The Smart Way to Retaliate Against Trump’s Tariffs

Why make your own citizens pay, when you can make Big Pharma do it instead?

Governments around the world are pondering how to respond to Trump’s “Liberation Day” tariffs. For many the instinct is to retaliate with tariffs of their own. Yet doing so punishes your own citizens and risks launching a tit-for-tat trade war that ultimately leaves everyone worse off and economic relationships damaged. Do nothing, while probably the best response, does nothing to disincentivise Trump’s economic carnage.

Australia, to its credit, has so far resisted the temptation to retaliate. Tariffs raise the price of imported goods, supposedly making local alternatives more competitive. But in practice, they act as a tax on domestic consumers, drive up inflation, and invite retaliation. Unless you're a protected industry, nobody wins.

But what if there were a way to respond to trade aggression that didn’t hurt your own consumers—but actually helped them?

I propose a response that does exactly this by winding back intellectual property rules that the US imposes on us.

Trading for intellectual property

Modern trade agreements are often branded as “free trade” pacts. But in practice, they’re just as focused on harmonising regulations—especially IP laws. The U.S.–Australia Free Trade Agreement, for example, saw Australia extend copyright terms and strengthen patent protections, particularly in pharmaceuticals. These changes were not strictly in Australia’s interest, as they meant higher drug prices for longer periods of time, but were made to secure better US market access for Australian exporters.

Another example of this dynamic comes from the negotiations over the now-shelved Trans-Pacific Partnership (TPP). The U.S. lobbied hard to extend patent protections on newly developed biologic drugs, which are expensive, cutting-edge treatments for diseases like cancer and autoimmune disorders. Most other countries—including Australia—resisted as these protections would delay the entry of cheaper generic versions and drive up healthcare costs.

Yet after Trump pulled the U.S. out of the TPP, the remaining countries agreed to move forward keeping the IP provisions that everyone disliked but suspending them, essentially holding them in reserve as a kind of bait for a future U.S. administration. Everyone knew what the U.S. wanted. But nobody else saw it as worth enshrining if the US wasn’t willing to join the party.

This goes to a fundamental truth about IP rules in the modern economy. They aren’t universal norms or optimally set policy rules. They’re bargaining chips.

Asymmetric economic warfare

This is why the smarter path might lie not in responding in kind by taxing imports, but in revisiting the intellectual property protections for pharmaceutical companies - which are overwhelmingly based in the US - or the copyright increases that were granted to Hollywood through the deal.

This approach might sound radical and indeed would require legislative changes to enact. But it is a better way of retaliating than by punishing Australian consumers. Instead it recognises that IP protections are not immutable laws of nature. They’re policy choices—and in many cases, they’ve been shaped to serve the interests of foreign exporters at the expense of Australian consumers. In an age of economic coercion and geopolitical tension, it's worth asking: why should Australia unilaterally uphold aggressive IP protections that disproportionately benefit large American firms, especially when those same firms are lobbying for tariffs that harm us?

Rolling back certain IP protections thus achieves two things at once:

1. It lowers costs for Australian consumers. Drug prices fall, and access improves. The subsidy flows directly to patients and the healthcare system.

2. It imposes pain on politically powerful U.S. interests. Pharmaceutical firms are some of the most influential lobbyists in Washington. If Australian policy starts to affect their bottom line, they’ll have a strong incentive to push the U.S. government to rethink its approach.

Most importantly, this kind of retaliation is credible. It’s politically sustainable because, unlike tariffs, it actually makes Australians better off. A trade way on the other hand requires asking the public to endure short-term pain in exchange for uncertain long-term gain.

Critics might argue that pulling back IP protections is unfair, or undermines the rule of law. But there’s a double standard at work here. When the U.S. imposes unilateral tariffs on its allies in the name of “national security,” few stop to ask whether that’s a fair or cooperative move. When American firms benefit from IP regimes that price drugs out of reach for millions, nobody questions whether that's an acceptable status quo.

There is not to say that all patent rules should be scrapped. There is an obvious value to society in rewarding innovation. But this incentive comes with a cost. And the US has used the lure of its giant market to increase those costs over time. So when they play hardball on trade, we shouldn't hesitate to re-examine the privileges we extend to their firms—especially when those privileges come at a cost to our own citizens.

In a world where economic leverage is increasingly weaponised, we need to think creatively about our responses. Adding tariffs on Australian consumers would cause domestic pain, and might spiral out into a global recession. Rolling back harmful or unnecessary IP protections is a way Australia can fight back while lowering drug prices for Australian consumers. Win-win.