The US president has laid out plans to impose 200 per cent tariffs on drug imports in a year's time, threatening Australia's third-most significant export to America.
Mr Trump's proposal comes after lobbying by the powerful US pharmaceutical sector, which has long taken issue with Australia's drug subsidy scheme and wants the president to act so it can sell drugs to Australians for more.
His announcement could be seen as a way for the US to chip away at the Pharmaceutical Benefits Scheme in exchange for a tariff exemption or trade deal.
But Treasurer Jim Chalmers has ruled that out.
"Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on," he told ABC radio on Wednesday.
Mr Trump also revealed a 50 per cent tariff on copper imported to the US, but this poses less of a problem for Australia as the US accounts for less than one per cent of its copper exports.
By comparison, Australia sent $2.1 billion worth of medicinal and pharmaceuticals to the US in 2024, according to the Australia Bureau of Statistics.
The president's remarks are the latest in a series of new trade measures, after he unveiled an increased 25 per cent tariff on items from Japan and Korea, which are Australia's second- and third-biggest export markets.
Although Australia has been spared for now, it remains vulnerable to flow-on effects, Monash University economics lecturer Isaac Gross said.
One of Australia's main exports to Japan and South Korea is iron ore, which is used to make vehicles, many of which are sent to the US.
But if cars sale fall off in the American market, that could mean less demand for Australian iron ore, which could also impact mining giants like BHP and Rio Tinto.
"The principal way that affects the Australian economy is through a lower Australian dollar and less tax revenue," Dr Gross told AAP.
"That would affect Australians as a whole ... it would definitely hurt the government's budget line and reduce economic activity, in especially the mining states."
There could be some upside for Australian consumers as South Korean or Japanese goods that would normally have been exported to the US might be sent to Australia at a discounted price.
But Dr Chalmers maintains the escalating trade tensions around the world were a "substantial concern" and that tariffs pose a risk to global growth.
A number of countries have tried to strike trade deals with the US to get some certainty from the tariff volatility.
However, many are now growing frustrated, according to University of Sydney associate professor David Smith.
"They think that negotiations are going in one direction and then Trump makes a sudden announcement that takes it in another direction," he told AAP.
Prime Minister Anthony Albanese has faced increasing pressure to schedule a face-to-face meeting with the US president and push for a total tariff exemption.
But it is unclear if that would work.
Japanese Prime Minister Shigeru Ishiba met Mr Trump in February, but by July the US president revealed his increased tariffs on the Asian nation and appeared to skip over its leader's name, calling him "Mr Japan" in a recent interview.
"I can see why the (Australian) prime minister would be seeking a face-to-face meeting, but it doesn't have the same kind of certainty that it had in the past," Prof Smith said.
"Now we're in a situation where the US is trying to negotiate 100 trade deals at once - it's clearly beyond the capacity of American negotiators.
"Trump is getting very frustrated. Trump's blaming other countries for the slowness of the negotiations and now he's lashing out."
8°C