Trump’s 2025 US tariffs—25% on Canada and Mexico, 10% on Chinese goods, and 25% on steel and aluminum—are hitting Australian SMEs hard, especially those tied to the $19 billion in annual exports to the US, including $1 billion in steel and aluminum now facing higher costs.
Shipping delays from the Panama Canal and potential Trump-led changes are jacking up expenses, squeezing tight SME margins, and disrupting schedules, while a possible 10-20% surcharge looms. The Australia-US Free Trade Agreement (AUSFTA) offers a lifeline, boosting Aussie-made goods over tariff-hit rivals, but SMEs must act fast—sourcing new suppliers, shifting production onshore, or lobbying for government help—to protect their slice of that $19 billion market.
The tariff shift
The US’s tariff war is forcing companies worldwide to rethink their strategies. Australian businesses, particularly those in industries like steel or e-commerce, are already feeling the heat. PwC’s analysis highlights that many Aussie companies rely on imports from markets like Canada and Mexico—25% tariffs on those goods will push up costs, hurt margins, and slow down supply chains. Even if you’re not directly importing from these countries, the ripple effect can affect everything from shipping to pricing. E-commerce sellers, in particular, are under pressure, as the US has removed the $800 tax exemption for small shipments, meaning more costs for online sellers trying to break into the US market.
But here’s the twist—there’s potential to turn this disruption into an opportunity. Australia’s trade agreement with the US (AUSFTA) still gives us an edge. In fact, PwC suggests that US buyers may be more inclined to purchase Australian-made goods to avoid these new tariffs. If your products are locally sourced, you might just find yourself with a competitive advantage in the US.
The EU: A new frontier?
While the US market has long been attractive for Aussie businesses—boasting a GDP of close to $US30 trillion and a population of more than 335 million—there’s a growing concern about how the tariffs will affect future growth. While Australia hasn’t yet been singled out for tariffs, there’s potential for additional costs down the line that could diminish the market’s appeal. With that uncertainty in mind, it’s worth considering alternative markets.
One market that stands out is the European Union. With a population of nearly 450 million, the EU is even larger than the US and offers a simpler regulatory environment for Australian businesses. Chris Calverley, Head of Sales and Partnerships at Avalara, suggests that the EU could be an ideal destination. The region benefits from a harmonized VAT system, making it easier to navigate for businesses selling across multiple countries. In comparison, the US tax system, with over 13,000 sales and use tax jurisdictions, can be a logistical nightmare for exporters. “Expanding into the EU comes with logistical benefits.”
As Chris points out, countries like the Netherlands are home to well-established 3PL hubs that can service all 27 EU member states. This makes it easier for businesses to manage distribution without needing to establish local warehouses. With its proximity to highways and airports, the Netherlands, in particular, offers significant advantages for Aussie businesses trying to scale quickly in Europe. When it comes to tax compliance, the EU’s system is more straightforward than the US’s. VAT, fixed at a minimum of 15%, is applied consistently across member states, which simplifies the process for exporters. However, getting it wrong can result in delays and negative customer experiences. To avoid this, it’s crucial to use automated tax compliance platforms. These tools can ensure that taxes are applied correctly and in real-time across the EU, streamlining your export process and reducing the risk of costly errors.
Chris emphasizes that, with the right technology in place, Aussie businesses can confidently sell in multiple EU countries, ensuring that all compliance details are covered. An automated tax compliance platform is essential for businesses planning to scale globally, as it takes the guesswork out of navigating complex tax systems and customs regulations.
So, should Aussie businesses keep pushing into the US or pivot to Europe? The answer isn’t necessarily “either-or.” While it’s still possible to take advantage of the US market using the AUSFTA deal, the tariffs and trade uncertainty make it wise to consider alternative markets. The EU presents a promising opportunity, especially for businesses that can offer premium or Australian-made products. And with emerging markets in Asia, like Japan and Singapore, now growing faster than ever, it’s worth exploring new regions as well.
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In the volatile trade environment of 2025, the key will be flexibility. Businesses that can pivot quickly and manage costs efficiently will be best positioned to succeed. And with the right digital tools in place, Aussie businesses can thrive in international markets, whether that’s in the US, Europe, or beyond.
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Tariffs batter SMEs with pricey chaos, hiking costs and snarling supplies. Our expert says you can still grow—here’s how News, tariffs Dynamic Business
