Donald Trump says the US will soon introduce “a major tariff on pharmaceuticals” designed to force more manufacturing giants to relocate to America, a move that could further strain relations with Australia.
His comments come hours after his trade representative, Jamieson Greer, said the US should be “running up the score” with Australia and using money generated by tariffs to address a broader $1.2tn trade deficit with the rest of the world. The US maintains a trade surplus with Australia.
In a speech to the National Republican Congressional Committee dinner on Wednesday, the US president made reference to subsidised medicine systems run by many nations including Australia, where it is known as the Pharmaceutical Benefits Scheme (PBS).
“These other countries are smart,” Trump said. “They say you can’t charge more than $88 otherwise you can’t sell your product and the drug companies listen to them.
“But we’re going to do something that we have to do. We’re going to put tariff on our pharmaceuticals and once we do that, they’re going to come rushing back into our country because we’re the big market.
“The advantage we have over everybody is that we’re the big market. So we’re going to be announcing very shortly a major tariff on pharmaceuticals.”
Trump did not give any detail on what the tariff increase would be or make any reference to Australia.
US pharmaceutical companies have long raised concerns about the PBS, claiming Australians aren’t paying enough for medicines considering the billions the companies pour into research and development.
Monash University experts, writing in the Conversation, have said it is hard to see how tariffs would influence the PBS “unless these issues are caught up in some larger trade or political deal”. But, they write, if the US puts tariffs on drugs Australia exports to the US, that could have an effect.
They argue it would make Australian drugs more expensive, potentially driving down demand, which could prompt Australian manufacturers to move overseas where production might be cheaper.
Australia exports about $2bn worth of pharmaceuticals – mainly vaccines and blood products – to the US each year.
The imposition of tariffs on pharmaceuticals is likely to further strain diplomatic relations with Australia. Anthony Albanese and Peter Dutton have said the PBS is “not up for negotiation”, and the opposition leader, Peter Dutton, has declared protecting it is “sacrosanct” in trade negotiations.
On Wednesday, Albanese was asked to respond to Greer’s comments, which suggested Australia was being punished to compensate for an overall US trade deficit.
“We’re addressing the $1.2tn [trade] deficit – the largest in human history – that President Biden left us with. We should be running up the score in Australia,” Greer said.
The comments made during a US Senate hearing prompted a heated response from the Democrat senator for Virginia, Mark Warner, who accused the Trump administration of delivering an unfair “whack” to one of its strongest allies.
Albanese said Greer had used a “footy term for when you have a lead trying to get a further lead”.
In response to Greer’s comments, Warner said “you’re a much smarter person than that answer”.
“The idea that we are going to whack a friend and foe alike, particularly friends at this level, is insulting to the Australians, undermines our national security and, frankly, makes us not a good partner going forward.”
The prime minister said Warner had drawn attention to Australia’s long-term negotiation position, which is the tariffs are an unfair act given US maintains a trade surplus with Australia.
“It is certainly not an appropriate action and it certainly isn’t reciprocal that Australia has received a 10% tariff,” Albanese said. “Whilst we acknowledge that every other country has a worse arrangement than Australia, or certainly no one has a better arrangement than Australia.”
