When Donald Trump returned to the White House in January 2025, tariffs roared back into the limelight.
For Australian small and medium-sized manufacturers—a group already rebounding from a 23% drop in revenue last late 2024, as the Unleashed Manufacturing Report tells us—their general question now is: how do we survive this storm?
Trump’s trade policies, a signature of his first term beginning in 2016, are again rocking global markets, and SMEs with their lean finances and export aspirations are squarely in the sights. Here’s what’s on the horizon—and how you can prepare yourself.
ALSO READ: The Tariff Trap: How SMEs beat the cost crunch
Trump’s opening salvo
Trump wasn’t holding back in 2025. He placed 25% tariffs on Mexican and Canadian imports—though intense political opposition delayed those until April 2—and tacked on a 20% tariff to every Chinese import, an increase from 10% in February, the U.S. Trade Representative office said. China struck back promptly by applying tariffs of 10-15% on US fossil fuels, machinery like tractors, and vehicles. Australia dodged direct tariffs so far, but SMEs shouldn’t pop the bubbly yet.
“We dodged them last time in Trump’s first term, but the sting still hurt,” says Jarrod Adam, Unleashed Software Head of Product. As fellow AUKUS friends, we might hope for a mates’ rates deal, but so did Canada and Mexico—before they didn’t. With an Australian federal election looming by mid-2025, U.S. trade relations will be at the forefront of minds. Adam’s advice: “SMEs need to get ready now.” One smart strategy: band together through organizations such as Ai Group to lobby for exemptions. “Strength in numbers may be capable of tipping the scales in negotiations,” Adam quotes ABC News, reporting on Australia’s demand for tariff relief against Trump’s sweeping policies.
Tariffs 101: The Basics
So what is a tariff? “It’s a tax on imports to protect local industry or punish rivals,” says University of Melbourne economist Dr. Sarah Turner. Consider this: an SME sells $10,000 of lamb to the U.S. A 10% tariff increases it to $11,000. The U.S. customer pays the difference—unless they complain, and that’s a sale lost.
Trump would like to revive American manufacturing, but the past has shown the big players to wriggle free. “Some went to Vietnam, some used final assembly in the U.S. to circumvent the rules,” Turner says, quoting trends in Trump’s 2018 tariffs. For SMEs though, offshore shifts are a fantasy—too costly. Worse, blocked imports—like Chinese steel—can flood into Australia instead, devastating local prices. Turner’s remedy: “Team for bulk shipping to share the cost, or adopt the ‘Aussie-made’ tag to justify a premium.”
The Ripple Effect on Aussie SMEs
Australia’s SME manufacturers are sipping a bittersweet cocktail. “We avoided Trump tariffs between 2017-2020, but the collateral damage was brutal,” insists Adam. Unleashed’s 2024 figures put SME turnover at $2.127 million, fuelled by exports like lamb, wine, and rare earths—high-value products that ride out price hikes. But importing U.S. or tariff-hit equipment? Trouble. A $50,000 Mexican-made tractor now costs $62,500 with Trump’s 25% tariff.
And then, of course, there’s China. “If they can’t sell steel in America, they might dump it here,” says Turner in reference to China’s readiness to divert exports. A Melbourne steel fabricator could see margins evaporate overnight. Currency adds another complication: the Aussie dollar fell 5 cents since Trump’s 2024 election, to 70 U.S. cents. Exports become more affordable—good news—but U.S. components sting worse.
So what do SMEs do? “Lock in supplier prices now, source from Asia-Pacific nations such as Japan under RCEP, or reduce inventories—our Q4 2024 data show a 60% drop released $110,000 per business,” says Adam. Australia’s $2.2 billion January 2025 trade surplus to the U.S., which is dominated by gold exports, could negate our exemption case, so diversification is crucial. Think Southeast Asia or Europe—markets less troubled by Trump’s trade wars.
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Can Australian SMEs outrun Trump’s tariffs? The answer lies in a strategy few have considered. News, tariffs Dynamic Business