Australia can win in Trump trade war

CHINA’S response to trade friction with the US could benefit Australia, Westpac chief economist Bill Evans said in Geelong on Friday.

“China has freed up local government to borrow a lot more money in the capital markets, so we are seeing this lift in housing construction, this lift in infrastructure and we are seeing that in terms of the lift in the iron ore price,” Mr Evans said.

“To the extent that China overall slows down it affects us, but in terms of the policy response that China is embarking on, that actually benefits us.”

He said Australia was not as badly affected as some countries, as it was not a significant part of the global supply chain and it also benefited from a likely drop in the value of the Aussie dollar as the global economy slowed.

Mr Evans was speaking at the Westpac Economic Breakfast in Geelong on Friday, only hours after US President Donald Trump intensified pressure on China to reach a trade deal by saying he would increase tariffs on the remaining $300 billion in Chinese imports he had not already taxed.

US consumers will likely feel the pain in increased costs if the tariffs go ahead.

Mr Evans said it seemed clear China was not prepared to change the way it had structured how it did business.

He said Mr Trump might back down if Americans started to feel the pinch.

“He might rationalise it by saying, ‘If I don’t back off, I’m not going to win the election, so I want to be there to finish the job, so I have to back off now in order to be able to get another four years’,” he said.