US President Donald Trump has slapped 25 per cent tariffs on Australian steel and aluminium exports, a step slammed as a "form of economic self-harm" by Prime Minister Anthony Albanese that flies in the face of the free trade agreement between the nations.The tariffs cover all imports of those metals from across the globe into the United States, and while Australia had pushed for an exemption, the White House has announced they will go ahead as originally planned.So how will the policy impact Australia and our local economy? This is what you need to know.
Australian steel and aluminium exports into the the United States will now be slapped with a 25 per cent tariff. (Peter Braig)
What is a tariff?
A tariff is a tax on imported goods.While Trump has indicated they are paid by the country the tariffs are placed on, they're actually charged to the company that imports the good in question, which generally just leads to higher prices for consumers.
What tariffs is Trump introducing and why is he doing it?
In the first few weeks of his second term in the White House, Trump has already introduced a raft of tariffs, including 25 per cent on goods from Canada and Mexico and 20 per cent on Chinese exports.The one we're particularly interested in, though, is a 25 per cent tariff on all steel and aluminium imports into the US, which includes those from Australia.Trump has said this will both raise revenue for his government and boost US manufacturing. 
Donald Trump has promoted tariffs as a way to boost both American manufacturing and his budget bottom line. (AP)
Why didn't Australia receive an exemption?
It's important to note no countries received an exemption."A 25 per cent tariff on steel and aluminium with no exceptions or exemptions will go into effect for Canada and all of our other trading partners at midnight, March 12th," White House spokesperson Kush Desai said.Where Australia is a little different is that Trump said he would "give great consideration" to an exemption following a phone call with Prime Minister Anthony Albanese last month.That sparked some hope that Canberra would be let off the hook, particularly given former prime minister Malcolm Turnbull had secured a similar exemption from Trump in 2018 – although such exceptions were more common then, and Turnbull himself has admitted a second such let-off was unlikely this time around.
Anthony Albanese has labelled the tariffs an act of "economic self-harm". (Alex Ellinghausen)
How will Trump's tariffs affect the Australian economy?
The tariffs will clearly discourage US companies and consumers from buying Australian-made steel and aluminium.However, the exports of those two metals to the US make up a miniscule fraction of Australia's total trade output – "less than 0.2 per cent of the total value of our exports," Albanese noted – so it's unlikely to have a significant impact on the overall economy.Australia also only exports about 10 per cent of its steel and aluminium to the US, so the remaining 90 per cent won't be directly hit by the tariffs, but their impact will still nonetheless be felt in the sector."In terms of exports, aluminium and steel are only a fraction of the size of Australian mining sector," Dr Scott French from the University of NSW Business School said."So, if you're looking at Australia as a whole, the direct effect on miners is smaller. But it's a bigger overall sector, so when you multiply that out it's probably the bigger of the two impacts for Australia overall."
Local steel and aluminium manufacturing could take a hit from the tariffs, with the biggest concern a potential influx of cheap foreign produce onto the Australian market. (Glenn Hunt)It could also spell trouble for specific steel and aluminium workers."This will be bad for the steelworkers of the Illawarra and the aluminium workers of Portland," University of Technology Sydney chief economist Tim Harcourt said.Where the tariffs – not just on steel and aluminium but all those announced by the White House – are having a broader impact is on the stock exchange.Share markets like financial stability and dislike uncertainty, and Trump's chaotic approach to tariffs – such as promising to double duties on Canadian goods only to quickly U-turn on the commitment – is sowing uncertainty on Wall Street, which in turn is bleeding a sea of red onto the Australian stock exchange.There are also concerns that the steel and aluminium taxes could lead other nations, similarly deprived of free access to the US market, to flood Australia with an influx of cheap produce, which would be a financial hammer-blow to local producers."The one thing I've seen coming out of the industry is they're worried about foreign products flooding the Australian market and displacing the domestic manufacturing here," French said.EXPLAINED: The cyclone blew away an April election, so when will it be held now?
Trump's tariffs and their uncertainty have caused damage on the stock market. (Nicolas Walker)
Are there any benefits for Australia from these tariffs?
While saying there are benefits for Australia from these tariffs is a bit of a stretch – there's a reason the federal government lobbied so hard for an exemption – there are some opportunities that will emerge.Key among them is an increase in trade with nations to our north-west."Australia already has trade agreements with most of its Indo-Pacific trading partners… I would expect trade to pick up between Australia and these other countries automatically," French said.Harcourt says other nations, including Canada, would also be in the frame."The Albanese Labor government, to its credit, has improved relations with… Europe and the emerging markets of the Middle East and North Africa (MENA) and Latin America," he said."We could actually get closer to Canada under their new Prime Minister, given our similar economic and political backgrounds (if not geography) and current situation on steel and aluminium tariffs."Australian manufacturers could also step into the void of US produce as other nations slap Washington with retaliatory tariffs.
Australian manufacturers could find new trading partners thanks to the tariffs. (AAP)
How is Australia responding?
While Canada, China and Mexico have all hit back at the US with tariffs of their own, Albanese said Australia will be taking a different route."Australia will not be imposing reciprocal tariffs on the United States," the prime minister said."Such a course of action would only push up prices for Australian consumers and increase inflation."French says that is the right approach."I can already feel the push for protective tariffs to keep out foreign products competing with domestic production," he said."I'm very, very wary of something like that because I find that Australia has done well by having very low trade barriers. And we don't want to go back to the experience from earlier decades where local manufacturing was very highly protected and very uncompetitive."Instead, Australia is going to continue pushing for an exemption from the White House, while at the same time flagging new support for local producers."In the March budget, we'll provide additional support for our Buy Australian campaign which we'll be announcing as part of the budget process," Albanese said.