AUSTRALIA PERSPECTIVE

Canberra, July 24, 2026. The Australian government faces a significant trade hurdle as the US Trade Representative's office confirmed on Thursday a tariff hike on Australian exports from 10 to 12.5 percent, set to take effect at midnight Friday, which is 2 pm Friday in Sydney. The move comes after an investigation found that Australia, along with 59 other countries, is not doing enough to eliminate forced labor from their supply chains. Despite submitting a detailed brief outlining its "robust legal architecture" against modern slavery, the Australian government's efforts were not enough to sway the US decision, which also takes into account a 20-year-old free trade agreement between the two nations. The US office cited public comments, testimony, and "specific presidential guidance" in maintaining its decision.

The US Trade Ambassador, Jamieson Greer, stated that the US has had a nearly century-long ban on importing goods made with forced labor and that "it's high time our trading partners did the same." However, many analysts, including Michael Froman, president of the Council on Foreign Relations, see this as an attempt to reconfigure "reciprocal" tariffs, which the Supreme Court deemed illegal in February, through a series of sectoral investigations. Countries such as the UK, Canada, India, Indonesia, Malaysia, and Argentina are exempt from the higher 12.5 percent rate, with a 10 percent tariff applied instead.

The Australian government and the Business Council of Australia had formally requested an exemption during the consultation period but were unsuccessful. Exporters, including cochlear implant manufacturer Cochlear, are advocating for sectoral exemptions, arguing that their medical devices save lives in the US. This new tariff comes amidst ongoing economic uncertainty, with over $85 billion of the $166 billion in refunds owed after the "Liberation Day" tariffs were invalidated already paid out to businesses, yet the economic and diplomatic damage to close allies like Canberra remains.