Omari Gates
The United States and Australia have a close and cooperative trade relationship, with the US being the largest and most significant investor in Australia. In 2023, US investment in Australia stood at $1.17 trillion, while Australian investment in the US stood at $1.20 trillion. The two countries have a Free Trade Agreement (AUSFTA) in place, which came into effect in 2005, promoting low trade barriers and eliminating tariffs for agricultural products. Since the agreement, two-way trade has grown significantly, with Australian companies operating in a diverse range of industries in the US and vice versa. The trade relationship is further strengthened by Australia's highly skilled workforce, robust economy, and stable society, making it an attractive destination for US investment.
| Characteristics | Values |
|---|---|
| Nature of trade relationship | Close and cooperative, underpinned by the U.S.-Australia Free Trade Agreement (FTA) |
| Largest economic partner of Australia | The United States |
| Largest investor in Australia | The United States ($929 billion in 2020, $1.17 trillion in 2023) |
| Largest foreign investment destination for Australia | The United States ($864 billion in 2020, $1.2 trillion in 2023) |
| Two-way trade | $77 billion |
| Two-way trade growth since AUSFTA came into force | 138% |
| Annual value of two-way merchandise trade (2024) | $74.4 billion |
| Value of goods exports to the USA (2005-2024) | Increased by 157% |
| Value of goods imports from the USA (2005-2024) | Increased by 136% |
| Number of Australian companies exporting to the United States | Over 12,000 |
| Number of Australians employed by Australian companies in the US | 150,000 |
| Number of Australians employed by Australian companies in California and Texas | 19,000 each |
| Number of industries in California with Australian companies | 83 |
| Number of committees set up under the AUSFTA | 2 (Joint Committee, Committee on Agriculture) |
| Number of subcommittees set up under the AUSFTA | 2 (Labour, Environment) |
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What You'll Learn
The US-Australia Free Trade Agreement (FTA)
The US-Australia Free Trade Agreement (AUSFTA) is a preferential trade agreement between the United States and Australia. The agreement came into effect on January 1, 2005, after being signed on May 18, 2004. The US first proposed a free trade agreement with Australia as early as 1945, but it was not until 2001, with George W. Bush in power in the US and John Howard in Australia, that negotiations began.
The AUSFTA has resulted in the elimination of tariffs that averaged 4.3% on over 99% of tariff lines for qualifying US manufactured goods exported to Australia. It has also opened markets for services such as life insurance and express delivery, improved intellectual property protection, and facilitated American investments through predictable access and a stable business environment. The agreement has also made advances in e-commerce and market access for pharmaceuticals.
Under the AUSFTA, Australian companies have access to the federal government procurement market in the United States, valued at US$637 billion, as well as the government procurement markets of 31 US states. Over 97% of Australia's non-agricultural exports to the US (excluding textiles and clothing) are now duty-free, and three-quarters of agricultural tariff lines have been eliminated. Two-way trade between the US and Australia has grown from US$32 billion to US$77 billion since the agreement came into force, with bilateral goods and services trade more than doubling. The US runs a large trade surplus with Australia, and the country is Australia's largest economic partner.
The US-Australia FTA has faced criticism from various groups, including trade unions and labour groups, who expressed concerns about the potential impact on jobs and the economy. There were also concerns about the agreement's failure to meet congressional negotiating objectives and potential negative effects on certain industries, such as the sugar industry. However, the agreement has been supported by others, including the Howard government in Australia, which saw it as a potential gain for the Australian economy and essential to the continuation of the US-Australia alliance.
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Two-way trade and investment
The United States and Australia have a close and cooperative trade relationship, supported by the Australia-United States Free Trade Agreement (AUSFTA). This agreement, which came into force on 1 January 2005, promotes low trade barriers between the two countries.
Since the implementation of AUSFTA, two-way trade has grown significantly. Between 2005 and 2024, the value of goods exports from Australia to the US increased by 157%, while the value of goods imports from the US to Australia rose by 136%. The annual value of two-way merchandise trade between the two countries was $74.4 billion in 2024.
The United States is Australia's largest economic partner, with two-way trade valued at $77 billion and an investment relationship worth $1.6 trillion. The US is the largest and most significant investor in Australia, with investments totalling $929 billion in 2020 and $1.17 trillion in 2023. Australia is also a significant investor in the US, with investments in 2020 valued at $864 billion and rising to $1.2 trillion in 2023.
Under AUSFTA, over 97% of Australia's non-agricultural exports to the US are duty-free, and three-quarters of agricultural tariff lines have been eliminated. Australian companies have access to the US federal government procurement market, valued at $637 billion, as well as the procurement markets of 31 US states.
The trade agreement also establishes committees to address specific issues, such as trade in goods, agriculture, sanitary and phytosanitary matters, and financial services. These committees work to resolve trade concerns, promote trade activities, and eliminate export subsidies. The agreement further commits both countries to transparency in regulations and information sharing.
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AUSFTA's impact on tariffs
The Australia-United States Free Trade Agreement (AUSFTA) came into effect in 2005, with the United States as Australia's largest economic partner. Over 12,000 Australian companies export to the US, and two-way trade has grown by 138% since the agreement came into force.
