It is still not well known that Australia generally runs a trade deficit with America and have done for decades. But this still didn’t stop Trump levying a 10% tariff on Australian exports into the US – with Norfolk island, an Australian territory, somehow managing to earn a separate tariff of 29%. To complete the lunacy, two Australian territories, the Cocos (Keeling) Islands and uninhabited (by humans) Heard and McDonald Islands were levied separate tariffs of 10%.
Our politicians are sometimes limited in what they can see and do, but that doesn’t apply to normal human beings, and Australians have in general taken a very strong dislike to Trump and his mindless aggression and arrogance, which has often seemed focussed on friends rather than (historical) foes.
So, boycotting US goods is becoming a popular pastime and will likely grow well beyond Tesla. In that context our friends in Canada and Denmark provide some glimpse of what that might happen – with websites and Reddit guides galore devoted to the topic of how best to leave America behind. But I think a distinction should be drawn between US owned firms that actually manufacture and produce in Australia, with substantial Australian employment, and those that simply act as marketing hubs.
Those that operate as marketing hubs in Australia include many of the big US technology companies such as Meta, Microsoft, Apple, Alphabet (Google), Netflix, Adobe, Tesla and Oracle. Moving away from these “services” can in practice be more difficult than dropping certain goods. All these companies have benefitted from US economic power in years gone by – on a worldwide basis US technology companies have been inveterate avoiders of national tax on their activities and have been shielded by an obstinate US refusal to tackle international profit shifting.
Lets illustrate with some figures, courtesy of the ATO for 2022-23; Apple paid tax of $142M on revenue of $12.B in Australia – a rate of 1.12%; Microsoft paid tax of $118M on revenue of $7.5B in Australia – a rate of 1.57% and Facebook (Meta) paid $37.9M on revenue of $1.26B – a rate of 3.0%. And more and more of this revenue is taking the form of subscription revenue – such as Microsoft 365, Salesforce, Netflix and myriad games companies.
That partly explains why payments made by Australia to the US for “Intellectual Property” (IP) rose from $4.582B in 2019-20 to $9.907B in 2023-24, a near doubling in 5 years, and in part that is also driven by very favourable rules regarding IP forced on the world by the US.
So, services need to be addressed very closely, and with more attention perhaps than US manufacturers based in Australia who actually produce “widgets”. Some greater flexibility around copyrights and patents will help plus much higher taxation of the big tech/software companies.
