Monster trade war brings wins, losses
THE Australian economy will take a hit if “the largest trade war in economic history” drags on, economists warn.
But the spiralling trade war between the world’s two biggest economies will also create opportunities for Australia.
China yesterday vowed to retaliate dollar-for-dollar with taxes on US imports as America’s new tariffs on Chinese goods came into effect.
America imposed 25 per cent duties on imports from China worth $46 billion a year.
The duties apply to Chinese machinery, electronics and hitech equipment, including cars, hard drives and LEDs.
Chinese officials said the US had launched “the largest trade war in economic history” by imposing the tariffs, and it had no choice but to “take necessary countermeasures”.
The Chinese commerce ministry did not provide details on its response, but has previously said it will levy a 25 per cent tax on US imports including soybeans and cars. There are reports some US products are being held up in Chinese ports.
Mr Trump has vowed to introduce more tariffs if China retaliates, potentially on as much as $606 billion of Chinese imports a year.
Australian-Super chief investment officer Mark Delaney said there was a “medium” risk of a full-blown trade war.
Mr Delaney said if the US pursued bilateral trade deals — favouring one-on-one pacts — the rest of the world would hopefully stay the course.
“But if people retaliated on a widespread basis, it would have a material effect on global economic activity,” he said.
“There’s been lots of studies [showing] that 10 per cent across-the-board tariff increas- es globally would take about 1 per cent off global GDP, so it’s a big number.”
HSBC Australia chief economist Paul Bloxham said trade tensions presented Australia with risks and opportunities.
“China will still be seeking to import energy, hard commodities, tourism and education services,” he said. “Australia remains well placed to boost its exports of these goods and services. Education service providers could be a key beneficiary.”
The four big exporters of education are the US, Canada, Britain and Australia, he said.