Will Trump's tariffs make medicine more expensive?

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Trump's tariffs have re-entered the chat.

The US President's latest announcement, mainly potential steep tariffs like 200%

on drugs, pharmaceuticals, has renewed uncertainty.

It's also helped Labor move the conversation on from yesterday's sting of an RBA rate hold, i.e.

we didn't get the cut.

The PM has confirmed a visit to China, but does Trump's latest tariff news renew the need for an urgent US visit?

Welcome to Politics Now.

Hi, I'm Patricia Carvellis.

And I'm Brett Worthington.

And Brett, Trump and his tariffs might now provide like the perfect deflection from any negative emotional feelings the Australian public might have about the rates being held or I don't know, people are probably still a little obsessed with it given it's so real for them.

But a fight on pharmaceuticals was something the Labor government was probably hoping to avoid with the US.

Big theme, I think, of the election campaign where the pharmaceutical benefits scheme kept coming up.

and the Prime Minister was pretty tough in saying he'd defend it.

To be fair, so was Peter Dutton.

Now, the Treasurer has spoken.

He has staunchly ruled out any changes to it if we need to go into negotiations with the US on this.

Just a little caveat.

This 200% tariffs on pharmaceuticals, this, you know, I don't know, is it a thought bubble?

Is there anything with writing around it?

Not quite sure.

There is a bit of a delay.

I think it's about a year till he, Donald Trump, says they would kick in.

So there is time on these ones, but it would affect us big time because we are quite trade exposed on this one, right, Brad?

Yeah, I mean it's a fantastic idea that I think the Australian government should implement PK.

Take the cameras into the cabinet room and just let the Prime Minister riff and talk about actual things that you want to be broadcast because it's where this Donald Trump proposal of the 200%

was first flagged.

He's talking about it could be a year or a year and a half until it comes in.

In that delay, there is an opportunity here for the federal government to set up an ability to work with them.

And why they're so concerned about it is that $1.4 billion US is what we are sending in pharmaceuticals to the United States.

It's our third largest export.

And it's a little different from, say, beef, where that's our biggest export to the United States.

It's around $4 billion.

And there are ways in which Australia might be able to negotiate around that, try and tell Donald Trump that there are ways in which US beef can be sent to Australia.

But the pharmaceutical side of it is fascinating because it has been a long-held idea from the US pharmaceutical industry that they hate the PBS in Australia.

Socialised medicine is what they call it.

And given both sides of politics pledged ahead of that last election to not just maintain the PBS, but make medicines even cheaper, it sets up that even higher standard for the government then to make sure that any efforts from the US, be it from the government or from the pharmaceutical industry, are unable to eat into Australia's PBS.

And maybe does that limit the government's ability to negotiate with Donald Trump on this one, unlike with beef, because it is such a firm line in the sand for the government that they are not for moving on the PBS.

Look, I really think that's a very strong point you make.

They are so crystal clear about this and there are so many reasons.

One is the public support for such a thing.

I mean we are in a country where you can have accessible life-changing drugs at affordable prices.

And that is something I don't know any Australian, rich or poor, wants to get rid of.

I think it's a real consensus thing.

So no one wants to mess with that.

So you can imagine the politics of if you even tried to touch it.

What could they do though?

Clearly they wouldn't want to relent on the idea of being able to negotiate as they do and getting the cheaper prices.

They wouldn't want to do anything on that.

But how about the timeframes it takes?

One of the grievances the drug companies have is how long it takes to get a drug into Australia because of this.

Could they make that faster?

Could they offer anything that could perhaps not have such an obvious impact on people in terms of

pricing, but does give in on any level?

I mean, Brett, there are other options, aren't there?

Yeah, that's right, Piquet.

And that point that you mentioned about the delays is one that we see as a grievance that's being listed.

So in the US at the moment, the person who's been assigned to overlook the trade and to look at all the tariffs that could be imposed on the world, the common thread that came through with Australia is the PBS being listed as a nuisance for all those reasons that we talked about, socialised medicine and why they hate it.

