Rabobank Australia, Media Release, 3 April 2025

April 2 was ‘Liberation Day’ in the USA and Donald Trump has announced his promised reciprocal tariffs on trading partners.

Key takeouts

• There is a baseline minimum tariff rate of 10 per cent for all countries except Canada and Mexico (who have been affected by previous tariff announcements).
• Tariffs apply from 12:01am EDT on April 5^th (tomorrow morning). Australia has attracted reciprocal tariffs of 10 per cent (equal to the baseline minimum rate).
• The USA has calculated a tariff rate for each country equivalent to the barriers to trade that US producers face to sell into those markets.

1. This number includes the effects of non-tariff barriers like quotas and biosecurity restrictions
2. It also includes the impact of currency manipulation and ad valorum consumption taxes like the GST
3. The USA has calculated that Australia imposes barriers to trade equivalent to a 10 per cent tariff rate.

• President Trump has described these reciprocal tariffs as “kind” because the rates that the USA is imposing are typically half the rate of the trade barriers that US exporters face (except for countries like Australia and the UK, where US exporters face very low barriers already).
• China has been hit with a 34 per cent tariff on top of the 20 per cent tariffs that had previously been announced.
• Other tariff rates for selected economies:

1. EU: 20 per cent
2. Japan: 24 per cent
3. India: 27 per cent
4. South Korea: 26 per cent
5. Vietnam: 46 per cent
6. Indonesia: 32 per cent

Who pays the tariffs?

• Technically importers pay the tariffs,  but the cost of tariffs is ultimately determined by the elasticity of supply and demand, so will vary depending on the product type.

Potential implications for Australian agricultural exports

The United States is a top 3 export destination for Australian agriculture.  Major Australian agricultural exports to the USA include beef, sheep meat and wine.

A 10 per cent across-the-board tariff means Australia is not disadvantaged compared with other trading partners and in some cases – where competition comes from identified countries with specifically-announced higher tariffs – possibly in a slightly better position.

Beef:

• In 2024, the US was the number 1 export destination for Australian beef.
• President Trump specifically identified Aussie beef exports as a concern from the perspective of US trade officials during his press conference. Australia has current restrictions on the importation of US beef due to BSE (mad cow disease) concerns from 2003. An Australian review is currently underway and a draft report was published in 2024.
• Demand for manufacturing (lean trimmings 90 + 95 CL) beef in the US is likely to be high until around 2029 due to the US beef herd rebuild and therefore the volume of US beef imports is expected to remain high.
• The watching point may be a shift in trade flows. If there are any retaliatory actions taken by countries – such as Japan, China and South Korea – that have had larger tariffs imposed on them, this might influence trade flows between them and the US. These countries are also major destinations for Australian beef and this could potentially lead to increased demand in these markets for Australian beef.

Sheepmeat:

• The US is the third-largest export destination for Australian sheepmeat.  In 2024, 13 per cent of sheepmeat production was exported to the US – 16 per cent of lamb production and 7 per cent of mutton exports.
• Australian lamb supplies a large proportion of the US consumption, with New Zealand as the second-largest supplier, but lamb makes up a small proportion of the US diet.

Wine:

• The US is a top 3 export destination for Australian wine.  In 2024, 13 per cent of total Australian wine exports were to the US. The largest wine exporters to the US – France and Italy –  will face a tariff rate of 20 per cent, 10 per cent more than Australia, New Zealand and other large non-EU wine exporters. While these tariffs may impact total wine exports to the US, Australia should be relatively less negatively impacted than EU exporters.

Grains and Oilseeds:

• Beyond the macroeconomic impacts of the announced tariffs, Australian grain and oilseed exports may be influenced by potential counter tariffs in the near future.
• Australia’s barley exports have minimal overlap with US barley and corn markets, so significant impacts are not anticipated. Additionally, Canada has been spared from the tariffs announced today, easing the pressure on the canola market.
• However, the wheat market could see notable shifts. Both the US and Australia have a strong footprint in key Asian markets, including the Philippines, China, Japan, South Korea and Indonesia. If any of these countries impose counter tariffs on US imports, the global wheat trade may shift, potentially benefiting Australia’s wheat exports.
• Another potential outcome of reciprocal tariffs is increased demand for South American grains. While grain and oilseed supplies are strong after two good seasons, chronic issues with exporting capacity persist. This situation could create market opportunities for Australian products, similar to the recent surge in feed barley exports to the Middle East.

Cotton and wool:

• For cotton and wool markets, the biggest negative impact of the announcement could come in the form of a slowdown in Chinese growth. This is particularly significant for wool, with 85 per cent of Australian wool exports sent to China.