Trump’s 10% tariff slug could end up being 20%, hurting our manufacturers, miners and farmers. If this rumour’s right, just how much hurt will it meter out to us Aussies and our economy?

The story that’s worrying Australia today is that Donald Trump’s 10% tariff slug might end up being 20%, which would hurt numerous manufacturers, miners and farmers but the question is that if this rumour is right, then just how much hurt will it meter out to us and our economy?

We get to find out this Friday, the first day of August, when the President’s 90-day deadline expires. Those countries that haven’t cut a deal will face what was expected to be a 10% tariff on products sold into the US.

After his Scotland trip to check out his golf course (oh yeah!) and also have a meeting with Ursula Gertrud von der Leyen, President of the European Commission, over what tariff the EU would cop, Trump did one of his thinking-out-loud pieces to camera for the media.

This is what he said: “I would say it'll be somewhere in the 15 to 20 per cent range. I just want to be nice, [it will] probably one of those two numbers.”

What the actual numbers turn out to be will be a real test of who Donald Trump is. While I guess there are more than two types of Americans, I’ve always seen them as either US-centric people, who don’t even wonder why a game of baseball between two US teams is called the “World Series” and who ask for coke in a beautiful French restaurant in Paris and don’t even pause to think there’s anything unsophisticated about that. These people are Americans that I call Type A.

Then there are citizens-of-the-world Americans, who explain why their country is world class when it comes to invention and innovation. Their leaders, like Franklin D. Roosevelt, were giants among the politicians of the world and of history! I can’t call them Type B yanks. I have to call them Triple A Americans.

While I think the US should reward Australia’s loyalty when it has played global cop to fix a geopolitical crisis, I also think we should pay for the implied big brother protection our ally has always seemingly offered if we were attacked by a foreign force.

Note, there is no official commitment but only a belief that the US has our back, if only for economic reasons. I bet Trump, who’s a very transactional guy (critics call him a bully) has worked out that he has, if you like, the trump cards with us. He knows he could hit us with a 20% tariff, and we’d cop it.  And we would, but it could be the kick in the pants for our complacency, when it comes to the US and trade, which might make us go looking for other trading opportunities and other allies.

Of course, if it’s 20%, it will be the same for the rest of the world that hasn’t cut a deal with the Trump team. Of course, China has been given another 90 days to nut out a new tariff regime between the two countries.

The Albanese Government isn’t publicly grovelling and 9news.com.au reports the following on the subject: “Our position is unchanged — any tariffs on Australian goods are unjustified and an act of economic self-harm,” a spokesperson for Trade Minister Don Farrell said. “We will continue to engage at all levels to advocate for the removal of all tariffs, in line with our free trade agreement with the United States”.

But the question is how hard will these US tariffs hit us?

First, the US is our fourth most important export customer, as the table below shows.

Source: DFAT

Second, as abc.net.au reported in April: “Australia's most valuable exports to the US are services” and they won’t be tariffed.

Third, while the US only accounts for roughly 5% of Australia’s total exports, the compound effect could be significant. The Guardian reports that new tariffs could cost the Australian economy up to AUD 27 billion or 17.5 billion USA factoring in lost market share, supply chain disruptions, and global investor uncertainty, but this is just less than 1% of the 1,752.19 billion US dollars of total GDP we made in 2024! (This was based on a 10% tariff. If it’s 20%, there could be a 2% hit to our GDP).

While individual manufacturers, graziers and miners could see their profits hit by Trump’s tariffs, it won’t be a total disaster for them, nor our economy.

I hope Trump turns out to be a loyal American but as I always argue with my financial planning customers and subscribers to our investment newsletter The Switzer Report, “hope is not a strategy!”

It's a big trading world out there. If the Yanks want to play hardball with us, then this should be the incentive to go looking for softer ball players. As the old saying goes: “When the going gets tough, the tough get going!”