They say it's an unfair playing field, but it's that delay element as well.

They'll point to other OECD nations and say Australia takes much longer than others in order to go through all the processes to get it listed.

So maybe is there room for negotiation there as somewhere that the government can say, look, we will look to eat into this to limit the delays that you might be facing.

That could be an area of negotiation or is it part of a broader play where you're saying we as Australia will be encouraging business to improve or grow their investment within the US, much like we're seeing with AUKUS?

We're putting a lot of money into your domestic manufacturing sector to build those submarines.

Is there a way in which you can try and show Donald Trump you are looking to invest physically into the United States as a way of then showing him, look, you're getting something out of this and we're going to keep our PBS system as well?

Okay, so the interesting word I heard from the Treasurer this morning was urgent.

The word urgent.

We are urgently seeking clarity.

Whether the US operates on the same urgency as us, well, perhaps not, because we haven't even been able to get a one-on-one meeting between the President and the Prime Minister.

And I suspect we kind of have been pretty active in trying to request that.

There doesn't seem to be a lot of urgency there.

So there was also a difficulty even in getting in the President on the phone.

I just spoke to Justin Woofers, who's an economist, Australian, you know, Australian by birth, Australian by, I think, passion, but lives in the the US and is an economist.

And whoa, it's going to be an afternoon briefing.

It was quite the interview because, you know, the guy is just like tearing his hair out saying, as an economist, I cannot tell you anything because it is so

everything changes every day.

It is an impossible thing.

to be an economist right now in many ways because there's no predictability to this guy.

We have one date, then that date changes.

When we've got one rate, then that rate changes.

The implications in terms of what businesses can do and plan is terrible.

And there's only one thing that happens as a consequence of that.

This is like, I didn't need Justin Woofers to help me with this.

I could have year 12 economics teaches you this, which is if you can't plan, if you can't actually make plans for your business, because, oh, all of a sudden there's a copper tariff.

Think about businesses in the United States.

They're the ones getting absolutely smashed by all of this.

Then it has an implication for the world economy.

And so this neatly segues into our conversation about the Reserve Bank of Australia pausing on interest rates.

Well, if the economy is going to go through another

kind of potential downturn, which is what happens when all of this uncertainty happens and there are new tariffs and there are these sorts of implications, well,

We're going to see an interest rate cut at the next board meeting, aren't we?

I mean, you know, timing, timing, timing, says the Reserve Bank governor.

But you know what I'm saying here?

One leads to the other.

One certainty outranks another certainty.

I think Michelle Bullock's statements after the announcement yesterday, if there wasn't to be a cut at the next meeting, you could imagine the reaction.

If people were expecting it last time, that you've had the governor really set up this notion that come the August meeting, there should have been the quarterly figures, which she talks a lot about as giving the bank greater confidence as to what underlying inflation is doing, that then that shores up that certainty that we talk about.

There's no certainty in it really, that there would be that cut.

And I think if we think back, PK, to when the budget was being released, all the way back in those dark days before the last election, it was before Donald Trump's quote-unquote Liberation Day tariffs.

And the message that was coming through from the Treasury back then was they were concerned about a short inflationary impact that you could see as a result of the trade war that could be about to begin.

This is back in March.

But their bigger concern, though, was this broader product that you're talking about of businesses putting their wallet away and not looking to invest for the four years of the full Donald Trump administration.

And their argument there is that would lead to a much longer consequence in terms of lower standards of living for Australians than the short-term pain of dealing with inflation.

So this bigger picture is the one that Michelle Bullock, the RBA, the Treasury are trying to navigate as a way of where are you pitching the Australian economy so you can encourage that level of investment, give business surety and confidence that here is a place to invest invest so that living standards more broadly, and when we talk about productivity, things like that can improve.

