From the newsrooms of the Sydney Morning Herald and The Age. This is the morning edition. I'm Samantha Salinger Morris. It's Wednesday, March 12th. So it's happened. Donald Trump has slapped a massive tariff on our aluminium and steel exports to the United States. This after our government has spent weeks trying to forestall this event. So how will it impact our economy? Today, international and political editor Peter Hartcher on what message the American president is sending to Australia and whether this decision added to Trump's other erratic moves made in his first 53 days in office, might just lead our country and others down a road to a nervous breakdown. So, Peter, just hours before recording, our North American correspondent Michael Koziol broke the news that Donald Trump will in fact be slapping a heavy tariff on Australian steel and aluminium. So tell us what we've heard.

From the newsrooms of the Sydney Morning Herald and The Age. This is the morning edition. I'm Samantha Salinger Morris. It's Wednesday, March 12th. So it's happened. Donald Trump has slapped a massive tariff on our aluminium and steel exports to the United States. This after our government has spent weeks trying to forestall this event. So how will it impact our economy? Today, international and political editor Peter Hartcher on what message the American president is sending to Australia and whether this decision added to Trump's other erratic moves made in his first 53 days in office, might just lead our country and others down a road to a nervous breakdown. So, Peter, just hours before recording, our North American correspondent Michael Koziol broke the news that Donald Trump will in fact be slapping a heavy tariff on Australian steel and aluminium. So tell us what we've heard.

The Donald Trump has decided to withdraw all exemptions for countries that have, until now, enjoyed exemptions on tariffs on their steel and aluminium exports to the US. Australia is one of the dozens of countries those countries included Brazil, Argentina, South Korea, all of the EU countries, Japan. They're now losing those exemptions and we're one of them. You wouldn't know that from the Australian coverage, which seems to suggest that we are a lonely victim here. But we are in fact now part of the universal Trump mistreatment of all countries. But most importantly, it's the mistreatment of his own people, because these tariffs simply push up the cost of goods, imported goods in the US.

The Donald Trump has decided to withdraw all exemptions for countries that have, until now, enjoyed exemptions on tariffs on their steel and aluminium exports to the US. Australia is one of the dozens of countries those countries included Brazil, Argentina, South Korea, all of the EU countries, Japan. They're now losing those exemptions and we're one of them. You wouldn't know that from the Australian coverage, which seems to suggest that we are a lonely victim here. But we are in fact now part of the universal Trump mistreatment of all countries. But most importantly, it's the mistreatment of his own people, because these tariffs simply push up the cost of goods, imported goods in the US.

So tell us then, why has Donald Trump actually introduced tariffs on these industries?

So tell us then, why has Donald Trump actually introduced tariffs on these industries?

Well, the impulse and the politics of it are one thing, and the economics and the practicalities are another. Donald Trump has a broadly 19th century mercantilist mindset. He's a man from another time. He believes that the power of a country is measured by its territorial area, hence making claims to annex all of Canada, making claims, and reserving the use of force to annex all of Greenland from another NATO ally, Denmark. He's a man who believes that country's prosperity is measured according to their trade balances. Whereas, of course, since the 1930s, the last great disastrous global encounter with tariffs, which contributed to throwing the world into the Great Depression, ever since then we have learned that, in fact, the best possible trade is the freest possible because it keeps the costs to ultimate consumers lowest, the cost of productions lowest. But the US has persuaded itself in recent decades. The decades, the American public has persuaded itself, and American policymakers and politicians have allowed it to happen. That trade has been unfair and punitive for American workers and manufacturing jobs in particular. And it is true that global trade did strip out a lot of manufacturing from the US, but also from other high cost countries like Australia, and relocated mostly to China, and that now is in a process of dispersing yet again to lower cost producers. India, Vietnam, Thailand, for example. Now, why is it that the US is the only one of these developed countries that lost a lot of manufacturing to lower cost countries, the only one with this sort of recidivist recourse to punitive tariffs. The main reason I'd suggest is that the US being the most right wing of any developed country on Earth, perhaps, except possible exception of Israel, doesn't believe, not seriously in any serious way in Redistribution to support the middle and lower classes. So the result is that because of failure of domestic politics in the US and the failure of redistribution and the failure to look after middle class and lower, lower income people in the US, that they have all blamed global free trade. So when Trump said, we've been terribly exploited and we're going to retaliate with tariffs. Americans cheered because they'd been led into this strawman argument that it's all the fault of global trade. Rather than look inwardly and say, we need to take better care of our own citizens, that's the essence of this. So Trump says not everything Trump says and does, of course, is wrong. He says that the US has been taken advantage of by all countries everywhere for a very long time, and there's a lot of truth in that. But the recourse to tariff policy is stupid because, as Jim Chalmers, Anthony Albanese and others have been saying today, it is an act of economic self-harm. It means American consumers will pay more for their imported goods. And this I would point out, Samantha, is the still the early phase of Trump's tariff unleashing.

