Trump Tariff Plans for China Won’t Be Disastrous for Australia, Experts Say

While U.S. tariffs on imports from China will cause problems for Beijing, the flow-on effect for Australia is not likely to be that great, according to experts.
Trump Tariff Plans for China Won’t Be Disastrous for Australia, Experts Say
Australian beef is seen at a supermarket in Beijing on May 12, 2020 Greg Baker/AFP via Getty Images
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The second Trump presidency’s promise to slap tariffs as high as 60 percent on Chinese-made goods, and 10 to 20 percent on all other imported goods, has spurred discussion on the ramifications for Australia, which relies heavily on the China market.

Yet two analysts believe the situation may not be as dire as predicted by some media outlets.

Reserve Bank of Australia Governor Michelle Bullock told a Senate Estimates hearing this week that if China were badly affected, Australia would be too, but she repeatedly cautioned that it was still early days.

The Bank had done modelling and analysis on the effect of a Trump presidency on Australia’s inflation and cash rate.

“We have a broad understanding of the way some of these policies, if they are implemented, will work out, but we haven’t done very explicit scenario analysis,” she said.

“There’s things going in all sorts of directions here. It might be inflationary in some ways, but it might be deflationary.”

Australia Unlikely to Feel Much Pressure: Defence Expert

Michael Shoebridge, director at Strategic Analysis Australia, advises a “wait and see” approach.

“[President Trump] is a longtime believer in tariffs and did apply them to China—and to partners and allies in Europe and the Indo Pacific—in his first term,” he told The Epoch Times.

And while tariffs can be damaging to the U.S. economy due to their inflationary effect, the fact that trade measures against China are popular with the voters who elected Trump, will likely see him try to push through at least part of that agenda, Shoebridge predicts.

“I expect him to deepen the trade confrontation with China and to use increased tariffs as a key tool. That will compound China’s existing—mainly domestic and government-induced—economic problems at a very bad time for Xi Jinping.”

Any further slowing in China’s economic growth is of concern, but since Australia’s main exports to China—iron ore, coal, and gas—aren’t major components of China’s exports to the United States, Shoebridge says “the direct effect will be smaller than catastrophiers predict.”

“Overall, though, as the determination of the U.S. to check China’s predatory approach to economics continues, it’s smart policy for Australia to push to diversify [its] economy away from China’s,” Shoebridge says.

“But that is the opposite to the path the Albanese government is taking, which is all about celebrating Beijing slowly ending its coercion of Australia economically, and seeking to cheer on Australian companies who are trying to pile back into a dangerous big bet on the China market.

Since the Labor Party won power in 2022, relations between Australia and China have softened somewhat with Beijing lifting a series of trade bans on exports to the country.

“Lobsters and photos of grinning [Ministers] Anthony Albanese, Penny Wong and Don Farrell are examples of this shortsighted, self-damaging policy approach in action.”

Shoebridge says Beijing is obviously concerned about the deepening economic confrontation that a Trump administration may bring.

“That’s a good sign that it might be a smart move,” Shoebridge says. “I expect Xi Jinping to see if he can charm Donald Trump in other ways—and that will be odd theatre for us all to see.”

Global Markets Can Absorb Prospective Tariffs

Graham Young, executive director of the Australia Institute for Progress, said the president-elect’s policies did pose a challenge to the current world trading system, but noted global markets are big enough to absorb any changes.

“It’s likely we'll develop into two trading blocs, both large enough to capture most of the economies of scale and specialisation inherent in international trade,” he predicts.

“In fact, the greatest risk from Trump’s tariff policies is that people might try to copy them domestically. We [Australia] are a small economy of 26 million without the scale to produce all we need at the lowest cost, which is an entirely different situation to a county of 315 million,” Young told The Epoch Times.

Australia’s most significant exports to the United States are financial services, gold, sheep/goat meat, transportation services and vaccines.

Currently, the relationship is governed by the Australia-United States Free Trade Agreement (AUSFTA), signed in January 2005.

Over 97 percent of Australia’s non-agricultural exports to the United States (excluding textiles and clothing) are now duty-free, and three-quarters of agricultural tariffs have been eliminated.

Under AUSFTA, Australian companies also have access to the U.S. federal government procurement market, valued at $957.5 billion (US$637 billion), and the government procurement markets of 31 U.S. states.

Under the agreement, two-way trade has grown from $48 billion to $115.7 billion since it came into force.

Rex Widerstrom
Rex Widerstrom
Author
Rex Widerstrom is a New Zealand-based reporter with over 40 years of experience in media, including radio and print. He is currently a presenter for Hutt Radio.
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