And the treasurer, when he comes out afterwards, you get that sense that he's both trying to telegraph to the public and saying, look, millions of households were hoping that there'd be a bit of rate relief.

And then his messaging almost immediately turns and it feels like it's for an audience of one to the Reserve Bank, that independent board, that the independents gets a certain extra emphasis when the board's not necessarily doing what the government would want to do, to really kind of remind the bank about the consequences of taking no action as we're seeing yesterday.

Yeah, unless, how did someone frame it?

I heard someone on the radio this morning say, it's not no action, it's delayed action.

So is that no action?

Well, it's no action right now.

It's not going to make a difference if you've got a mortgage for the next month.

But this is just me being a bit sort of deeper.

I'm not an economist.

I don't sit around the RBA's board for obvious reasons.

You do wonder, do they think there's going to be a sudden clarity around these global headwinds and uncertainty?

There's not going to be.

I think that's actually the other, obviously I really enjoyed this interview because I keep referring to it, but that was the other message from Justin Woolfers.

Strap in, it's four years of this.

There's nothing that's going to be sorted out.

This is a year of uncertainty before even this begins, Brett.

Am I missing something?

Well, we're only six months in, isn't it?

So it's sort of like, this is how we feel like we're sprinting since January 20 when Donald Trump

moved back into the Oval Office.

It does set up this really fascinating period for an Australian government in trying to boost productivity at a domestic level.

They want to lift living standards.

They've got the possibility because of the parliament in which they could try and actually do some things and bring people together.

But the elephant that will hang over this whole term of parliament is that Donald Trump will be in the White House even after the next election.

He will continue to have an influence, even when he's not aiming to immediately have an influence, on domestic politics here within Australia and I think how then you've got someone like the Reserve Bank governor is trying to navigate that which they have completely no control about and then overseeing the Australian economy makes for a difficult time for someone like Michelle Bullock but it is clear in the position that we're in now as opposed to where we were under the the former bank with with with a different governor that that you see Michelle Bullock come out and communicate is a way in which she can message directly to the public.

Now, she says that the bank was restricted in what it could say before the decision, in that there was all this discussion that this rate was going to be cut, but their ability to influence that was limited because the board hadn't met.

We now know because of the changes that the board was also split over these changes.

That they don't look to release the names.

Michelle Bullock says, well, that could open up people to being lobbied by the outside.

I still think people are going to be lobbied either way.

They sit on the Reserve Bank.

That is the nature of them.

They are experts sitting on that board.

That we don't know their names doesn't prevent somebody from being lobbied.

But as much as there is greater transparency, there will always be that push for even more.

And, you know, separate to sending the cameras in, like that Trump cabinet meeting, I suspect we'll always be wanting more.

Yeah, well, that's what we do.

We're always wanting more, Brett.

That's something very deep.

Look, this weekend, big, big weekend for the Australia-China relationship, which is sometimes

fraught.

Well, it's always fraught.

I think that's...

a given.

It's a fraught relationship.

It's very important.

It's very important economically.

And it's also important strategically, right?

China's one of the great powers in our region, but we are buddied up, of course, with the United States as our ally, AUKUS.

It's complicated.

It wasn't that long ago that the Chinese were circumnavigating our country.

And now our Prime Minister is going to China to meet Xi Jinping and other senior officials.

I think that's a great thing.

I think you always want people meeting as a thing in the world.

That's, you know, This is obviously not about

kind of defence, but that is the elephant in the room.

So given those big issues do exist, I think it's really good.

Australia does have this huge trade relationship with China.

But what's this all about?

Why is the Xi Jinping meeting such a big deal for Australia?

And what is the Prime Minister trying to achieve?

There's that element of Anthony Albanese takes great pride in this stabilisation, to use his word, of restoring relations with the Chinese government.

And it has meant that you've seen resumption of trade to our largest trading partner, like a whopping $300-odd billion dollars in two-way trade.

It just dwarfs everything else.

And any Australian Prime Minister, no matter what political persuasion they come from, has to walk this high-wire act of having your trading partner on one side in China and your security partner in the United States.

