Trump, tariffs and taxes: Should Australia be on its guard?

In his first week back in the White House, Donald Trump has escalated tensions with countries including Canada, Mexico, Denmark, Greenland, and Panama. However, his first major action was targeted at Colombia.

In a dispute over deportation flights, Trump announced sweeping new tariffs, visa restrictions, and travel bans on Colombian officials, their allies, and government supporters. Additionally, Colombians would face more stringent customs checks. This raises the question: If Trump is willing to do this, could he do the same to Australia? The answer is, in the most costly options, he could.

Professor Wesley Widmaier, an international relations professor at the Australian National University, told 9News.com.au that the US president has significant autonomy when it comes to tariffs. "The president has a lot of executive power. What has limited these practices in the past is norms," Widmaier said. "If we've learned anything from Donald Trump, it's that norms don't have an effective hold on him." The US president can impose tariffs on imports from any country under the guise of national security, and the president doesn't need to justify their perceived national security reason, meaning their word is final. Therefore, if Australia were to annoy Trump like Colombia has, he could immediately impose tariffs on Australian imports.

Regarding visas, while the president's powers aren't as broad, he could still make it more difficult for Australians to live or visit the US. Trump could order any or all Australians to be subject to more rigorous screening procedures upon entry. Such screening could be so difficult that many Australians wouldn't even bother applying. "Given the close relationship between the two societies, travel restrictions would have real effects," said Professor Shahar Hameiri from the University of Queensland. "Australia has a visa-waiver agreement with the US, but this could of course be revoked, thus undermining the ability of Australians to travel to the US." Trump has precedent for preventing citizens of other countries from entering. In 2017, he implemented a 90-day entry ban for people from Iran, Libya, Somalia, Sudan, Syria, and Yemen. Later, citizens of Eritrea, Kyrgyzstan, Myanmar, Nigeria, Sudan, and Tanzania were also banned. A similar ban targeting Australians could be struck down in the courts, but it could drag on long enough to ruin many people's holidays.

Currently, the White House is discussing a plan that could double the taxes of around 90,000 Australians living in the US. The White House is considering the punitive measure in response to the Australian government's proposed digital platform tax. The tax requires internet giants such as Google and Facebook to pay for content from Australian news websites. The Trump administration believes they can do this under a 90-year-old provision in the tax code known as Section 891. "Whenever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes, the President shall so proclaim, and in every such case, the rate of tax shall be doubled in the case of each citizen and corporation of such foreign country." The White House's argument is that the digital platform tax is a "discriminatory or extraterritorial tax."

Donald Trump didn't publicly discuss any issues with Australia during his presidency. But the president has always been known for his unpredictability. After picking fights with countries like Denmark, Canada, Colombia, Mexico, and Panama in recent weeks, Australia could also draw his ire. "I don't think any country can be completely complacent. He feels emboldened to use tariffs for a whole range of reasons beyond narrow economic objectives," John Kunkel, a senior economic advisor at the United States Studies Centre, told 9News.com.au.

Australia could retaliate with measures such as tariffs, visa restrictions, and taxes, but there isn't much to be gained. Retaliatory taxes and visa restrictions could hurt the US, but they would also hurt Australia's own economic interests. "Getting into a trade war, including implementing tariffs, would hurt us," Kunkel said. "There might be a strategic view that says, 'Well, we need to have a demonstration effect that we're not going to lie down,' but at the same time, the question is, what's the point?" However, Australia is in a rather unique position that might give Trump pause. Australia has the advantage of being one of the few countries with which the US has a trade surplus. This means that if Australia implemented retaliatory tariffs, the US would be worse off overall. And, Australia is the only country from which the US has a net migration loss – that is, more Americans migrate here than vice versa. But Australia may need to take an economic hit rather than standing up for itself. "Australia could retaliate, although their relative economic impact would be negligible, so they would largely be symbolic," Hameiri said. "Given Australia's current security dependence on the US, and the fact we don't currently have a Plan B, I would be shocked if the Australian government provoked something like this."