Well, the impulse and the politics of it are one thing, and the economics and the practicalities are another. Donald Trump has a broadly 19th century mercantilist mindset. He's a man from another time. He believes that the power of a country is measured by its territorial area, hence making claims to annex all of Canada, making claims, and reserving the use of force to annex all of Greenland from another NATO ally, Denmark. He's a man who believes that country's prosperity is measured according to their trade balances. Whereas, of course, since the 1930s, the last great disastrous global encounter with tariffs, which contributed to throwing the world into the Great Depression, ever since then we have learned that, in fact, the best possible trade is the freest possible because it keeps the costs to ultimate consumers lowest, the cost of productions lowest. But the US has persuaded itself in recent decades. The decades, the American public has persuaded itself, and American policymakers and politicians have allowed it to happen. That trade has been unfair and punitive for American workers and manufacturing jobs in particular. And it is true that global trade did strip out a lot of manufacturing from the US, but also from other high cost countries like Australia, and relocated mostly to China, and that now is in a process of dispersing yet again to lower cost producers. India, Vietnam, Thailand, for example. Now, why is it that the US is the only one of these developed countries that lost a lot of manufacturing to lower cost countries, the only one with this sort of recidivist recourse to punitive tariffs. The main reason I'd suggest is that the US being the most right wing of any developed country on Earth, perhaps, except possible exception of Israel, doesn't believe, not seriously in any serious way in Redistribution to support the middle and lower classes. So the result is that because of failure of domestic politics in the US and the failure of redistribution and the failure to look after middle class and lower, lower income people in the US, that they have all blamed global free trade. So when Trump said, we've been terribly exploited and we're going to retaliate with tariffs. Americans cheered because they'd been led into this strawman argument that it's all the fault of global trade. Rather than look inwardly and say, we need to take better care of our own citizens, that's the essence of this. So Trump says not everything Trump says and does, of course, is wrong. He says that the US has been taken advantage of by all countries everywhere for a very long time, and there's a lot of truth in that. But the recourse to tariff policy is stupid because, as Jim Chalmers, Anthony Albanese and others have been saying today, it is an act of economic self-harm. It means American consumers will pay more for their imported goods. And this I would point out, Samantha, is the still the early phase of Trump's tariff unleashing.

Well, that's a bit of a warning there. But let's turn to Australia and our steel and aluminium industry. How big is it and how much do we actually export to the US?

Well, that's a bit of a warning there. But let's turn to Australia and our steel and aluminium industry. How big is it and how much do we actually export to the US?

