Trump’s trade power play: What it means for South Australian businesses

The imposition of sweeping tariffs by President Donald Trump, including a universal minimum 10% levy on all imports to the United States, presents significant challenges for SMEs and family businesses in South Australia. Notwithstanding that Australia has been allocated the minimum tariff, these measures – combined with existing sector-specific regulatory barriers on industries such as agriculture, wine and manufacturing – raise concerns about financial strain, contract renegotiations and broader trade disruptions. SMEs and family businesses may, in particular, be more vulnerable if they lack the financial flexibility to absorb these additional costs compared to larger corporations. They may also have fewer options to switch suppliers or negotiate better terms.

Trump’s so-called Declaration of Economic Independence isn’t just about rebalancing trade. It’s a high-stakes geopolitical move – designed to reset the global economic order, force bilateral negotiations and pressure trade foes and allies alike into direct trade concessions. For businesses, this isn’t just a trade hiccup – it’s a signal that the rules of international commerce are being rewritten in real time.

South Australian exporters face immediate financial pressure due to increased costs associated with the tariffs. For industries like wine and beef production – key contributors to South Australia’s economy – profit margins may shrink significantly. Businesses must carefully review their agreements to ascertain their rights and obligations and avoid contractual breaches. In particular:

• It’s important to note that U.S. tariffs are levied on the importer – usually the U.S. buyer – not the Australian seller. However, depending on the terms of the underlying sales contract, U.S. buyers may seek to pass on those costs to the exporter. This will depend on how pricing and risk are allocated between the parties.
• In this context, businesses should review key provisions such as price adjustment clauses, change in law provisions and Incoterms – which define when risk and responsibility for customs duties and freight costs transfer between buyer and seller. Fixed-price contracts with U.S. buyers could require renegotiation or trigger force majeure clauses, creating potential legal disputes.
  

Aside from the direct tariff costs, South Australian exporters may also feel the effects of reduced demand in key export markets. Countries such as China, South Korea and Japan – all of which face significantly higher tariffs under Trump’s policy – could see economic slowdowns as a result. That, in turn, may dampen demand for Australian exports in those regions, adding another layer of commercial risk for local producers.

While the tariffs are imposed by the U.S. on imports into its own market, the ripple effects will be global – and Australian supply chains will not be immune. South Australian businesses that source raw materials or machinery from countries specifically targeted by U.S. tariffs, such as China and South Korea, may face indirect consequences. Even without retaliation by their governments, foreign manufacturers affected by lost U.S. market access may raise global prices to recoup losses, making essential imports more expensive for South Australian businesses. South Australian manufacturers could also face higher operational costs and/or delays due to production slowdowns and logistical bottlenecks abroad.

The situation may deteriorate further if the targeted countries respond with retaliatory trade measures. For example, countries like China (which has already responded with certain measures) may impose not only retaliatory tariffs on U.S. goods but also make it harder to export key materials or parts that are used in manufacturing – especially if they think those materials are helping U.S.-linked industries. Even though those measures are aimed at the U.S., they could make it harder or more expensive for South Australian businesses to get the supplies they need.

Adding further strain, global competition is likely to intensify. Exporters shut out of the U.S. market may pivot aggressively into third-country markets, including Australia, flooding them with cheaper goods. And if U.S. exporters are hit by retaliatory tariffs from other nations like China, they will also start selling aggressively into Australia. All of this could undercut local businesses that struggle to compete on price, particularly in sectors like agriculture and manufacturing where margins are already thin.

While the tariffs are officially framed as a measure to rectify trade deficits and boost domestic manufacturing, they are also likely to be a deliberate pressure tactic – not just against adversaries, but against allies – to extract one-on-one deals on his terms. He has already flagged possible exemptions for “friendly” countries like Vietnam or Israel in exchange for concessions.

In that sense, this is not a policy shift, but a power move. A signal to the world: either negotiate directly with the U.S. on its terms or pay the price. Australia is now part of that calculation.

Economically, the rationale is shaky. Trump’s policy rests on the idea that bilateral trade deficits are inherently bad – an idea rejected by most economists, who argue deficits reflect broader savings and investment patterns. Attempting to eliminate them through a blunt instrument like tariffs risks unintended consequences, particularly for export-dependent regions like South Australia.

