MELBOURNE, Australia — As President Trump stood fast by his vow to impose tariffs on steel and aluminum imports, many of his fellow Republicans warned of the impact they would have on key trading partners.
One of those key trading partners is Australia. Though it exports relatively little steel and aluminum to the United States, it has a lot to lose.
Should American tariffs lead other countries to retaliate, it could result in a full-blown trade war. That could have a harsh impact on Australia, which counts on exports — particularly to China — for a big share of its economic growth. The tariffs could also call into question the longstanding political, economic and military ties between Australia and the United States.
Key Australian businesses and political leaders are now publicly clamoring to be exempt. Here are the potential impacts if the tariffs come to pass.
Steel and aluminum workers could be hit by tariffs. For now, the broader economy probably will not.
Australia exported about 500 million Australian dollars ($400 million) of aluminum and steel to the United States last year. That totals only about 5 percent of Australia’s American-bound exports. By contrast, Australian meat exports to the United States are roughly five times that size, according to IHS Global Trade Atlas, a data provider.
In fact, Australia’s largest steel maker was initially seen as a potential winner. Shares of Bluescope Steel jumped last week after Mr. Trump vowed to impose tariffs because it has operations in the United States. Investors saw the possibility that the company’s American arm could charge more for what it makes.
The bigger hazard for the Australian steel industry is that American tariffs will force steel makers in other countries to send more of what they make to Australia. That could result in leaner profits, price wars and local layoffs.
“If the exports get the tariffs whacked on them, we’re going to have surplus of steel and aluminum in the marketplace — and at the same time as the rest of the world is,” said Daniel Walton, national secretary for the Australian Works’ Union, one of the country’s largest blue-collar unions.
It could, if steel and aluminum tariffs lead to something more drastic.
Canadian and European officials have already publicly discussed ways they could retaliate. United States trading partners could specifically target products made in parts of the country that support Mr. Trump, such as soybeans from the Midwest and bourbon from Kentucky.
“Right now, it’s just steel and aluminum, but it can very easily become much more,” said John Tang, a senior lecturer at the Australian National University’s school of economics. “This would threaten the stability of global markets.”
Cascading tariffs could hurt Australia. Exports of goods and services account for roughly one-fifth of its economic output. Australia’s economy is particularly sensitive to the economic scene in China, its largest trading partner and a major buyer of Australian food and minerals. If broader tariffs hurt Chinese growth, Australia will feel the impact.
It was supposed to be, at least according to Australian officials.
Local media has widely reported that Prime Minister Malcolm Turnbull reached a handshake deal with President Trump at the Group of 20 summit last year to exempt Australia from steel tariffs. While Mr. Trump has kept the details to himself, he has said no country will be exempt.
To many Australian officials, it feels like a betrayal.
“There’s a variety of reasons why Australia should be exempt, not least of which was the understanding reached at the G-20,” said Steven Ciobo, Australia’s trade minister, in an interview with local news media earlier this week.
The country has long been a central ally for the United States, but relations have sometimes been tested since President Trump came to office. Last year, the two leaders shared a contentious phone call. The two have taken pains since to put up a united front — at least until the tariff announcement.
“It appears now that a confidence guarantee, given verbally, counts for nothing,” said John Blaxland, professor of international security and intelligence studies at Australian National University. “In a relationship that has been about ‘shared values,’ it’s damaging. It’s deeply damaging.”
For now, officials and business leaders are publicly pushing the Trump administration to reconsider. But one option appears to be off the table for now: retaliation.
“There is no prosperity at all that flows from putting up trade walls or higher taxes on traded goods,” Mr. Ciobo told local media earlier this week.
Australia’s political posture is likely to remain measured.
“My sense in Australia is that most people are seeing President Trump as unbalanced and unduly influenced by emotional ups and downs: in how he responds to a phone call from Malcolm Turnbull, a comment from Kim Jong-un, or anyone across the spectrum in between,” said Prof. Blaxland.