In practical terms, it's negligible. This is a marginal question for Australia in terms of total Australian exports. These steel and aluminium exports make to the US make up 0.2% of exports. That's one fifth of 1% of our exports. And the company most affected, BlueScope steel, which also has major manufacturing plant in the US, so it can simply crank up its production behind the tariff wall in the US and its production from Australia can be diverted to other countries. Has said it doesn't expect any major effect. The investment banking broking analysts have all said they don't expect any major effect on any Australian company, so it really is a trivial matter. Even the companies that are the targets of this have said it won't affect them materially. This is a political for Australia in the direct sense, direct relationship with the US. This is a political and social event, not a serious economic event. There is a serious economic consequence for Australia, but it's not direct. It's not because of what the US is doing to our aluminium and steel exports, the economic consequence that Australia could suffer. Presuming that this continues and continues to escalate, which is exactly what's unfolding, comes from the global blowback from this. So he's put these tariffs on everybody, including China, which is the biggest producer of most of the imports that most countries buy. And this is this is raising the cost of global trade. This is putting a tax on trade everywhere which reduces incomes everywhere. This will be a global consequence and a global slowdown in trade, which could produce an inflation uptick because the prices of imports to everybody, everywhere will go up. Therefore, central banks will have to respond again by raising interest rates. We thought we'd ended that cycle. But if this continues, rates around the world will enter a new tightening cycle and rates will go up again. Growth will slow and the world will enter a recession. If this continues, that's how Australia will be affected, not by what the US has done to us. What the US has done to us is a political signal that we are no longer special, that we have no special privileges and shouldn't expect any.

In practical terms, it's negligible. This is a marginal question for Australia in terms of total Australian exports. These steel and aluminium exports make to the US make up 0.2% of exports. That's one fifth of 1% of our exports. And the company most affected, BlueScope steel, which also has major manufacturing plant in the US, so it can simply crank up its production behind the tariff wall in the US and its production from Australia can be diverted to other countries. Has said it doesn't expect any major effect. The investment banking broking analysts have all said they don't expect any major effect on any Australian company, so it really is a trivial matter. Even the companies that are the targets of this have said it won't affect them materially. This is a political for Australia in the direct sense, direct relationship with the US. This is a political and social event, not a serious economic event. There is a serious economic consequence for Australia, but it's not direct. It's not because of what the US is doing to our aluminium and steel exports, the economic consequence that Australia could suffer. Presuming that this continues and continues to escalate, which is exactly what's unfolding, comes from the global blowback from this. So he's put these tariffs on everybody, including China, which is the biggest producer of most of the imports that most countries buy. And this is this is raising the cost of global trade. This is putting a tax on trade everywhere which reduces incomes everywhere. This will be a global consequence and a global slowdown in trade, which could produce an inflation uptick because the prices of imports to everybody, everywhere will go up. Therefore, central banks will have to respond again by raising interest rates. We thought we'd ended that cycle. But if this continues, rates around the world will enter a new tightening cycle and rates will go up again. Growth will slow and the world will enter a recession. If this continues, that's how Australia will be affected, not by what the US has done to us. What the US has done to us is a political signal that we are no longer special, that we have no special privileges and shouldn't expect any.

We'll be right back. Well, let's get into the political calculations there, because we know that there's been an enormous amount of work done behind the scenes by the Australian government to try and dodge these tariffs. So are you surprised in any way that Trump has actually gone ahead with them?

We'll be right back. Well, let's get into the political calculations there, because we know that there's been an enormous amount of work done behind the scenes by the Australian government to try and dodge these tariffs. So are you surprised in any way that Trump has actually gone ahead with them?

Well not really. He's got to demonstrate that he's tough. You know he's tough and tough on everybody. And he's said he would be reluctant to give any exemptions. And his primary argument in terms of tariffs was that other countries have been running trade surpluses against the US, which has been in a trade deficit with those individual countries. That hasn't been true in Australia's case. One of the few countries on earth was actually the other way around. We ran the deficit and they ran the surplus. But by a sheer stroke of fortune, that changed on Tuesday. Just this week, on Tuesday, for the first time in decades, Australia reported a trade surplus with the US, and the US ran a deficit, and that was because of a surge in Australian gold exports to the US. Now get this. How's this? How's this for an inadvertent like.

