The Impact of US Tariffs on Australian Manufacturing: Protecting Your Business with Insurance Solutions [Updated July 2025]

Global trade has changed dramatically in 2025, with the United States implementing new tariff policies that are affecting international business. For Australian manufacturers, these changes create both immediate challenges and longer-term issues that require thorough understanding and careful handling to navigate cost-effectively.

As your trusted manufacturing insurance brokers, Tudor Insurance knows that uncertain trade conditions require smart risk management. With over 30 years of experience helping Australian businesses protect their interests, we’re here to guide you through these changes and keep your manufacturing business strong amid shifting trade policies.

Recent Tariff Updates: What’s Changed?

The US government has put in place wide-ranging tariff measures that directly affect Australian exporters. Understanding these changes is essential for any manufacturer with connections to US markets or supply chains.

A 10% tariff now applies to most goods imported into the United States, which took effect within the first few weeks of the new government. This broad approach aims to make American-made goods cheaper by comparison to overseas imports, increasing the cost of foreign products to drive purchasers to US-made equivalents in support of the US economy.
More importantly for some industries, as of June 2025, steel and aluminium imports face a 50% tariff worldwide. The UK is the only country of origin exempt from this new rate, maintaining the previous tariff of 25%. While the policy mainly targets Canada, Mexico, and China, the universal steel and aluminium tariffs affect manufacturers everywhere. This means that even long-term trade partners like Australia aren’t exempt.

The US’ relationship with China has been particularly volatile, with tariffs initially reaching 145% before recent diplomatic efforts. As of May 2025, The US and China reached a 90-day suspension agreement, reducing these specific tariffs to 30% for goods imported from China, pending further negotiations. This indicates a period of de-escalation for some highly affected trade routes, but the underlying threat of high tariffs remains.

Free Trade Agreement Influence

For Australian businesses, understanding the role of the Australia-United States Free Trade Agreement (AUSFTA) is crucial. This comprehensive agreement, which came into effect at the beginning of 2005, had a primary goal of eliminating or significantly reducing tariffs and other trade barriers between our two nations. Under the AUSFTA, goods genuinely originating from Australia typically enjoy preferential tariff rates, often allowing them to enter the US market with lower to no tariffs.

However, the current global tariff system creates a tricky challenge for this agreement. The 25% tariff on steel and aluminium is put in place as a justified national security measure, which likely overrides the standard trade obligations within free trade agreements. This means Australian steel and aluminium exporters face the same tariff costs as manufacturers from countries without free trade agreements.

Currently, the Australian government is continuing to work actively to maintain the integrity of the free trade agreement through diplomatic channels. While negotiations are ongoing, there are no guarantees that exemptions will be secured, and businesses are advised to prepare for scenarios where current tariff levels remain in place.

How Tariffs Will Impact Australian Businesses

Who Will Be Affected?

The reach of these tariff policies extends far beyond direct exporters to the United States. Australian manufacturers across multiple sectors need to assess their exposure and prepare accordingly.

Direct Exporters: Businesses that sell products directly to US markets face immediate cost pressures. The additional tariff burden means that their goods become more expensive for American consumers, potentially leading to reduced demand and profitability.

Businesses who Sell Predominantly within Australia: A secondary or tertiary impact arises from the potential for increased domestic competition. If international producers find it harder to sell their goods in the US due to tariffs, they may redirect their exports to other markets, including Australia, potentially flooding the local market with cheaper goods.

Steel and Aluminium Derivative Manufacturers: The 25% tariff doesn’t only apply to raw steel and aluminium producers; any business whose final product is a “derivative product” with significant steel and aluminium content will also face these higher tariffs. For example, BBQ manufacturers, construction equipment producers, or automotive parts suppliers that primarily use Australian steel for core components would likely see their products subject to the 25% tariff when exported to the US, making them less competitive.

Businesses using Non-Australian Components: Even if an Australian manufacturer’s product would otherwise qualify for zero tariffs under the AUSFTA, the “rules of origin” are critical. If a major component of their product originates from a non-FTA country, such as China, the entire product might not qualify for AUSFTA exemption. For instance, an Australian company assembling smart lamps where the LED light modules, chips, and circuit boards are manufactured in China, then assembled into Australian-made casings with local wiring, would likely find that the product’s country of origin for tariff purposes remains China. In this scenario, the product would be subject to the tariff applicable to Chinese goods, rather than receiving the AUSFTA benefit. This can pose a significant threat to cost competitiveness.

