The US has imposed a 25 per cent tariff on steel and aluminium imports, set to impinge Australian companies from March 12.
Australia exported 223,000 tonnes (t) of steel and 83,000t of aluminium to the US last year, and while the Federal Government is seeking an exemption, the outcome remains uncertain as trade negotiations continue with the US Government.
“This tension between economic interests and security alliances presents significant challenges,” UNSW business school Professor Maggie Dong said.
“With the US and China already engaged in a global trade war, Australian companies must prepare for heightened trade tensions, increased uncertainty, and higher prices.”
Dong highlighted several short-term strategies that businesses can implement to cushion the impacts of tariffs, including flexible contracting, nearshoring, diversification and financial hedging.
By adopting flexible contracting, companies can renegotiate pricing and terms as external conditions change.
“(A) flexible contract usually includes a clause allowing for quick renegotiation in the event of some unpredicted situations, like tariffs or supply shocks,” Dong said.
Reducing reliance on the US market is another key step, but Dong warned that growing local protectionism is making trade riskier, and companies must explore alternative markets.
“Especially for multinationals, they should avoid over-reliance on a single source or just a couple of markets to better absorb the shocks of tariffs or trade barriers,” she said.
Another effective strategy is shifting production closer to home to reduce reliance on US-dependent supply chains.
“Australia’s strategic location at the crossroads of the Indo-Pacific region puts it in a unique position to strengthen trade alliances and mitigate the impact of US tariff policies,” Dong said.
“By deepening engagements with growing Asian economies, Australia can diversify export markets and leverage its regional influence for better trade deals.”
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