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Australia’s tariff exemption is only temporary, according to Trump advisor

There was a huge outcry several weeks ago when President Donald Trump implemented trade tariffs on foreign steel and aluminium, which would affect allies indiscriminately. However, the administration then conceded that some allies could be exempt.

However, an article in The Australian is quoting President Donald Trump’s senior trade policy adviser, Peter Navarro, as saying that Australia could face quotas on its steel and aluminium exports to the US so that no third-party country tries to gain backdoor entry to American markets.

The current exemption some countries are experiencing may only last until 1 May 2018 “pending discussions of satisfactory long-term alternative means to address the threatened impairment to US national security” according to Mr Navarro.

He continued “By May 1, 2018, the President will decide whether to continue to exempt these countries from the tariffs, based on the status of the discussions.”

The quotas may not actually affect Australia much, if at all, because Australia only exports a reasonably small volume of steel and aluminium to the United States.

However, it goes to show that even being one of the United States’ most loyal allies over the past several decades doesn’t guarantee being treated differently from any other country. Every country is someone to be bartered with, according to the way the Trump Administration is acting.

Mr Navarro commented further “Here’s what’s going to happen, they’re temporary exemptions conditioned on the ability of these countries to come to the table and give us more fair and reciprocal trade.”

Foolish takeaway

Australia is one of the few countries that the US has a trade surplus with, so it’s unclear how Australia can be even more fair, particularly as the US walked away from the Trans-Pacific Partnership (TPP). It will be interesting to see how this affects BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) as a lot of their iron is turned into steel in various countries, particularly China.

Resource stocks can be inherently risky for reasons such as these tariffs, which is why I’d want to invest in these top growth stocks instead.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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