US tariff reset could impose $1.6bn in costs on Australian exports, EY modelling finds

• Proposed 12.5 per cent US tariffs could impose around $1.6 billion a year in costs on Australian exports to the US
• The proposed measure signals a reset of US trade policy after the earlier IEEPA tariffs were overturned by the Supreme Court
• Australian businesses should prepare for higher costs and uncertainty for the foreseeable future when trading with the US.

SYDNEY, AUSTRALIA - 9 JUNE 2026

New EY Australia modelling estimates that proposed US ‘Section 301’ tariffs could impose around AUD$1.6 billion a year on costs paid by US importers and consumers for Australian exports, as Washington reshapes its trade settings following legal setbacks.

The United States Trade Representative (USTR) has proposed tariffs of up to 12.5 per cent on imports from Australia, arguing some trading partners have not done enough to restrict goods linked to forced labour.

The proposal follows the US Supreme Court’s ruling in February overturning tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and comes ahead of the expiry of a temporary 10 per cent tariff in July, prompting a rapid reset of US trade policy.

EY Global Trade Leader for Oceania Luke Branson said the modelling points not just to a direct cost, but to Australia losing the relative tariff advantage it had over some competitors under the earlier IEEPA tariffs.

“Under the unlawful IEEPA tariffs, a rate of 10 per cent was applied to Australian origin goods when imported to the US. This was at least 5 points lower than New Zealand and as much as 10 points lower than competitors in Southeast Asia and South America,” Mr Branson said.

“With this new regime recommended by the USTR, 13 countries are the European Union are proposed to have a 10 per cent rate and Australia is not one of them, meaning we are going backwards when it comes to US market access.”

“Our modelling finds the proposed tariffs could translate into a cost of around $1.6 billion per year, depending on in-year trade performance in terms of volume, value and currency fluctuations, and how the final settings are applied,” Mr Branson said.

“Unfortunately for Australian exporters, particularly those who have established US operations via subsidiaries, they will need to plan for these additional costs and begin yet another round of challenging commercial discussions with their US domestic customers.”

“The 12.5 per cent tariff is designed to apply broadly across goods entering the US market, so the impact is felt across a wide range of export categories rather than a single sector. In practice, that means Australian exports in advanced manufacturing, industrial goods, medical devices, instrumentation, machinery and parts are directly in scope.”

While there are carve-outs for some major exports such as beef, pharmaceuticals and certain resources, the tariff still raises the baseline cost of competing in the US market for a large share of exporters.

Mr Branson said recent policy changes highlight how quickly US trade settings are shifting.

“This is the US rebuilding its tariff architecture after the Supreme Court ruling, and it’s happening quickly and across multiple fronts,” he said.

“Earlier this month, the US reduced tariffs on some steel and aluminium derivative products, including certain agricultural and industrial machinery, from 25 per cent to 15 per cent. That reflects a targeted recalibration in specific sectors, even as broader measures like the proposed 12.5 per cent tariff lock in coverage across a much wider base of trade.”

Mr Branson said that a separate White House directive strengthening customs enforcement would add to the cost and complexity of accessing the US market by tightening rules on non-resident importers and requiring more detailed disclosure on business operations and supply chains.

“This new Executive Order goes beyond tariffs; it is a more interventionist approach to how trade is administered and may create a two-track trading system where US headquartered importers are treated differently to subsidiaries of non-US companies. This ultimately means increased compliance costs for Australian businesses, particularly those with US operations,” he said.

This new modelling follows earlier EY analysis which found Australian exporters are owed up to $1.4 billion in tariff refunds following the unwinding of IEEPA tariffs.

“Those refunds are flowing back with interest to Australian exporters with US operations, providing some short-term relief, but they do not change the underlying policy direction,” Mr Branson said.

“With consultation on the proposed 12.5 per cent tariffs open until early July, there is still a window for Australia to make the case for different treatment.”

“However, the broader direction is clear: exporters should expect a more complex and costly trading relationship with the United States, with ongoing policy uncertainty shaping how businesses plan, price and invest.”

-ENDS-

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Phone: 0467 346 364
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