The Hawke-Keating-Howard era is endlessly lauded as the “golden age” of reform in Australia. In no small part, this is because, in a sharp break with the past, our country – on a bipartisan basis – decided to dramatically cut tariffs.
Perhaps it is not surprising, then, that those still around from that period have reacted so negatively to the idea that their approach to trade policy may have been flawed from the beginning.
Paul Keating called Trump’s tariffs a “blitzkrieg on globalisation” and suggested that Australia’s alliance with the United States was at risk. John Howard declared the Republican Party leader “not a real conservative” and labelled his move “stupidity”.
Trump’s views on trade have generally been presented across the Australian media as obviously wrong and rather idiosyncratic. The fact that most of the great leaders of the Western world seem to hold similar views to him appears to have been ignored.
Every former US president whose face appears on Mt Rushmore strongly believed in tariffs. So did Alexander Hamilton, the brilliant first treasury secretary of the US, who designed a financial system that now sits at the heart of the global economy.
Robert Menzies strongly believed in tariffs, as did almost every man who occupied the Lodge before that well-known supporter of free enterprise, Gough Whitlam.
The Republican Party of Abraham Lincoln was founded with high tariffs as one of its key platforms. The same is true of the Conservative Party of Canada. The British Conservative Party of Benjamin Disraeli was long sceptical of utopian claims about “free trade”.
One is entitled to disagree with all these leaders, just as you are allowed to disagree with Trump’s cabinet even though it contains some of the most successful people in global finance and technology. But it would be wrong to dismiss all of them as stupid.
It is simply inaccurate to say that tariffs do not form part of the conservative political tradition.
Why might great leaders then and now believe in tariffs? Did they not realise these amount to taxes?
That is true. Tariffs are indeed a tax on imported goods. Personally, I don’t like taxes. Maybe that’s just me. However, focusing on one individual tax misses the full story. The more important question is what the overall tax structure of your country should look like.
The Hawke-Keating-Howard era got rid of tariffs. But in their place, they brought in a range of imposts that never existed before, or at least not to the same degree – for example, capital gains tax, fringe benefits tax, compulsory superannuation, GST, carbon taxes, and so on.
This policy framework actively encouraged the movement of manufacturing out of Australia. If you remained here, you were hit with these taxes, but if you moved your business overseas – to China or elsewhere – you were allowed to sell your product back into our consumer market duty-free.
Today, essentially the only businesses in Australia that remain are those that cannot be easily moved – mining, property, agriculture and ancillary services or those that depend on mass immigration for growth.
We have, in effect, created a system that encourages the importation of products and people, and actively penalises businesses and families who try to produce goods here.
Government spending and debt have grown dramatically as taxpayer funds are required to employ those who previously would have been engaged in industries that have moved offshore.
There are other flow-on effects. It has created a class of people in our capital port cities that are affluent global “anywheres”, not tied to the rest of the nation.
It has also created grave risks to our national security as we have destroyed our industrial base and now rely on potential adversaries to make all our stuff.
All these issues exist in America too, but at least they are now attempting a course correction. The cost of imported goods is going to rise but domestic taxes are being cut drastically.
Trump has even flagged the prospect of eliminating personal income tax and capital gains tax. Incidentally, neither of these taxes existed when America became an industrial superpower behind a great big, beautiful tariff wall.
In Australia, by contrast, the major parties are promising only the most minor cuts to income tax and petrol excise while simultaneously remaining united in their belief that there should be no change to a free trade agreement with China that allows manufactured goods to come in duty-free.
Trump has famously promised a “new golden age of America”. Unfortunately, unless we discard the old thinking in Australia, we will not experience our renaissance, and the future will get very dark indeed.
First published in The Australian Financial Review 11 April 2025 as “Hawke and Keating were wrong. There is a strong case for tariffs.” © Dan Ryan 2025. All Rights Reserved.
