Beef and pharmaceuticals could prevent Australia-US trade deal, CommBank predicts
An Australia-US trade deal will be hard to strike as beef and pharmaceuticals continue to be sticking points, a Commonwealth Bank economist has said.
Commonwealth Bank chief economist Luke Yeaman has predicted that it will be difficult for Australia to negotiate exemptions from US President Donald Trump’s tariffs, with most US demands considered politically “off the table” in Australia.
“The US demands relate to biosecurity restrictions on US beef exports; the Pharmaceutical Benefits Scheme; and the government’s news media bargaining code. All are considered off the table by the Australian government,” Yeaman wrote in an insight.
Australia is in a strong position in terms of the tariffs, relatively speaking, only facing the baseline 10 per cent tariff rate alongside 50 per cent tariffs on steel and aluminium. However, further exemptions could be difficult to achieve, Yeaman said.
Looking to the UK-US trade agreement as a template, the chief economist predicted that Trump would require certain concessions from Australia if a trade deal were to be struck, including greater access to Australian markets or changes to local regulations.
He anticipated that the US would push for greater freedom to export beef products to Australia, many of which are currently barred due to biosecurity reasons.
The US administration has also taken aim at the Australian government’s Pharmaceutical Benefits Scheme, which subsidises prescription medicine to ensure Australians don’t pay exorbitant costs for medicine.
Lastly, Australia’s news media bargaining code, which aims to force social media giants to pay local media outlets for their news content, could be another sticking point in negotiations due to its restrictions on US-based multinationals.
While the US has taken issue with Australia’s regulations, its rich critical mineral reserves could prove to be an important bargaining chip in any trade negotiations between the nations.
Rare earth elements (REEs) are crucial for US national security, being a key element of many of their defense technologies. To access these materials, the US currently relies on China, which controlled 92 per cent of REE processing in 2023, according to the International Energy Agency.
Australia’s critical minerals reserve strategy, which has sought to build sovereign capability in critical minerals processing, could strengthen Australia’s hand when negotiating with the US in the medium term.
While a US-Australia trade deal could be hard to strike, a recent US trade court decision which found the tariffs to be unconstitutional could provide more immediate relief, Yeaman noted.
However, if the court challenge fails, there could be further trade turbulence ahead, with numerous tariff pauses set to expire in coming months.
“As it currently stands, the suite of ‘Liberation Day’ reciprocal tariffs are due to resume from 9 July and the 90-day pause on higher US-China tariffs is due to end on 12 August,” Yeaman said.
“The legal challenges will continue to play out in the background but won’t deter the President from pushing ahead.”
Furthermore, as Graeme Cooper, professor of taxation law at the University of Sydney wrote for The Conversation, Australia could be in the firing line for Trump’s “revenge tax” agenda if his “Big Beautiful Bill” passes the Senate.
Australia’s recent efforts to crack down on multinational tax avoidance, such as through its new public country-by-country reporting rules, could net Australia an additional 20 per cent tariff from the US in coming years.
“Having been an integral part of an international effort to create a global 15 per cent minimum tax, Australia now finds itself in the firing line of Trump’s ‘revenge tax’ warfare – and it’s a fight we’re unlikely to win,” Cooper wrote.
