The US has slapped a whopping 104 per cent tariff on China in an escalating trade war, and has foreshadowed tariffs on pharmaceuticals, which could harm Australian suppliers.

On Wednesday (AEST), the White House amended its 34 per cent ‘reciprocal’ tariff on China to be 84 per cent, culminating in a 104 per cent total tariff on Chinese imports to the US.

US President Donald Trump also foreshadowed further tariffs on pharmaceuticals in a televised address to the National Republican Congressional Committee on Wednesday.

“We are going to tariff our pharmaceuticals, and once we do that, they’re going to come rushing back into our country because we’re the big market,” Trump said.

Australia exported $1.05 billion worth of vaccines, blood, antisera, toxins and cultures to the US in 2023, alongside $92.8 million of packaged medicaments, data presented by the Observatory of Economic Complexity showed.

Approximately 43 per cent of Australia’s exports across these categories went to the US market, meaning that targeted pharmaceutical tariffs could exert a sizable hit to Australia’s exports.

The escalating trade war has also left Australia caught between its closest geopolitical ally, the US, and its largest trading partner, China.

China has signalled that it does not intend to bow to US pressure, and has levied 34 per cent tariffs on US imports in retaliation.

“This is now a battle of endurance. Trump is ratcheting up the pressure, believing he can force concessions through intimidation,” Nigel Green, chief executive of global financial advisory firm deVere Group, said.

“Beijing, however, is determined to show that it will not be cowed. Rather than rolling over, China is fortifying itself — insulating key industries, diversifying its supply chains, and preparing policy weapons for a prolonged standoff.”

China’s lead over the US in international trade has only widened after the US-China trade war of 2018–19, Lowy Institute analysis of IMF data found.

“About 70 per cent of the world, or 145 economies, now trade more with China than with America,” the Lowy Institute wrote, based on 2023 trade data.

Australia is among this group. China was Australia’s largest trading partner in 2023–24, comprising $325 billion in two-way trade and accounting for 26 per cent of Australia’s goods and services trade.

In contrast, the US was Australia’s third-largest trading partner in 2023, with two-way trade of $98.7 billion, DFAT said.

China has indicated that it would not back down from a trade war with the US, paving the way for an extended economic conflict set to rock the global economy. To counteract the blow to exports expected from a global economic slowdown, China has devalued the yuan.

“The timing and nature of the yuan’s movement underscore the seriousness of Beijing’s position. It’s not a reckless devaluation aimed at short-term advantage. It is a carefully calibrated message to the White House: escalation will not come without consequences,” Green said.

“By allowing the yuan to weaken, Beijing is flexing its muscles and demonstrating that it holds powerful economic cards it’s willing to play if pushed further.

“China is no longer trying to avoid a trade war at all costs — it is preparing to win one if forced into it.”