Trade war talk es­ca­lates risk

Tasmanian Country - - NEWS -

AUS­TRALIA could be forced to choose be­tween trad­ing with the United States or China, as Don­ald Trump’s trade war threat­ens to es­ca­late into a Cold War.

Mar­ket ob­servers made the com­ment af­ter the an­nounce­ment by China last week it would im­pose tar­iffs of up to 25 per cent on hun­dreds of US im­ports.

China made the call in re­tal­i­a­tion to US Pres­i­dent Don­ald Trump’s de­ci­sion last month to im­pose up to $60 bil­lion worth of trade tar­iffs on Chi­nese ex­ports to the US.

Rabobank’s head of fi­nan­cial mar­kets re­search in the Asia-Pa­cific, Michael Ev­ery, warned the cur­rent sit­u­a­tion could be “in­cred­i­bly se­ri­ous” for global trade.

“If it es­ca­lates into a full­blown Cold War then ev­ery­one will be forced to take sides,” Mr Ev­ery said.

Mr Ev­ery said the global risk could now be po­lit­i­cal or ide­o­log­i­cal, not just eco­nomic.

“The US no longer feels it gets what it de­serves from the global sys­tem, while China is seen, ac­cu­rately, as get­ting far too much,” Mr Ev­ery said.

Rabobank food and agri re­search gen­eral man­ager Tim Hunt said it was likely Aus­tralian ex­porters could win from a trade war in the short term, by fill­ing the void of US ex­ports into China, and the weaker Aus­tralian dol­lar.

“We’re al­ready see­ing the im­pact on the Aus­tralian dol­lar, which has fallen US1c over the last month,” Mr Hunt said. He said Aus­tralian trade of­fi­cials were quickly try­ing to open new mar­kets.

“We send more than 20 per cent of agri­cul­tural ex­ports to China – it is a great mar­ket but we need di­ver­sity – it has been more than 25 years since we’ve had that kind of ex­po­sure to just one coun­try,” said Mr Hunt, re­fer­ring to trade with Ja­pan.

He warned that if the tar­iffs pro­posed by the US and China were acted on, it could have a detri­men­tal ef­fect for years.

“Worst-case sce­nario, we could be asked to toe the line with one side,” Mr Hunt said.

Mer­cado an­a­lyst An­drew Whitelaw said China’s tar­iffs could af­fect up to $50 bil­lion worth of trade.

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