12.5% US trade tariff

The impact of the new 12.5% US trade tariff

Australian businesses exporting to the United States are facing a higher cost of trade following the introduction of a 12.5% tariff on Australian goods.

For businesses with exposure to the US market, the immediate priority is understanding what the tariff means for margins, pricing and commercial arrangements — and where there may be opportunities to reduce its impact.

“This imposition of higher tariffs on Australia is unjustified and we will continue to lobby the United States trade representative to remove all tariffs on Australian goods.” Don Farrell, Trade Minister

Why has the tariff increased?

The Trump administration has increased the tariff on Australian goods from 10% to 12.5%, using a Section 301 trade investigation focused on the use of “forced labour”.

This follows the US Supreme Court striking down the White House’s initial tariff measures. The administration subsequently turned to Section 301 and its authority concerning “unfair trade practices” as the legal basis for the new measures.

The policy has been framed around forced labour enforcement, with higher tariff rates applied to countries, including Australia, that do not have explicit US-style import bans.

The Australian Government has rejected the suggestion that Australia’s regulatory framework is inadequate in addressing forced labour.

Deputy Prime Minister Richard Marles told Sky News:

“In terms of combating forced labour and regulating that in Australia and having laws opposed to that, we have one of the strongest regimes in the world. So we stand with pride in terms of how our legal regime works in respect of forced labour.”

What does this mean for Australian exporters?

The 12.5% tariff took effect on Friday, 24 July 2026.

Goods already subject to higher tariffs, including steel and aluminium exports, will remain subject to their existing tariff arrangements. Most other Australian goods imported into the US will be affected by the new rate.

For Australian exporters, the commercial implications can extend beyond the tariff itself.

A higher import cost can place pressure on pricing, gross margins, customer negotiations and the competitiveness of Australian products in the US market.

While the Australian Government continues to challenge the measures, exporters need to consider how their businesses will operate under the current tariff settings.

Three ways to respond

1. Diversify your export markets

Consider whether greater geographic diversification could reduce your reliance on the US market. This may include exploring markets where Australia already has free trade agreements and where the commercial conditions suit your products and business model.

2. Review your tariff classifications

Correct classification matters. Work with an appropriately qualified customs broker to review the US Harmonized System (HS) codes applying to your goods and confirm that your products are being correctly classified for tariff purposes.

3. Revisit your commercial terms

Review your arrangements with US customers and consider how the additional cost is being allocated.

Depending on your existing agreements, this may involve discussions around pricing, volume commitments and responsibility for import duties, including the commercial implications of terms such as DDP and FOB.

Know your numbers before making the next move

For exporters, a tariff increase is not simply a trade issue. It is a margin and strategy issue.

Understanding the financial impact at a product, customer and market level can help you make more informed decisions about pricing, negotiations and where future export growth should come from.

If your business is exposed to the new 12.5% US trade tariff, talk to us. We can help you model the impact on your margins and assess what changes to your pricing and export strategy may be appropriate.