How The U.S. — China Trade War Will Affect Australia… You May Be Surprised
Every country is in panic, or at least they should be from the U.S.- China trade war. Countries such as Australia, are beginning to feel the effects, mirrored by stock price declines across the board. If the U.S.- China trade war continues to escalate (and this seems reasonably likely), the world could be thrown into an economic slump that some experts are saying would take even longer to recover from than the GFC in 2008.
Here are the three areas that currently are and will most likely continue to be affected by the U.S.- China trade war posturing.
Some would say at the moment, Australia is caught between a rock and a hard place. Its strong economic and military relationship with the U.S. coupled with China being its top trade partner is looking more and more concerning by the day. At the very least, the Australian economy greatly depends on both countries and the impact of the trade war will eventually hit Australia negatively in more ways than one if it continues to escalate.
However, at least for now, our steel industry can relax just a little with Australia’s Prime Minister, Malcolm Turnbull stating he is all but certain that Australia’s steel and aluminium exports will be spared Trump’s imposed tariffs on the two metals after President Trump indicated a likely Australian exemption.
BlueScope Steel expressed cautious reassurance as the CEO stated the Australian Steel Manufacturer currently employs 3,000 Americans. To impose tariffs that would directly affect U.S. citizens could be a major misstep for Trump and contradictory to his political agenda.
China’s Finance Ministry announced on the 1st of April (sadly, it wasn’t an April fools joke) that it would impose tariffs in direct retaliation to the U.S. on up to 128 kinds of U.S. goods, following through on their threat from the 23rd of March.
When China’s new tariffs are implemented against the U.S., Australia’s nut, wine and fruit producers could win out. Almost 40% of Australia’s fruit exports are to China and its wine exports to the country rose by a whopping 63% in 2017. Australian agricultural businesses could benefit greatly with the new tariffs announced by China as there will be less competition from the U.S.
With less competition in the China market, Australia could continue to develop a stronger trade relationship with China seemingly against all odds. Although it’s hard to tell the long-term effects of the current U.S. — China trade war, as well as more tariffs being introduced down the track, for now, Australia’s agriculture can breathe a sigh of relief.
When US President Donald Trump made his first tweet about potential trade tariffs 1360 points were cut off the Dow Jones in two days. Australia’s stock market responded in unison. So, how badly could the U.S- China trade war affect Australia? Well, given they are two of our strongest allies, there are bound to be negative repercussions if it continues to escalate. These won’t just be felt in Australia, but the rest of the world.
According to KPMG’s modelling, if the trade war continues to escalate onto a global scale, Australia’s economy could shrink by $35 billion with the loss of 285,000 jobs. According to their estimates, the world economy could take even longer to recover than from the GFC, due to the increased levels of protectionism compared to a decade ago.
It is clear, no-one is really going to benefit from this trade war. It is crucial for the Australian and the world economy that the current tensions and tariffs do not escalate any further. I guess all we can do is sit back and hope that we don’t have to watch the world burn.