Well not really. He's got to demonstrate that he's tough. You know he's tough and tough on everybody. And he's said he would be reluctant to give any exemptions. And his primary argument in terms of tariffs was that other countries have been running trade surpluses against the US, which has been in a trade deficit with those individual countries. That hasn't been true in Australia's case. One of the few countries on earth was actually the other way around. We ran the deficit and they ran the surplus. But by a sheer stroke of fortune, that changed on Tuesday. Just this week, on Tuesday, for the first time in decades, Australia reported a trade surplus with the US, and the US ran a deficit, and that was because of a surge in Australian gold exports to the US. Now get this. How's this? How's this for an inadvertent like.

You couldn't write.

You couldn't write.

It. You couldn't. Why did why did Australian gold export surge thousands of percentage points over the previous year's sales? Because there's a rush on gold in the US and buyers can't get enough of it. So Australian gold miners have been shipping massive quantities. Now, why is there a rush on gold in the US? Because of investor uncertainty. Because of Donald Trump. So Trump himself is the cause of Americans rushing to get gold because they don't trust the economic consequences of what's about to happen. That, in turn, has has stimulated Australian gold exports. That in turn has created, for the first time in decades, an Australian trade surplus with the US, which then gives Trump license to say, oh look, we caught the Aussies too, and therefore put tariffs on us.

It. You couldn't. Why did why did Australian gold export surge thousands of percentage points over the previous year's sales? Because there's a rush on gold in the US and buyers can't get enough of it. So Australian gold miners have been shipping massive quantities. Now, why is there a rush on gold in the US? Because of investor uncertainty. Because of Donald Trump. So Trump himself is the cause of Americans rushing to get gold because they don't trust the economic consequences of what's about to happen. That, in turn, has has stimulated Australian gold exports. That in turn has created, for the first time in decades, an Australian trade surplus with the US, which then gives Trump license to say, oh look, we caught the Aussies too, and therefore put tariffs on us.

Sorry, I have to pause because it's so crazy. And it does make me want to ask you just about your response to something that Thomas Friedman wrote in the New York Times. He said, our markets are going to have a nervous breakdown from uncertainty. Our allies will have a nervous breakdown, and we're going to give the rest of the world a nervous breakdown. Do you think that's what this is showing we're on the way to or is that just hyperbole?

Sorry, I have to pause because it's so crazy. And it does make me want to ask you just about your response to something that Thomas Friedman wrote in the New York Times. He said, our markets are going to have a nervous breakdown from uncertainty. Our allies will have a nervous breakdown, and we're going to give the rest of the world a nervous breakdown. Do you think that's what this is showing we're on the way to or is that just hyperbole?

I think Donald Trump's already courtesy of the American voter, has set the world into the early phase of a nervous breakdown. And you feel that, especially if you live in Europe. The Ukrainians, of course, are the are the primary victims so far. But the Europeans have been living in a state of suspended belief. I suppose they didn't think that Trump was seriously about to walk away from NATO. That Trump was seriously about to abandon allies. And yet we've now seen it. It's irrefutably true in the case of Ukraine. By the way, there is one country, I should add. I should correct myself. There's one country that's been exempted from a new wave of American tariffs on their steel and aluminium. Do you know what it is that country is Russia now? It's for a fair enough reason, which is that since the invasion of Ukraine, the Biden administration has put a 200% tariff on Russian steel and aluminium. So it's already at a huge disadvantage, effectively priced out of the US market, which.

I think Donald Trump's already courtesy of the American voter, has set the world into the early phase of a nervous breakdown. And you feel that, especially if you live in Europe. The Ukrainians, of course, are the are the primary victims so far. But the Europeans have been living in a state of suspended belief. I suppose they didn't think that Trump was seriously about to walk away from NATO. That Trump was seriously about to abandon allies. And yet we've now seen it. It's irrefutably true in the case of Ukraine. By the way, there is one country, I should add. I should correct myself. There's one country that's been exempted from a new wave of American tariffs on their steel and aluminium. Do you know what it is that country is Russia now? It's for a fair enough reason, which is that since the invasion of Ukraine, the Biden administration has put a 200% tariff on Russian steel and aluminium. So it's already at a huge disadvantage, effectively priced out of the US market, which.

