Trump ups the ante in trade war with China

A DRAMATIC escalation in the trade war between the US and China will cause limited short- term damage to Australia’s exports, a study indicates.

But left unchecked, it threatens lasting damage to the global trading system and the world economy, according to the modelling by accounting heavyweight KPMG.

US President Donald Trump yesterday announced taxes on another $ US200 billion ($ 277 billion) of Chinese imports every year and threatened more if Beijing retaliated.

From next Monday, the US will impose 10 per cent taxes, rising to 25 per cent on January 1, on a long list of imports.

The tariffs are on top of import taxes – of 25 per cent – previously announced on $ US50 billion a year worth of Chinese goods.

That slug had prompted China to return fire with its own taxes on imports from the US. Beijing had warned ahead of yesterday’s announcement that it would hit an extra $ US60 billion in US products with import taxes if Mr Trump ordered more tariffs.

KPMG suggests losses to the Australian economy as a result of the new tariffs will reach about $ 2 billion in the first year.

The bill will rise to a maximum of about $ 5 billon a year – or 0.3 per cent of gross domestic product – by the early 2020s as commodity prices and export volumes suffer, the accounting firm says.

Australia has a greater dependence on the Chinese market than any other advanced country, with latest trade figures showing China takes 36 per cent of goods exported. It is also the biggest offshore market for our services, particularly education and tourism.

Australia has not had such a heavy dependence on a single market since the fading of the British Empire after World War II.

The US wants all foreign investment restrictions into China removed.