The Fracturing Global Order
The advent of the second Trump administration has sent shockwaves through the global economy and threatens to further destabilise the transition to a multipolar world order.Professors Warwick Powell and Felicity Dean discuss at length, and in a granular fashion, the implications and threats of the coercive practices of the US administration and the looming political, economic, security and social crises that are unfolding.Summary of Key Implications of US Tariff MeasuresSummary provided by DeepseekNB: The discussion between the host and Professor Felicity Dean examines the U.S. administration’s tariffs on steel, aluminium, and impending reciprocal measures, focusing on their implications for Australia and global trade systems. Economic Implications The tariffs threaten Australia’s export sectors, particularly beef and pharmaceuticals. Under the **Australia-U.S. Free Trade Agreement (AUSFTA)**, Australian beef has enjoyed zero tariffs in the U.S. since 2018, but new measures could breach this agreement, raising costs for U.S. consumers (e.g., fast-food chains like McDonald’s) and reducing demand for Australian exports. While the Australian red meat industry remains cautiously calm, prolonged tariffs could trigger legal action via WTO dispute mechanisms or AUSFTA terms. However, the WTO’s enforcement capacity is weakened by the paralyzed Appellate Body, which the U.S. has blocked from appointing new members since 2020. The Pharmaceutical Benefits Scheme (PBS), Australia’s subsidised medication program, faces scrutiny from U.S. pharmaceutical lobbies as a “non-tariff barrier.” Though bipartisan Australian commitments aim to protect the PBS, tariffs on pharmaceuticals could inflate U.S. drug prices, disproportionately affecting low-income households. Australia, a net importer of U.S. goods, risks retaliatory tariffs harming its consumers amid a domestic cost-of-living crisis. Political ImplicationsThe U.S. shift toward protectionism undermines **post-WWII multilateral trade norms**, challenging Australia’s advocacy for rules-based systems. The Biden administration’s 2024 report framing the PBS as a trade barrier exemplifies politicization of domestic policies. Professor Dean highlights the fragility of international institutions, noting the WTO’s diminished authority due to U.S. obstructionism. Domestically, trade policies are increasingly weaponised in political discourse. In the U.S., stagnant wages and inequality (60% of Americans live paycheck-to-paycheck) fuel polarization, while Australia faces debates over balancing sovereignty (e.g., defending the PBS) with global trade obligations. Social Implications Tariffs risk deepening socioeconomic divides. In the U.S., higher beef costs could strain low-income families reliant on affordable food, exacerbating food insecurity. In Australia, threats to the PBS jeopardize equitable healthcare access. Both nations grapple with mental health crises linked to economic precarity, with rising pharmaceutical dependency reflecting systemic stress. Education’s role as a social equalizer is also at risk. Austerity in higher education funding, driven by scapegoating international students for housing shortages, threatens long-term workforce readiness and productivity—a trend mirroring U.S. declines in educational attainment. Security ImplicationsWhile not explicitly addressed, indirect risks emerge from economic instability. Trade disputes could escalate into broader diplomatic tensions, undermining cooperation on **transnational challenges like climate change**. Social unrest, fueled by inequality and political polarization, poses internal security risks in the U.S., while Australia’s reliance on multilateral frameworks for global stability weakens as institutions erode. Future Outlook Professor Dean predicts that the next decade could see a fragmented global trade system, with nations prioritising short-term protectionism over collective action. Australia’s commitment to multilateralism faces tests, particularly in balancing sovereignty with international obligations. The erosion of trust in institutions and expertise threatens progress on global issues, emphasizing the need to reinvest in cooperative frameworks. Conclusion The U.S. tariffs signal a pivot from globalization to protectionism, with cascading effects on economic stability, political cohesion, social equity, and global security. Australia’s challenge lies in defending its interests while advocating for renewed multilateralism. Without systemic reforms, these trends risk entrenching division, weakening responses to global crises, and deepening inequalities.US tariffs will upend global trade. This is how Australia can respondBy Felicity Deane (Published: April 3)US President Donald Trump has imposed a range of tariffs on all products entering the US market, with Australian exports set to face a 10% tariff, effective April 5.These import taxes will be charged by US customs on each imported item. The punitive tariffs on 60 countries range as high as 34% on imports from China and 46% on Vietnam, and exceed the rates agreed between the United States and other global trade partners.“For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike,” Trump said.The impact on Australian industries will be both direct and indirect. The largest Australian export to the US is meat products, totalling A$4 billion in 2024, and our farmers may divert some product to other nations.Direct and indirect impactsThe larger economic risk is to our regional trading partners.While Australia faces only 10% tariffs, our major trading partners China, Japan and South Korea all face much higher US tariffs under the new regime. So the risk of a manufacturing slowdown in those countries could dampen demand for Australia’s much larger exports – iron ore, coal and gas.Australian investors reacted swiftly, wiping 2.1% off the main stock market index, the S&P/ASX 200, in the first hour of trade.Another problem will be the disruption to global supply chains. It is not just finished products impacted. For instance, the 25% automobile tariff will be extended to auto parts on May 3. This means even if a car is entirely built in the US, it will still be more expensive because many components are imported.What sectors has the US complained about?On April 1, the US released an annual trade report that identifies what it describes as “foreign trade barriers”. There was a long list of grievances with both tariff and non-tariff barriers identified.The report identified Australia’s biosecurity restrictions on meat, apples and pears. The Australian biosecurity rules do not directly ban any products, although in practice raw beef products are excluded.Trump singled out Australian beef in his speech. “They won’t take any of our beef,” he claimed.In a speech riddled with inaccuracies and falsehoods, this was one of them. Australia take shelf-stable US products, but not raw products for which consumer safety can not be assured.The US cited two other main Australian trade barriers. US drug companies have criticised the Pharmaceutical Benefits Scheme approvals processes. The Albanese government’s plan to strengthen the News Media Bargaining Code that requires tech companies to pay for news published on their platforms was also targeted.How can Australia respond?Both Prime Minister Anthony Albanese and Opposition Leader Peter Dutton are in agreement over what we should do in response. They say Australian law and policy is not up for sale. We don’t negotiate on biosecurity, we don’t negotiate on the Pharmaceutical Benefits Scheme process, and our local news media deserves protection from Big Tech.* All avenues start with negotiationsThe preferred option is for a negotiation with the US to secure an exemption.A dispute at the World Trade Organization (WTO) sends a strong message to our trading partners and will also mean there’s an expert a… Get full access to Long Mekong at longmekong.substack.com/subscribe
