Time for Australia to Dump a Bad Friend: But Avoid Doubling the Damage on Tariffs

Donald Trump has just imposed 25% tariffs on Australian steel and aluminium, rejecting our bid for an exemption. While unsurprising given his appalling treatment of other close US allies like Canada, these tariffs highlight a deeper issue for Australia: our overreliance on a so-called "friend" that prioritises economic and political bullying over alliances. If Trump is willing to punish Australia despite our history of unswerving loyality, it’s clear that the US no longer cares about us.

So how should Australia respond? The answer is not to retaliate with our own tariffs - that would only harm our economy more and risk a trade war. Instead, we should use this as a wake-up call to accelerate our economic and strategic independence from the US.

Retaliatory tariffs might feel like justice, but as an economist, I know they would end up hurting Australian consumers and businesses even more. They would increase costs, disrupt supply chains, and create further economic uncertainty. And over the longer-term, they would reduce our international competitiveness. PM Albanese was right to describe Trump’s tariffs as "unjustified and unhelpful," but our best response is not economic self-harm.

Rather than engaging in a tit-for-tat trade war, Australia should do something deeper and more significant. We should be seriously rethinking our economic and strategic reliance on the US. Here’s what we should be doing:

1. Exit AUKUS before it costs us an arm and a leg

AUKUS ties us to the US in an expensive, unreliable, risky and unnecessary nuclear submarine deal that does little for our real defence needs. As the US becomes more politically unstable and unpredictable, sinking billions into AUKUS is even more risky. Ditching AUKUS, as part of reassessing our military ties with an increasingly selfish and authoritarian America, is wise.

2. Reconsider US Military Bases in Australia

Hosting US military bases on our soil may have once been a deterrent against aggression, but they are now looking increasingly like strategic liabilities. As US offensiveness and belligerence increases and its strategic influence declines, hosting its military assets will make us a real target in future conflicts and erode our neighbours' confidence in us. It’s time to take control of our own defence strategy rather than outsourcing it to Washington.

3. Rapidly Diversify Trade and Investment Away from the US

We need to intensify efforts to reduce our economic dependence on the US. This means strengthening trade ties with Asia and the EU and deepening relations with emerging economies. Africa and Latin America are rapidly growing markets. And they will offer more potential to Australia as they diversify and disengage from the US as well. Finally, by enhancing domestic manufacturing and value-adding and embracing renewable energy, we can increase our own security. Instead of relying on raw material exports to the US, we can invest in value-added production at home, including green technologies and advanced manufacturing.

4. Reinforce a Rules-Based International Order

Australia’s interests as a middle power lie in defending multilateral institutions like the World Trade Organization (WTO) and advocating for fair trade rules. Trump’s tariffs are a blatant violation of these principles. We should work with other nations to hold the US accountable in global forums and push for stronger dispute resolution mechanisms.

5. Build a Truly Independent Foreign Policy

For too long, Australia has been a "deputy sheriff" for the US - especially in the Asia-Pacific. Even if that role was previously in our interests, it no longer is. We can't be a lacky to the latest bully on the block. We can take a more independent approach - one with integrity and that prioritises regional stability and cooperation over blind loyalty to Washington.

It's time for Australia to walk away from an increasingly one-sided, unreliable and dangerous friendship. Trump's latest tariff decision is a warning: a MAGA-movement US will always put itself first, no matter how loyal we have been.

We don’t need to retaliate with tariffs, but we do need to start making decisions that protect our national interests, rather than hoping America will return the favour.

It’s time to dump a bad friend and build stronger, more reliable partnerships elsewhere.