From a legal and diplomatic standpoint, the Australian government has several options to push back on the tariff measures:

• Australia–US Free Trade Agreement (AUSFTA): The government could invoke dispute resolution mechanisms under AUSFTA, which provides a formal process for addressing breaches of agreed trade terms. Whether Trump’s blanket tariff violates AUSFTA remains a live question. If the tariff is applied in a non-discriminatory way and framed as a national security measure under Section 232 of the U.S. Trade Expansion Act, the U.S. may argue it is exempt. However, Australia could still initiate a dispute to test the limits of these justifications.
• World Trade Organization (WTO): The WTO’s dispute settlement process allows member countries to litigate violations of global trade rules. Trump’s broad tariff regime may breach WTO commitments by undermining principles of non-discrimination and prohibiting unjustified trade barriers. While the U.S. has sidelined WTO decisions in the past, pursuing this route would still send a strong signal about Australia’s commitment to international norms.
• Diplomatic Engagement: The Albanese government, in its five-point plan, has indicated its intention to push for renewed talks with U.S. officials while ruling out retaliatory tariffs that could hurt Australian consumers. Strengthening anti-dumping regulations domestically will be another tool to shield local industries – Albanese has flagged these protections for key sectors such as steel, aluminium and manufacturing. Meanwhile, the Dutton opposition has indicated it would use Australia’s defence relationship with the U.S. to negotiate a better deal from Trump.

There are a number of ways businesses can start preparing for the imminent impact of the tariffs:

1. Legal advice

• Contract review and renegotiation: Work with a lawyer to review existing contracts with suppliers, customers or partners to be prepared for tariff-related changes. You may need to renegotiate terms to address higher costs or delays caused by the tariffs.
• Force majeure and contingencies: Check if your contracts include clauses for unexpected events, like tariffs, that could disrupt your business. A lawyer can help clarify how these clauses work and advise you on your rights or options if tariffs impact your ability to deliver goods or meet deadlines.
• Risk management and dispute resolution: Legal counsel can guide you on how to protect your business against potential risks from tariff-related disruptions. This can include setting up strategies for resolving disputes with suppliers or customers who may be affected by the new trade policies. In industries that manage a high volume of contracts across multiple teams, this might also involve preparing practical checklists and negotiating frameworks to support consistent and compliant contracting practices for new contracts. In particular, now may be the time to incorporate clauses that address tariff risk, sourcing alternatives and obligations to mitigate impacts – helping future-proof commercial arrangements.
• International Trade Laws: While this is more complex, it's important to seek advice on any international trade laws that may impact your business, especially if you’re involved in importing or exporting goods.

2. Anti-dumping applications

Australian producers may seek relief through anti-dumping measures if foreign competitors flood local markets with underpriced goods. The Australian Anti-Dumping Commission may see a renewed role in shielding domestic industries from predatory pricing as global trade tensions escalate.

3. Seek government support

Part of the Albanese five-point plan involves:

• Allocating $50 million to assist industries adversely affected by the tariffs in identifying and securing new markets. This initiative aims to reduce reliance on the U.S. market and diversify export opportunities.
• Creating a $1 billion program under the National Reconstruction Fund to provide zero-interest loans to businesses. This financial support is designed to help firms capitalise on new export opportunities and enhance economic resilience.

The South Australian government will also presumably propose a set of their own measures to assist at risks industries in the region. In previous trade disruptions, state governments have played a key role in fast-tracking export support grants and trade facilitation services – such responses are likely to be revived in the current climate.

4. Market diversification

If you are considering expanding into new regions, this will require compliance with different trade agreements and legal/regulatory frameworks – seeking expert advice from local counsel in the relevant jurisdictions will be critical.

5. Advocate for negotiations

Collaborate with industry bodies to push for government engagement with the U.S. industry bodies and trade advisory groups will have early insight into trade negotiations and shifts in U.S. policy. Having visibility over possible changes in U.S. exemption lists or policy carve-outs could present opportunities to seek tailored treatment or advocate for sector-specific relief.

6. Monitor policy signals

Pay close attention to geopolitical shifts – not just legal changes. Being reactive is no longer enough; businesses must learn to anticipate moves in this new, power-driven trade environment. There is a risk that this is merely the first wave of protectionist measures. Businesses should plan for the possibility of future tariff increases or broader trade restrictions.

Trump’s tariffs pose immediate risks to South Australian businesses, but they also highlight a deeper shift: We’re entering an era where trade policy isn’t just about economics – it’s being wielded more openly as a geopolitical weapon. That means legal, trade and compliance strategies must evolve too.

By acting early – reassessing contracts and governance settings, securing supply chains and adjusting strategy – local businesses can not only withstand the current disruption but position themselves for what’s coming next. The rules are changing. Those who adapt first will come out ahead. If you’d like to sense-check your position or talk through the implications, we’re here to help.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.