.

 

Dr Michael Green
Chief Executive Officer

 

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By the numbers

Countries with the largest trade deficits with the United States
Top five countries that import more from the United States than they export

 

Source: US Office of the Trade Representative

As President Trump embarked on his mission to declare “economic independence” for the United States through his Liberation Day tariffs, even trading partners with whom the United States enjoys a trade surplus were targeted. The Netherlands and Belgium, as European Union member countries, were subject to a 20% tariff. Australia and the United Arab Emirates both received the minimum tariff level of 10%.

The US Trade Representative formula for calculating the so-called “reciprocal tariffs” was based on dividing the trade balance the United States has with a country by the total goods imports and then dividing by two. But this number was based on trade balances rather than actual tariffs and countries who import more from the United States than they export to it were still hit with the base rate for tariffs.

While the 90-day pause on tariffs is in effect, countries around the world are working with the White House to try and hammer out a deal. In the case of Australia, their trade deficit with the United States, AUKUS investments and pledges to increase defence spending make a strong case to be a favoured partner.

Expect to hear more about Australia’s critical minerals in the coming weeks as diplomats work to sweeten a deal with the United States. Australia currently has 26 minerals identified on the US 2022 Final List of Critical Minerals and Australian Government officials have indicated that they are working on a plan for strategic use of these minerals in response to the off-and-on-again tariffs.

 

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Institute Building (H03)
University of Sydney NSW 2006

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The United States Studies Centre at the University of Sydney is a university-based research centre, dedicated to the rigorous analysis of American foreign policy, economic security, emerging technology, politics, society and culture. The Centre is a national resource, that builds awareness of the dynamics shaping America, their implications for Australia and — critically — solutions for the Alliance.


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