Indirect Exposure: Even businesses that don’t directly export to the US may feel the impact through their suppliers or customers who do. Global supply chain disruptions can affect material costs, delivery schedules, and markets across the manufacturing sector, leading to reduced orders, delayed payments, or altered supply dynamics.

Potential Outcomes

The implementation of these tariffs creates several scenarios that Australian manufacturers should anticipate and prepare for.

Dumping Risks: When international producers lose access to US markets, they often seek alternative destinations for their products, potentially flooding other markets with competitively or unfairly-priced goods. This has the potential to severely hurt local Australian businesses that produce similar goods. While Australia has anti-dumping laws and an Anti-Dumping Commission in place to investigate and mitigate such practices, the risk of products circumventing these measures still exists.

Increased Domestic Competition: Australian manufacturers who previously focused on US exports may be forced to pivot toward the domestic market. This shift could intensify competition within Australia, potentially displacing established local providers and pressuring profit margins across the sector.

Market Diversification Pressure: Manufacturers heavily reliant on US exports will need to explore alternative international markets. This diversification, while potentially beneficial in the long term, requires significant investment in market research, relationship building, and potentially product adaptation for different regulatory environments.

Retaliatory Trade Measures: The imposition of tariffs often leads to retaliatory measures from other countries, with various nations imposing their own tariffs on US imports. This escalation can trigger a “trade war,” leading to the destabilisation of global markets. In essence, this scenario risks making everything more expensive for everyone, hindering global economic growth and certainty.

Protecting Your Manufacturing Business from Tariff Risks

While the current trade environment presents significant challenges, Australian manufacturers can take proactive steps to protect their businesses and maintain operational resilience.

The key to navigating these uncertain times lies in comprehensive risk assessment and appropriate insurance coverage. At Tudor Insurance, we understand that manufacturing businesses face unique exposures that require tailored protection strategies.

Manufacturing Insurance Review: Now is an optimal time to review your existing manufacturing insurance coverage. Ensure your policies provide adequate protection against business interruption scenarios and potential market value fluctuations. The changing trade landscape may have altered your risk profile, and your insurance coverage should reflect these new realities.

Business Interruption Insurance: While traditionally triggered by physical damage, a robust BI policy, particularly with carefully worded extensions, can provide crucial financial protection in the instance of reduced export demand or increased domestic competition directly stemming from covered perils. It helps cover lost profits and ongoing expenses, allowing you to weather downturns.

Trade Credit Insurance: This essential coverage protects your business against the risk of non-payment by your customers, whether domestic or international, due to insolvency or protracted default. In a tariff-affected environment, where customers might face financial strain, this cover is invaluable for maintaining healthy cash flow.

Supply Chain Disruption Insurance: Given the complex global supply chains that many manufacturers depend on, protection against supply chain disruptions is increasingly important. This coverage can offer financial protection if tariffs on key raw materials or components indirectly impact your production or ability to deliver products. It helps to cover the costs associated with delays, increased input prices, or rerouting of supply.

Strategic Risk Management: Beyond insurance, consider developing contingency plans for various tariff scenarios. This might include identifying alternative suppliers, exploring new markets, or adjusting product lines to reduce exposure to heavily tariffed materials.

Moving Forward with Confidence: Insurance for Manufacturers

The current tariff environment represents a significant shift in global trade dynamics, but it’s not insurmountable; Australian manufacturers have consistently demonstrated resilience and adaptability in the face of changing market conditions.

At Tudor Insurance, we’ve spent over three decades helping Australian businesses navigate uncertainty and protect their interests. Our extensive industry knowledge and comprehensive risk assessment process make us the ideal partner to help you understand your exposures and implement appropriate protection strategies.

The key to success in this environment is preparation and partnership. By working with experienced advisors who understand both the manufacturing sector and the insurance market, you can develop robust strategies that protect your business while positioning it for future growth.

Trust Tudor Insurance

Don’t let trade uncertainty derail your business objectives. Contact Tudor Insurance today to discuss how we can help you assess your risks and implement tailored insurance solutions that provide the protection and peace of mind you need to focus on what you do best; manufacturing quality products for your customers.