The REAL reason for Trump’s tariffs on Australia – and how it could send costs soaring for your next visit to the doctor

Donald Trump could force Australia to review its Pharmaceutical Benefits Scheme to escape being hit with more US tariffs, threatening the future of cheap medicines.

Trump is set to impose additional tariffs of up to 25 per cent on agriculture and pharmaceutical imports into the United States on April 1 – sparking a new round of negotiations with Australia desperate to secure an exemption.

New 25 per cent tariffs on Australian steel and aluminium exported to the US came into effect on Wednesday.

But unlike those metals, pharmaceuticals are a much more lucrative export, making up 8.6 per cent of goods sent from Australia to the US last year, compared with just 1.8 per cent for steel and 1.6 per cent for aluminium.

Former trade minister Simon Birmingham, who held the portfolio during the first Trump administration, said successive US governments regarded the PBS as an obstacle to American drug company profits.

‘American pharmaceutical companies have long argued they see the PBS as having unfair rules that are overly generous when it comes to things such as generic drugs,’ he told Daily Mail Australia.

‘And in doing so limit the ability of those companies to be able to fulfill the full economic potential of their investment in new drugs.

‘I would be surprised if US companies weren’t using the PBS as a point of leverage in their dialogue with the Trump Administration.’ 

Dr Patricia Ranald, a public policy expert with the University of Sydney’s School of Social and Political Sciences, said the Trump Administration could force Australia to review its PBS as part of negotiations to get an exemption on American import tariffs on medicines.

‘They don’t like the price control element, that’s the main thing, controlling the wholesale price,’ she told Daily Mail Australia.

‘They say that it’s an infringement of intellectual property rights.’

Dr Naoise McDonagh, a senior lecturer geopolitics and international trade at Perth’s Edith Cowan University, said the Trump administration was likely to argue that the PBS was a trade restriction.

‘They’re going to say the PBS, the Pharmaceutical Benefits Scheme, this is also another barrier to American exports,’ he told Daily Mail Australia.  

Australia’s PBS was a sore point in 2004 when the US, under then president George W. Bush, negotiated and signed the Australia-United States Free Trade Agreement during John Howard’s time as prime minister.

‘Because it was raised a non-tariff barrier, in the negotiation of this FTA, it’s possible they could be raised again,’ Dr Ranald said.

The PBS reduces the wholesale prices Australian retail chemists have to pay for subsidised drugs so the sick and the elderly can buy prescription medicines cheaply.

The Americans could argue that while it’s not a tariff on US pharmaceutical imports into Australia, it’s a barrier to making a bigger profit.  

‘They don’t like that system because they don’t have it in the US and because it means they get lower wholesale prices for new medicines – they identified that as a non-tariff barrier,’ Dr Ranald said.

‘The PBS is the most popular scheme ever – we don’t regard the PBS as a non-tariff barrier, it’s a public health measure and most countries in the world have something similar to make medicines affordable but the US is unique in an industrialised country that doesn’t have a similar system.’

Mr Birmingham said no Australian government would roll over on the PBS to satisfy an American government during trade negotiations.

‘The PBS is a central part of Australia’s health system – it is important in terms of providing equitable access to medicines,’ he said. 

Dr McDonagh, said pharmaceutical and agriculture exports were now the subject of an American plan for reciprocal, tit-for-tat tariffs due to come into effect on April 1.

‘It’s not based on any rational methodology, it’s not transparent and involves the Trump Administration in a unilateral manner deciding what their tariff rates are going to be,’ he said. 

US goods into Australia already incur zero tariffs, with the 2005 Australia-United States Free Trade Agreement eliminating import taxes on 97 per cent of Australia’s non-agricultural exports and two-thirds of agricultural exports. 

But McDonagh said the Trump administration could use ridiculous arguments to imply Australia’s 10 per cent Goods and Services Tax and biosecurity quarantine measures on agricultural imports amounted to trade barriers.

‘They’re going to start saying things like, “GST is actually a barrier to our company” even though GST applies to everyone,’ he said.

‘They’re going to say that biosecurity rules, which are very strict in Australia, are a barrier to American companies.’ 

But Mr Birmingham said the US also had strict quarantine rules, making them less likely to make biosecurity an issue in negotiating agriculture tariffs.

‘Australia’s biosecurity rules are raised by many of our trading partners, probably many others more so than the US because the US does have high standards themselves and advanced processing and quarantine facilities,’ he said. 

Meat was Australia’s biggest export to the US in 2024, with the $6.1billion worth sent there making up 25.8 per cent of Australia’s goods exports to the US, an AMP analysis of Australian Bureau of Statistics figures showed. 

Pharmaceutical products were the third biggest export after gold, with the $2.1billion worth of medicines sold to the US market making up 8.6 per cent of Australian exports sent there.

Tariffs on those Australian exports to the US would be more damaging, given they are much more lucrative than metal exports.

Aluminium made up 1.6 per cent of Australian exports to the US, with $400million sent there last year.

Steel made up 1.8 per cent of exports, and were also worth about $400million.