The US Supreme Court’s decision to strike down President Trump’s ‘Liberation Day’ tariffs has not deterred the administration from rebuilding a tariff wall around the US economy.

The United States has placed a 12.5% tariff on 38 major trading partners, including Australia, after a US Trade Representative (USTR) investigation found that they do not prohibit (or effectively prohibit) imports of goods made with forced labour. A group of 17 other countries that were judged as operating a ‘partial regime’ of banning forced-labour imports are now charged a 10% tariff rate.

Australia now faces a higher tariff rate than its initial Liberation Day rate. The figure above shows that Australia’s relative tariff advantage fell from 1.88% in December 2025 to -0.34%. A negative value means Australian exporters face higher tariffs than competing suppliers into the US market.

Why has Australia received the highest tariff rate?

The US Trade Representative’s investigation focused on a narrow question: does the country have a US-style ban on the importation of goods produced with forced labour?

Australia’s existing anti-forced labour legislation is robust and includes mandatory reporting on supply chain risks. Australia consistently ranks highly in the United States’ own Trafficking in Persons report. However, it does not have a US-style import ban on forced-labour goods and therefore received the higher tariff rate.

Countries such as Cambodia and India were judged as having strong forced labour restrictions and received the lower 10% tariff rate, despite consistently being ranked below Australia in forced labour prevention.

Australia is now at a disadvantage compared to other countries

Australia now faces a higher tariff rate than some of its key competitors.

In our previous analysis of US tariff policy, we discussed the importance of assessing the impacts of tariffs through the relative tariff advantage, which compares Australia’s tariff rate to that of our competitors which sell similar products to the United States.

Under this measure, Australia is now at a disadvantage. Australia has lost the slight tariff advantage it briefly enjoyed before the US Supreme Court struck down the Liberation Day tariffs. Under the new tariff regime, Australia now faces higher average tariffs than several competitors like Argentina and Canada face.

Figure 1 shows that Australia’s relative tariff advantage fell from 1.88% in December 2025 to -0.34%. A negative value means Australian exporters face higher tariffs than competing suppliers into the US market.

Although these tariff increases are marginal, they will add to existing cost pressures in manufacturing and parts of agriculture, particularly lamb and wine.

Despite additional exemptions, Australian exporters could face an additional $1.6 billion in tariffs

The fine print of the announcement does indicate some relief for certain goods. An additional 470 product exemptions, alongside existing exemptions for beef and gold, mean that around 60% of Australian exports to the United States will be exempt from these tariffs. These additional exemptions demonstrate the Trump administration’s wariness to drive up inflation with high tariffs.

But even after accounting for these exemptions, Australian exporters could face an additional $1.6 billion in tariff charges.

Looking ahead

Given the specific scope of the USTR’s investigation, it may be possible to reduce Australia’s tariff rate by introducing (or committing to introduce) a US-style ban on imports made with forced labour.

India managed to avoid a 12.5% tariff rate by amending its foreign trade policy on June 14 to adopt a US-style ban on imports of goods made with forced labour, which US Trade Representative Jamieson Greer cited when placing India in the lower 10% tariff band.

More tariffs could be on the horizon for the 16 countries targeted by the USTR in a separate investigation into excess manufacturing capacity. Australia is not subject to this investigation, but some of our biggest trading partners are, including China, South Korea and Japan. Adverse decisions taken by the United States against Australia’s regional partners could have spillover effects into an already fragile global economy.