And you get the sense the government would have preferred to have met with Donald Trump ahead of this meeting with Xi Jinping.

It didn't work out that way.

But Anthony Albanese will now have to navigate that you've got a relationship with China where they want more now from Australia.

We saw at the start of this week that the ambassador to Australia was writing in newsprint saying, hey, let's expand the free trade deal at a time at which Donald Trump is saying, well, we don't want as much of your elements.

Now, Anthony Albanese seems reluctant to want to really kind of go where the Chinese is going.

in terms of artificial intelligence as a way in which you could open up the trade deal even even further and look to expand that.

And there will be points of tension that both sides want to raise.

The Chinese government are not thrilled that the Australian government is going to take the port of Darwin back into domestic ownership.

At the same time, the Australian government doesn't want to see expansion of China throughout the Pacific.

And we will see the Prime Minister have to raise the plight of the Australian writer, Dr.

Young Hangzhong, who has been on detained since 2019.

He's about 18 months into this two-year period where his death sentence is on a reprieve.

Navigating these difficult relationships is something that the Prime Minister has so far shown he's got an ability to do with China, but he will be closely watched, even more so than usual, because of that Donald Trump elephant in the room will continue to hover over these meetings.

Hovering over like a hoverer, like a big giant omnipresent, he feels at times.

He's the hoverer of everything, really.

He lives rent-free in everyone's mind.

And I suspect there is a big part of Donald trump that's quite satisfied with that the sentence this is absolutely the the vision for his you know this is ultimate his ultimate dream being realized for sure i think that meeting though on the weekend is going to be for the prime minister you're right quite a key one in

kick-starting that relationship to the next level again.

But yeah, there are a few booby traps still for him.

A lot of questions around what the growing American presence means for the region, the way China views that, the way China behaves, the way China has intervened even recently in comments in the Australian press to talk about how we build up our own defense response, you know, in the wake of the US demanding we spend more on defence.

And so all of that feeds into all of this too.

And none of that is easy to manage.

They would also like, I bet, to, you know, deepen the relationship with China on trade as well.

And I think that will very much be on the cards.

But they also, back of their minds, it's very volatile, that relationship.

Let's not pretend that it's an easy one.

Let's not get too reliant on this relationship.

Let's keep working on the other project.

Don't you reckon, Brett, that's a big theme.

Yeah, that's right.

And you can see why businesses would have been so keen to put all their eggs in the Chinese basket, given the upside that that market potentially has.

But you've seen the consequence of that between 2020 and 2022.

When you are so heavily invested in one market and that market is turned off, the consequences of that can be crippling for businesses.

And we potentially are going to see an example of that even now outside of just the China context, PK, in that the copper tariff that Donald Trump is looking to impose.

Now, Australia, not necessarily really affected by that, but Chile will be.

And if Chile is the main supplier sending into the United States, they start sending their copper elsewhere, then it does become an Australian issue.

And And that's how these flow-on effects from decisions that are taken by governments on the other side of the world, even though we might not be directly affected by the immediate decision, the flow-on undoubtedly will have consequences in our government and in our livelihoods right across this country.

Brett, I just have enjoyed our time together so much.

Spears is back next week on the Wednesday, but you'll be around on the other days, so we'll be...

spending time.

Thank you so much, though, for hanging out with me.

It's a treat to be here.

Thanks for having me, Pika.

And tomorrow I'll be with Frank Kelly.

Kelly, and in your ears for the party room will also be Kwandamuka woman and journalist Carly Williams, who's all over that huge judgment out of Undamu this week in relation to Kumanjai Walker, racism and the police force in the Northern Territory, and kind of on NAIDOC week, the broader messages that are being sent to government so loudly, so clearly, will they be heeded?

We'll be talking about that.

And you can also send questions to the party room at abc.net.au and we'll endeavour to answer them.

See you, Brett.

See you, PK.