The United States recently announces tariffs for many countries on steel and aluminum, but Australia has been granted an exemption. While this comes as welcome news for many Australian companies, the announcement is worrisome to those who know the true effects that could come from the exemptions.
Recently, FX Australia did some analysis on the basis of the exemption and tariffs, as well as reveal the pros and cons of the Australian exemption on steel and aluminum exports going to the U.S. This is opening a lot of opportunities for speculation in the currency markets.
Here’s What You Need to Know About the Tariffs
The United States has been negotiating with many countries when it comes to trade, and after not being able to get the bargain desired, tariffs are being put into place. Tariffs on steel and aluminum are in place for the European Union, Canada, and Mexico.
The steel and aluminum tariff is as follows: a 25% tariff on steel and a 10% tariff on aluminum imports going into the United States from those countries.
The United States has granted exemptions from these tariffs for just a few countries. These countries include South Korea, Brazil, Argentina, and Australia.
How Does This Exemption Directly Impact Australia?
At first glance, the exemption seems like a great deal for Australia. The exemption on steel and aluminum going to the US does keep the relationship between the countries healthy, and it certainly inspires free trade.
The United States and Australia have agreed that there will be a quote or limit on the amount of steel and aluminum being imported from Australia. The same type of deal has been made with Argentina. This ensures that the American market doesn’t become flooded with import surges while contributing to increased capacity utilization.
The tariff exemptions do provide an opportunity for Australian steel and aluminum producers to continue maximizing their international sales, but there is one slightly unexpected downside to the exemption. We’ll discuss that further in just a moment – as well as what’s being done to stop it from posing a major disadvantage for Australia’s steel and aluminum companies.
A Quick Look at the Benefits of The Tariff Exemption Everyone’s Talking About
Specifically, the exemptions help preserve fair trade between the US and Australia. In addition, these tariff exemptions help to support jobs in both countries, which is helpful for both economies. Here in Australia, these exemptions maintain balanced trade growth.
All of these advantages are important for Australia, and our country would likely suffer if high tariffs were applied to our exports of steel and aluminum. Our metal market is strong, and the exemptions help us keep it that way. While it might seem like there are infinite advantages to the exemption, there are some negative impacts…
The Downside of the Australian Exemption on US Imports of Steel and Aluminum
Economists and industry experts are acutely aware of the downside to these exemptions. Considering that countries such as China, Vietnam, and India aren’t exempt from the tariff, they are going to have excess metals to dump, and they could turn to Australia. If those countries flood the market with cheap steel and aluminum, Australia’s own producers wouldn’t be able to compete. This “dumping” is being feared by companies – existing and new ones – across the country.
While dumping seems inevitable, the good news is that there are measures being put into place to help reduce dumping in Australia.
What’s Being Done to Prevent Dumping of Cheap Metals in Australia’s Market?
The country is working to put into place proactive measures to discourage dumping and keep the Australian metals market strong. For instance, the government is boosting resources for the Anti-Dumping Commission. Companies caught cheating the system that’s in place are facing triple the traditional penalties. In addition, an anti-dumping policy is being put into place.
The Anti-Dumping Commission has revised their system to ensure that Australian companies can compete with steel and aluminum being imported. Plus, the Anti-Dumping Commission is reducing red tape and improving certainty for Australian companies using the system.
In addition, all of these reforms comply with international trade obligations and the Australia World Trade Organization. It’s a win-win for all who want to keep the principles of free and fair trade alive and thriving.
In Conclusion…
Australia’s metal industry is booming, and thanks to the exemption and the revised rules being put into place by the Australia World Trade Organization, the economy will remain healthy!