Is an interesting point because, Peter, you've stated that on numerous occasions that Trump has a transactional relationship with America's allies. Now, obviously, who America's allies are keeps changing, as per your reference, just there to Russia. So does this change things at all in a practical way for us, these most recent tariffs.

Is an interesting point because, Peter, you've stated that on numerous occasions that Trump has a transactional relationship with America's allies. Now, obviously, who America's allies are keeps changing, as per your reference, just there to Russia. So does this change things at all in a practical way for us, these most recent tariffs.

If these tariffs mean anything for Australia, they should teach us first that Trump is Because, I mean, I think we have already absorbed this lesson economically destructive. But the second lesson I think is, is really a helpful one. I think this is a salutary lesson for Australia because we've been thinking that we are very special and we will always be protected by America because remember, you know, we have been freeloading on them for defense purposes for decades. Any illusion we might have now that we are in any way special should be gone, should be completely exploded by this development and wake us up. That we need to be self-reliant in every sense, every rational sense. And I don't mean by putting tariffs up. In fact, the rational Australian response would be to cut our own tariffs and Australia is in the happy position. I noticed that a lot of countries, the sheer politics, public resentment against the US has forced countries to to impose reciprocal tariffs on the US, which then Donald Trump responds to with what he calls reciprocal tariffs and keeps escalating. Where does that madness stop? Australia has remained sane, and because there is not that intense resentment across the ocean between Australia and the US, the politics will allow Albanese to say we're not imposing retaliatory tariffs and Dutton will stand with him. We will keep the cost of our imports down, which is a good thing for the Australian consumer. But the really rational response would be for Australia to cut its remaining tariffs completely, because we are one of the freest trading countries in the world. But it really should show us that in terms of defence, our reliance on the US for intelligence, vital intelligence flows, plus security guarantees or at least imagined security guarantees are completely unreliable, that the US can change its definition of allies and interests overnight. And we need to be prepared, and we are not.

If these tariffs mean anything for Australia, they should teach us first that Trump is Because, I mean, I think we have already absorbed this lesson economically destructive. But the second lesson I think is, is really a helpful one. I think this is a salutary lesson for Australia because we've been thinking that we are very special and we will always be protected by America because remember, you know, we have been freeloading on them for defense purposes for decades. Any illusion we might have now that we are in any way special should be gone, should be completely exploded by this development and wake us up. That we need to be self-reliant in every sense, every rational sense. And I don't mean by putting tariffs up. In fact, the rational Australian response would be to cut our own tariffs and Australia is in the happy position. I noticed that a lot of countries, the sheer politics, public resentment against the US has forced countries to to impose reciprocal tariffs on the US, which then Donald Trump responds to with what he calls reciprocal tariffs and keeps escalating. Where does that madness stop? Australia has remained sane, and because there is not that intense resentment across the ocean between Australia and the US, the politics will allow Albanese to say we're not imposing retaliatory tariffs and Dutton will stand with him. We will keep the cost of our imports down, which is a good thing for the Australian consumer. But the really rational response would be for Australia to cut its remaining tariffs completely, because we are one of the freest trading countries in the world. But it really should show us that in terms of defence, our reliance on the US for intelligence, vital intelligence flows, plus security guarantees or at least imagined security guarantees are completely unreliable, that the US can change its definition of allies and interests overnight. And we need to be prepared, and we are not.

But I did want to ask you, you know, is it possible for this decision, these latest tariffs that Trump has imposed to be reversed? I mean, because obviously we've seen him do this with other nations. He's slapped it on Canada and then taken it off. And there's this seesawing. So might we see that here?

But I did want to ask you, you know, is it possible for this decision, these latest tariffs that Trump has imposed to be reversed? I mean, because obviously we've seen him do this with other nations. He's slapped it on Canada and then taken it off. And there's this seesawing. So might we see that here?