AUSFTA has had a significant impact on tariffs. Over 97% of Australia's non-agricultural exports to the US (excluding textiles and clothing) are now duty-free, and three-quarters of agricultural tariff lines have been eliminated. Under AUSFTA, Australian companies also have access to the US federal government procurement market, valued at US$637 billion, and the government procurement markets of 31 US states.
However, the agreement has been criticised for failing to deliver on its promise of protecting free trade between the two countries. Despite Australia's focus on boosting agricultural exports, the US only made minor concessions on its protected and subsidised agricultural sector and did not relax restrictions on sugar imports. An analysis from 2015 concluded that critics of the agreement were correct.
The impact of AUSFTA on tariffs has also been questioned in light of recent US trade policy. Since 2020, the US has withdrawn from the North American Free Trade Agreement (NAFTA) and imposed tariffs on goods from Canada, Mexico, and China, with threats of tariffs on other countries as well. This has created uncertainty about the agreement's ability to protect Australian exporters from US tariffs.
Furthermore, AUSFTA includes a 'ratchet mechanism' for local content quotas, meaning Australia cannot increase these quotas, and if they are lowered, they cannot be raised again. This has hindered Australia's ability to promote its cultural sector and impose local content requirements on streaming platforms.
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$8.99
Trade in non-monetary gold
The United States and Australia have a close and cooperative trade relationship, supported by the U.S.-Australia Free Trade Agreement (AUSFTA). This agreement has led to significant growth in two-way trade, which currently stands at US$77 billion. The US is Australia's largest economic partner, and Australia is the US's most significant investor, with investments in Australia totalling $929 billion in 2020 and $1.17 trillion in 2023.
A notable aspect of the trade relationship between the US and Australia is the trade in non-monetary gold. In 2023, Australia exported $16.4 billion worth of unwrought non-monetary gold, making it the fifth-largest exporter globally. The US, on the other hand, was not among the top importers of non-monetary gold in 2023. However, in early 2025, Australia's non-monetary gold exports to the US surged to record levels, with a total value of $5.272 billion in January. This spike in exports to the US contributed to a dramatic increase in Australia's overall non-monetary gold exports, which grew by $6.85 billion between 2022 and 2023.
The surge in US demand for non-monetary gold from Australia is driven by several factors. Firstly, there is a growing global demand for gold as investors seek safe-haven assets amid economic uncertainty. Hedge funds, institutional investors, and gold-backed exchange-traded funds (ETFs) are among the key US buyers contributing to this surge. Additionally, rising central bank purchases of monetary gold have contributed to higher market prices, making non-monetary gold a more attractive investment option.
The trade in non-monetary gold between the US and Australia is significant for both countries. For the US, it ensures a stable supply of gold for investment, jewellery, and industrial purposes. For Australia, it represents a valuable export commodity, contributing to its strong and diverse economy. The close trade relationship between the two countries, facilitated by the AUSFTA, provides a favourable framework for this specific trade in non-monetary gold.
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The agreement's political context
The Australia–United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States. The AUSFTA was signed on 18 May 2004 and came into effect on 1 January 2005. The agreement has promoted low trade barriers between the two countries, with two-way trade growing from US$32 billion to US$77 billion since it came into force.
The political context of the agreement has been shaped by the following factors:
- The United States first proposed a free trade agreement with Australia as early as 1945. However, it was not until the early 2000s, with the election of George W. Bush in the US and John Howard in Australia, that the agreement began to take shape.
- The agreement faced opposition from some groups, including trade unions and labour organizations, who argued that it would lead to similar issues as those experienced under NAFTA. American manufacturing lobbies, on the other hand, strongly supported the FTA.
- The agreement became a major political issue leading up to the 2004 elections, with both houses of the United States Congress ultimately giving strong support. The Democratic Party Presidential nominee, John Kerry, also supported the agreement.
- The AUSFTA is modelled on the North American Free Trade Agreement (NAFTA) and aims to promote free and open trade between the two countries.
- The agreement established a Joint Committee to supervise the implementation of the AUSFTA and review the trade relationship between the parties. This committee meets regularly to discuss the functioning of the agreement and address specific trade issues.
- The agreement also established committees on goods, agriculture, sanitary and phytosanitary matters, and financial services, as well as subcommittees on labour and the environment. These committees work to resolve specific issues and promote trade between the two countries.
- The AUSFTA provides for the elimination of most tariffs for agricultural products being traded between the two countries and the elimination of export subsidies for goods exported to one of the party countries.
- The agreement also includes provisions for the sharing of information and the acceptance of each other's regulations to ensure transparency and guard against adverse effects on domestic industries.
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Frequently asked questions
Yes, the United States and Australia have a close and cooperative trade relationship.
The United States and Australia have a preferential trade agreement, AUSFTA, which came into effect on 1 January 2005. The agreement promotes low trade barriers and eliminates tariffs on most agricultural products traded between the two countries.
The United States and Australia conduct US$77 billion in two-way trade, with the US running a large trade surplus with Australia.
The trade relationship between the two countries has resulted in increased economic prosperity and investment opportunities. Australian companies employ approximately 150,000 people in the US, and the US is Australia's largest economic partner and largest foreign investment destination.
