Trump tariffs hit ASX as Australian businesses assess costly fallout

This article is originally written and posted the Australian Financial Review.

Dozens of major Australian companies will face higher costs and lower sales after the outbreak of a debilitating trade war between the United States and its closest partners, with exporters scrambling to evaluate the hit to their businesses from Donald Trump’s sweeping new tariffs.

Billions of dollars in pharmaceutical and manufacturing exports could be caught up if the US president expands trade restrictions to Australia, with executives urging the Albanese government to seek exemptions in their discussions with American officials.

Donald Trump walks the South Lawn of the White House. The US president has started a trade war with Canada, Mexico and China. Bloomberg

Deputy Prime Minister Richard Marles will visit the US this week to meet Defence Secretary Peter Hegseth and is expected to use those discussions to press Australia’s case – the important military relationship including through the AUKUS agreement – for exemption from broader tariffs.

Trade Minister Don Farrell has also requested to meet with Commerce Secretary Howard Lutnick, who has yet to be confirmed.

Shares in ASX-listed companies from medical device manufacturer Fisher & Paykel Healthcare to luxury online clothing marketplace Cettire slumped as investors assessed the impact of the tariffs, with the S&P/ASX 200 falling to its largest one-day loss in five months, down 1.8 per cent.

Mr Trump at the weekend said he would place a 25 per cent tariff on all goods from Mexico and Canada – except oil imports, which will have a lower levy – and a 10 per cent impost on goods imported from China. In response, Canada has announced tariffs on US goods worth more than $C160 billion ($177 billion), with the Mexican government flagging it would also respond.

Chinese officials said they would “take corresponding countermeasures” and will sue the US with the World Trade Organisation.

Calculating the cost

But the Trump administration has flagged expanding its tariffs, with the US president indicating that the European Union would be his next target.

Even before additional tariffs are introduced, some major ASX-listed companies are already racing to calculate the cost on their business.

Bottles and cans manufacturer Orora operates a factory in Mexico that supplies tequila makers selling into the US. An Orora spokeswoman said this factory accounted for less than 5 per cent of its revenues, adding it was “working through the implications” of the new trade restrictions. Orora shares ended the day down more than 6.7 per cent.

Shares in Cettire, the online luxury goods marketplace, fell 19 per cent as investors panicked over its exposure to suppliers in countries hit the tariffs. Cettire said 7.5 per cent of its sales in the US – or 4 per cent of its overall sales – were items manufactured in China, Mexico or Canada. This could increase significantly, however, should tariffs be expanded to Europe.

“Cettire began identifying strategies to prepare for and mitigate potential changes to the US tariff regime throughout calendar year 2024 and continues to closely monitor the situation,” the company told investors.

Shares in Fisher & Paykel Healthcare slumped more than 7 per cent on similar concerns. The company manufactures 45 per cent of its goods in Mexico and said the new trade restrictions would increase its costs.

The healthcare sector is one of the most exposed to tariffs if the Trump administration decides to expand its restrictions to Australia.

John Van Der Wielen is the chairman of Perth-based medical technology group Orthocell. He hopes Mr Trump’s tariffs will not apply to Australia. Mauro Palmieri

Australian government data show pharmaceuticals were the third-largest export to the US in the 12 months to June 30, worth around $1.6 billion.

Mr Trump said at the weekend that his administration was planning wide-ranging tariffs on pharmaceuticals, along with steel, aluminium and copper. Australia exports $500 million worth of steel and $310 million in aluminium to the US every year.

Seeking exemptions

John Van Der Wielen, the chairman of Perth-based medical technology group Orthocell, said the federal government should seek an exemption from US trade officials. If it were successful, more foreign investment would likely flow into ASX-listed companies like Orthocell.

“If the federal governments and the state governments manage this the right way, you will see more investment from foreign groups on Australian medical manufacturers. It could be a huge benefit,” he said.

Australian officials successfully argued against tariffs during the first Trump administration pointing out it exports $40 billion more than it imports from Australia every year. By comparison, the US imports significantly more from China than it exports, creating a major trade deficit.

Foreign Minister Penny Wong said she had made this argument to Secretary of State Marco Rubio when they met in Washington last month. “The US has a two-to-one trade surplus with Australia, and every good and service from the US comes into our country free of tariffs or impediments,” she said.

“It’s unlikely that we’re a high-priority target,” said Arthur Sinodinos, a former Turnbull government minister who was Australia’s ambassador in Washington during Mr Trump’s first administration.

“We’re more likely to be impacted any product-specific tariffs they put up and a tariff increase that impacts on our major trading partner, China,” Mr Sinodinos, now a partner at the Asia Group in Washington, said.

CSL, the biotechnology giant that makes blood plasma products in Melbourne, said it was also hoping for an exemption from trade restrictions given those levies would reduce access to medicines. “[This] is why the first Trump administration and policymakers of both parties consistently have refrained from imposing tariffs on medicines,” a spokesman said.

Trucks queue up to enter the US in Tijuana, Mexico. Orora manufactures glass in Mexico and sells to companies that export to the US. Getty Images

Investors in some of the most exposed healthcare companies are worried that the new trade restrictions will make American funders less likely to back Australian companies for fear of exposure to tariffs.

“The moment you make it more difficult for a US investor to justify supporting a non-US company because someone has erected a wall you stuff it up,” Jeremy Curnock Cook, who founded investment firm BioScience Managers and runs ASX-listed asthma products group Adherium.

BlueScope ‘net beneficiary’

“We are not making McDonald’s burgers, we are not just growing grapes. We are building something relevant to the global population. To threaten to put some sort of financial barrier in the way is enormously disruptive.”

One beneficiary of Mr Trump’s tariffs could be BlueScope Steel, the country’s largest steelmaker and a company with a sizeable presence in Ohio.

Argo Investments managing director Jason Beddow said BlueScope’s manufacturing operations in the US should put it in a stronger position after Chinese competitors were hit with a 10 per cent tariff.

“BlueScope is probably in the category of a net beneficiary,” he said.

But Mr Beddow said Argo, which manages $8 billion, would be cautious over the next few weeks because of the increased uncertainty. “It can all change in an instant. [Tariffs] could all be off the end of the week,” he added.