Australia’s export exposed economy has always been vulnerable to global politics, especially like that of the current rumbling between the US and China.
Both countries are key trading partners, meaning commodities such as grain and wool are particularly exposed.
Australia has embraced free trade and the idea of a level playing field more-so than other countries, but the argy-bargy unfolding between these two superpowers could well test our faith in this.
US President Donald Trump is an expert in bullying tactics, and it works for him. He has managed to get Canada and Mexico where he wants them, including that they now must notify the US before trading with non-market economies.
China, meanwhile, is the master of ruthless business tactics. And it has a distinct plan for long-term nation building, so a trade war would likely be just a speed hump as it heads toward the end goal.
This plan includes the country’s Belt and Road Initiative, a vast infrastructure program so far involving 900 projects in at least 60 countries with an estimated worth of $900 billion.
This initiative is about fostering international trade ties.
The US, meanwhile, is working out how to reinvigorate local manufacturing. This involves shutting out Chinese produced goods.
China still wants our quality products, and in the short term we will continue to benefit from this, but China will survive just fine without our clean, green goodies if it comes to the crunch.
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If the situation continues to escalate, Australia will need its political leaders to be working on more alternative trade avenues if we are to weather the storm.
Trump has indicated he is keen to renegotiate the Trans Pacific Partnership. Though, it appears that in return for remaining friends with the US, we’ll have the offer of being kept under its military wing.
China, meanwhile, has the carrot of increasing trade.
Australia can only buffer the blow through increasing diversification of trade into markets beyond these two nations.
Given the US says its aim is for China to play fair, then it is likely we will have to choose.
The trade war is already costing American farmers, so Trump won’t have any qualms about fall-out to ours.
