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Last-minute reprieve in US trade war

Beef Central 04/02/2025

US tariffs on Mexican and Canadian goods have been paused for one month after last-minute deals were struck between the nations’ leaders.

US president Donald Trump agreed to postpone the tariffs he threatened against Canada and Mexico by at least 30 days after leaders of both countries promised more cooperation on border security.

Each has agreed to deploy 10,000 troops and other personnel at their borders in order to clamp down on illegal immigration and drug trafficking, which was nominated as a key reason by Mr Trump for announcing heavy trade sanctions on Saturday.

Mr Trump has said he is also talking with Chinese leaders but no outcome has yet been signalled.

At the same time he has also warned European nations that additional US tariffs on products from the EU will “definitely happen”.

‘Statecraft’ driving trade policy

In its latest assessment of the fast-moving trade war, global agribusiness bank Rabobank notes that “economic statecraft” has supplanted economic efficiency as the primary driver of policy decisions.

Historically, periods of trade liberalisation have been associated with rising prosperity in Australia and New Zealand, while periods of rising protectionism are typically associated with slower growth.

Are more tariffs coming?

“Almost certainly” is the succinct assessment from the Rabo Research team.

“The Financial Times recently reported that US Treasury Secretary Scott Bessent had floated a plan to introduce universal tariffs (‘tariffs on everything from everywhere’) at an introductory rate of 2.5 percent, increasing by the same amount each month until the rate reached 20 percent.

“That perhaps provides an indication of where tariff rates may land, but there is certainly precedent for them to go higher.

“Higher tariff rates may even become likely if China, the EU and others follow Canada’s lead by imposing retaliatory duties on the USA. “

Rabo also noted that the free-floating currencies of Australia and New Zealand act as shock absorbers for their respective economies, increasing export competitiveness in the event of tariffs being imposed.

Both countries will likely face direct and indirect impacts from US tariff policy once universal tariffs are enacted and as the Chinese economy responds to tariffs, it said.

Australia and New Zealand lack the scale to pursue strategic autonomy, so must choose a policy suite to optimise security of both trade and defence.

New Zealand is more exposed than Australia, owing to its greater reliance on trade, the greater importance of the USA to its export program, its trade surplus with the USA and its low levels of defence spending.

Australian trade perspective

Australian agricultural bodies are monitoring the developing situation closely.

A spokesperson for the Australian Meat Industry Council told Beef Central that the United States is an important, long-standing and valued export market for Australian red meat and AMIC expects to maintain a strong, mutually beneficial trade relationship with the US.

“AMIC works closely with members, government, and the supply chain to manage trade risks across all markets.

“Any new tariffs would have implications on global trade in direct and indirect ways.

“However, we prefer not to speculate on what impact changes, or potential changes, in US trade policy would have on Australian red meat exports and agriculture more broadly.”

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