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Is the Australia-US free trade agreement dead?
12 February 2025
One month after the 20th anniversary of the Australia-US Free Trade Agreement (AUSFTA), President Trump announced 25% tariffs on all steel and aluminium imported into the United States – without any exemptions. This follows a similar pattern to the first Trump term, though back then Australia was able to secure an exemption, largely due to its trade surplus with the United States.
Australian Prime Minister Anthony Albanese discussed a possible exemption for the latest tariffs on the phone with President Trump this week, with Trump saying an exception was under “great consideration” but the executive orders released shortly after their discussion do not allow for them
Former president George W. Bush imposed steel tariffs of up to 30% in 2002 in an effort to protect American manufacturing. The tariffs were short-lived as they were challenged through the World Trade Organization (WTO) and economists estimate they ultimately cost the US approximately 200,000 jobs (equivalent to the 197,000 jobs in the US steel industry at the time).
If President Trump pushes ahead with tariffs on Australia, it would likely violate the AUSFTA and World Trade Organization rules. However, given Trump’s willingness to pull out of international bodies like the World Health Organization, any challenge via the WTO may simply lead to further pressure for a US withdrawal from the group altogether.
Mari Koeck
Director, Engagement and Impact
"We have a surplus with Australia. One of the few. And the reason is they buy a lot of airplanes. They're rather far away and they need lots of airplanes."
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Behind the numbers
Australian exports of steel, iron and aluminium
In billions (USD)
Since the United States signed a free trade agreement with Australia, which took effect on 1 January 2005, trade has increased 138% between the two countries, but not nearly as much as Australian exports to China has increased. In 2000, Japan imported the largest share of Australian steel, iron and aluminium (34%) and China imported 16%. That same year, the US imported 4% of these commodities, but their share of the imports has fallen markedly as China rapidly increased their imports.
By 2023, China imported 82% of Australia’s steel, iron and aluminium (US$7,703,300,000) and the US imported only .3% (US$267,000,000). Even when China began imposing steep tariffs on some Australian goods in 2020, Beijing did not add tariffs to imports of Australian steel and aluminium.
China overtook the United States as Australia’s largest trading partner in 2006 and they have not relinquished that title since. However, the United States remains Australia’s largest investment partner and more than 28% of Australia’s foreign investments are in the United States. As the tariff tensions increase, it will test the strength of not just the Australia-US Free Trade Agreement, but the relationship between Australia and its largest economic partner.
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US-China competition: AI, chips and export controls — where to next?
Kevin J. Wolf and Dr Alan Dupont AO join Hayley Channer to discuss how governments and the private sector can coordinate to address rising concerns around technology competition.
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24 February
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