Yes, absolutely. Last time around, when he put tariffs on Australian aluminium and steel, he removed them after seven months. And it is possible that he will see the inflationary consequences, the destructive consequences, the stock market consequences and step back from this madness. He might decide that they're all just negotiating positions to see if he can shake down trading partners for favours, much as he's used American support, military support for Ukraine to shake down the Ukrainians at their most vulnerable moment, to try and loot some of their rare earths and critical minerals, he might take a similar negotiating stance. It's entirely possible that the tariffs will be scaled back or removed.

Yes, absolutely. Last time around, when he put tariffs on Australian aluminium and steel, he removed them after seven months. And it is possible that he will see the inflationary consequences, the destructive consequences, the stock market consequences and step back from this madness. He might decide that they're all just negotiating positions to see if he can shake down trading partners for favours, much as he's used American support, military support for Ukraine to shake down the Ukrainians at their most vulnerable moment, to try and loot some of their rare earths and critical minerals, he might take a similar negotiating stance. It's entirely possible that the tariffs will be scaled back or removed.

And so I guess just to wrap up, Peter, you know, Albanese has studiously avoided personal criticism of Trump. You know, until now, I think it's safe to say even some of his more bizarre ideas like, you know, turning Gaza into the Riviera of the Middle East. Do you think this changes things in terms of how he might actually communicate with Trump?

And so I guess just to wrap up, Peter, you know, Albanese has studiously avoided personal criticism of Trump. You know, until now, I think it's safe to say even some of his more bizarre ideas like, you know, turning Gaza into the Riviera of the Middle East. Do you think this changes things in terms of how he might actually communicate with Trump?

No. And he and his government have continued to say today that they will proceed in relations with other countries and allies in a mature and respectful way. So they're not going to retaliate either economically or rhetorically. They're going to behave themselves and and be nice. The real logic there is that they fear provoking Trump, getting yet more punitive attention by being sticking out like a lightning rod. So they won't say anything overtly critical, and they'll behave themselves like like nice people. The there is an appetite in the electorate for, especially among the Australian left, to punch Trump in the nose to stand up to him. But Albanese won't, simply because he thinks that it would harm the national interest if he were to provoke Trump further.

No. And he and his government have continued to say today that they will proceed in relations with other countries and allies in a mature and respectful way. So they're not going to retaliate either economically or rhetorically. They're going to behave themselves and and be nice. The real logic there is that they fear provoking Trump, getting yet more punitive attention by being sticking out like a lightning rod. So they won't say anything overtly critical, and they'll behave themselves like like nice people. The there is an appetite in the electorate for, especially among the Australian left, to punch Trump in the nose to stand up to him. But Albanese won't, simply because he thinks that it would harm the national interest if he were to provoke Trump further.

That's a good point, Peter.

That's a good point, Peter.

Any time.

Any time.

That's why we have you here. So thank you as always.

That's why we have you here. So thank you as always.

Always a pleasure, Samantha.

Always a pleasure, Samantha.

For your time. Today's episode of The Morning Edition was produced by myself, Tammy Mills, and Josh towers. Our head of audio is Tom McKendrick. The Morning Edition is a production of The Age and The Sydney Morning Herald. To support our journalism, subscribe to us by visiting The Age or smh.com.au. Forward slash. Subscribe and sign up for our Morning Edition newsletter to receive a comprehensive summary of the day's most important news, analysis and insights in your inbox every day. Links are in the show. Notes. I'm Samantha Selinger. Morris. This is the morning edition. Thanks for listening.

For your time. Today's episode of The Morning Edition was produced by myself, Tammy Mills, and Josh towers. Our head of audio is Tom McKendrick. The Morning Edition is a production of The Age and The Sydney Morning Herald. To support our journalism, subscribe to us by visiting The Age or smh.com.au. Forward slash. Subscribe and sign up for our Morning Edition newsletter to receive a comprehensive summary of the day's most important news, analysis and insights in your inbox every day. Links are in the show. Notes. I'm Samantha Selinger. Morris. This is the morning edition. Thanks for listening.