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Donald Trump’s announcement of a blanket 25 per cent tariff on steel and aluminium imports into the US is a familiar playbook move – but one that could have disastrous consequences for Anthony Albanese.

As he did in his first term, Trump is using trade as a bargaining tool, throwing out headline-grabbing policies to bring key players to the negotiating table. Australia now finds itself facing a significant economic challenge, and the Albanese government must demonstrate it has the diplomatic and strategic skills to respond effectively. If you need evidence of this, look no further than the impact the trade announcement had on Australia’s share market in the hour after Trump spoke on Air Force One.

On paper, Australia should have a strong case for exemption. The US is our closest ally, with shared defence investments through AUKUS, and Australia maintains a trade balance that is favourable to the US. These are metrics Trump understands.

However, the ability of Prime Minister Anthony Albanese and his government to engage successfully with the Trump administration remains untested. While Albanese has spoken with Trump once since his election victory, further high-level engagement is urgently required. Trade Minister Don Farrell, who has yet to establish dialogue with incoming US Commerce Secretary Howard Lutnick, must act swiftly to ensure Australia is not caught in the crossfire of Trump’s aggressive trade policy.

It’s a delicate balance to get special treatment from Trump, without looking like we’re getting special treatment.

The economic implications of these tariffs extend beyond direct exports. While Australia’s steel and aluminium exports to the US are not large in dollar terms—$638 million and $439 million respectively in 2024—the global nature of these industries means the ripple effects could be significant. Reduced Chinese steel exports could impact Australia’s iron ore and coking coal industries, while Trump’s broader trade war tactics could disrupt global supply chains in unpredictable ways.

For companies like BlueScope, which has a strong US footprint and recently expanded its North Star steel mill in Ohio, there may be a silver lining.

The company’s shares rose following Trump’s announcement, and it is considering further expansion into the US market. However, for Australian manufacturers without US operations, such as Bisalloy Steel and South32, the tariffs could have severe consequences. The prospect of global steel manufacturers offloading excess supply into the Australian market could further squeeze margins and intensify competition.

Beyond the immediate economic impact, Trump’s protectionist stance represents a broader challenge for Australia.

The world is already shifting towards a more fragmented trading environment, with the European Union imposing carbon border tariffs and other nations prioritising domestic industries. Trump’s withdrawal from the Paris Agreement and emphasis on oil and gas production could further complicate Australia’s positioning in international markets.

The Albanese government faces a crucial test.

It must secure an exemption from these tariffs while also preparing for a world where global trade is increasingly driven by political whims rather than predictable rules. This will require skilled diplomacy, strategic economic planning, and a willingness to push back against protectionism.

Australia’s national interest lies in advocating for free and fair trade, ensuring that economic policies are not dictated by the political games of other nations.

And let’s not forget Australians are still extremely worried about how the Albanese government is managing the economy, with an election just months away.

Now is the time for decisive action.

Ahron Young is Ticker’s CEO and Managing Editor.