New tariffs, old problems: Where next for Australian trade?
Donald Trump’s sweeping tariffs signal a seismic shift in global trade.
Though broadly applied, they are centred on China and mark a deeper move away from rules-based trade toward economic nationalism.
For Australia, this is not just a foreign policy matter – it’s a national wake-up call. Trade supports jobs, curbs inflation, and underpins our standard of living.
Australia is not Trump’s direct target, but a 10 per cent tariff now applies to all Australian exports to the US, hitting sectors such as beef, wine, and pharmaceuticals. A 25 per cent tariff on steel and aluminium removes earlier exemptions.
The US accounts for just four per cent of Australia’s exports, but the message is clear – trade is becoming more contested and more politicised.
The greater risk lies in the knock-on effects.
Tariffs on our trading partners, such as a 64 per cent tariff on Chinese imports and a 24 per cent tariff on Japanese imports, risk slowing these economies. Together, these two countries take over half of our export goods. Any cooling in their economies will be felt here.
Diversification has long been a recurring theme in Australia’s trade policy.
In 1921, Australia appointed its first Trade Commissioner to China, in an early effort to reduce reliance on European markets. Yet despite repeated calls, our export profile remains heavily concentrated, highlighting the gap between aspiration and execution.
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At present, one in every three export dollars still comes from China.
ASEAN is expanding, India is opening, and the Gulf presents new opportunities, but none match China’s scale. Nor should they be expected to.
No combination of emerging markets will replicate the sheer volume of exports to China. That’s tied to China’s unique industrial structure and long-term demand.
The goal of diversification efforts isn’t to replace China, but to reduce exposure and build resilience.
Australia’s exports are also heavily concentrated by type. Resources and energy account for 62 per cent of export earnings. The volume is not inherently problematic.
As with China, the goal is not replacement, but balance. We must grow other sectors alongside resources to build a more competitive, resilient economy, particularly in high-value industries such as advanced manufacturing, clean energy, digital services, education and health.
The government has taken steps to respond. Our industry and trade officials have become more commercially focused. New agreements with India, the UK, and the Southeast Asia strategy lay useful groundwork.
Fewer than 2 per cent of Australian businesses are exporters. Photo: AAP
Historically, many support programs have emphasised access over outcomes, geared toward opening doors rather than helping businesses walk through them.
Export Market Development Grants are oversubscribed. More can be done to help services and digital exporters.
Missing middle
The more pressing challenge is domestic. Despite 2.6 million active businesses in Australia, fewer than 57,000 – or less than 2 per cent – are exporters.
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A small number of exporters drive most of the volume. The government’s Southeast Asia Economic Strategy revealed that just 250 firms account for over 90 per cent of merchandise exported to the region.
The real bottleneck is Australia’s “missing middle”, the absence of a strong tier of medium-sized exporters that drive global growth in other economies.
These firms are significantly underrepresented in our economy. The gap between well-resourced large corporations and small businesses limits the breadth of Australia’s exporter base.
Relying on a modest pool of large firms is no longer sufficient. Expanding the pipeline by fostering the growth of medium-sized enterprises and enabling smaller firms to scale globally is essential for broader participation.
Where next for Australian trade?
Diversification must mean expanding into new markets and backing a broader mix of globally competitive sectors and firms. It should be driven by opportunity, not just risk.
ASEAN, India and the Gulf region won’t match China’s scale but offer strong potential in services, technology, clean energy, healthcare and education.
Fewer markets, better chosen, and more deeply cultivated should be the aim.
Second, support firms to succeed, not just explore.
Beyond trade shows, we must help businesses build a real presence: localise, partner, hire and invest. Other countries offer tax incentives and export credits to support this kind of engagement. Australia should follow suit.
Third, use what we already have better.
Institutions, international talent and diaspora networks are underused.
The Asia-Australian community brings deep experience in key regional markets. Programs like the New Colombo Plan have built a valuable supply of regionally skilled leaders, but such supply-side initiatives must be matched by equivalent demand from employers if their full value is to be utilised.
Australia’s trade future depends on broader participation, deeper engagement across regions and greater resilience across sectors.
Business-led international engagement must be recognised as a national priority, supported by targeted reforms and a renewed focus on global capability.
The global environment is shifting fast. An integrated, international strategy championed equally by policymakers and industry is long overdue.
Leigh Howard is the CEO of Asialink Business at the University of Melbourne.
