Trump Was Thiiiis Close To Slapping Tariffs On Australia Last Week, Had To Be Restrained By Pentagon

As incredible as this most assuredly is, markets were very nearly treated to yet another trade escalation last week on top of the Mexico tariff threat and in addition to the Trump administration’s decision to move ahead with stripping India of GSP status.

According to the New York Times, Trump also considered announcing tariffs on Australia, with an emphasis on aluminum. The country managed to escape the original metals tariffs thanks to a “handshake deal” between then Prime Minister Malcolm Turnbull and Trump. Recall this tweet:

Spoke to PM @TurnbullMalcolm of Australia. He is committed to having a very fair and reciprocal military and trade relationship. Working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!

— Donald J. Trump (@realDonaldTrump) March 9, 2018

That exemption allowed Australia to undercut producers in Europe, North America and Asia. As a result, aluminum imports from Australia surged some 45% from 2017 to 2018 and, as the Times notes, they were up 350% YoY in Q1 of 2019.

Apparently, that’s not sitting particularly well some trade hardliners, including Bob Lighthizer and, of course, Peter Navarro. Both men allegedly backed the idea of slapping duties on Australian aluminum and “other products”.

This time, though, it sounds like the trade hawks ran into opposition from the Pentagon and State. “[Trump] decided against the move amid fierce opposition from military officials and the State Department”, the Times says.

Had Trump gone ahead, it would have represented yet another case of his policies tripping over one another. Slapping tariffs on Australia may well have soured the relationship at a critical juncture. Australia supports the Huawei ban and, more generally, Washington needs a staunch ally and a sympathetic ear in the region, as Beijing continues to press for what amounts to a kind of Sino Monroe Doctrine.

In addition to that, Scott Morrison’s “miracle” victory ensures the continuation of conservative politics down under, something Trump should be happy about. “[It] means Washington and Canberra are growing even closer, as some American officials find more affinity with their Australian counterparts”, the Times writes. “Congratulations to Scott on a GREAT WIN!”, Trump screamed into the digital void, when the upset was complete last month.

In addition to raising military and security concerns and jeopardizing the political relationship with a crucial ally, tariffs on Australia would have likely unnerved Canada and Mexico, who just agreed to a monitoring system that opened the door to the lifting of metals tariffs. That monitoring regime allows for the reimposition of duties in the event imports surge. An abrupt move against Australia might have put Canada and Mexico on high alert, although after Thursday’s broadside against the Mexican government, it’s not clear how much higher the alert knob goes for America’s neighbors when it comes to Trump.

One can only imagine what the market reaction would have been had Trump announced tariffs on Australia at the same time he threatened Mexico and amid the worsening dispute with China.

Speaking to reporters as he boarded an overnight flight to London (where he is most assuredly not welcome), Trump called this “the Australian situation”.

Asked about the Times article, the president tossed together one of his signature world salads. “No, we’re doing a very special relationship with Australia”, he rambled.

See? Everything is fine.