The deepening trade war between the United States and China is upending global trade. In response, countries are reconsidering their economic models. Tariffs — taxes, levied by governments on imported goods — have been a key battleground in this trade war. These tariffs are usually amounts set in advance and expressed as a share of the value paid by domestic consumers to foreign suppliers. As the cases continue to spread, countries around the world, including Australia, are preparing for possible fallout.
Since the Trump administration introduced a series of tariffs, more than 75 countries have engaged in discussions regarding these levies. From the Hill Tariffs are increasing costs, and Americans are paying the price. Companies often just transfer these additional costs directly onto their customers, leading to increased bids and greater prices. As you know, recent moves in the US‐China tariff war have shaken the global trade landscape. In response, countries are urgently hustling to catch up.
Implications for Australian Exports
The US tariffs have had a direct, immediate effect on Chinese goods coming into the American market. This one change has made a huge difference in trade patterns. Nearly every product, including agricultural commodities, have been priced out with increased tariffs. As it stands today, the US exports about $12 billion in soybeans to China annually. This trade may be short-lived as new import tariffs imposed by China make American soybeans less competitive.
Dr. Vladimir Tyazhelniko, an expert in international trade, commented on the broader implications:
“If they export less steel to the US, it would depress world prices of steel and will make it more difficult for Australian-produced steel to compete.”
As the US implements increasingly heavy tariffs, Australia’s steel industry is already on red alert. In fact, the threat of cheaper Chinese imports flooding the market would have a serious impact on defense local pricing structures and competitiveness.
China’s Retaliation and Its Effects
In retaliation to the US tariffs, China has imposed its own retaliatory tariffs. As of Saturday, China placed an unbelievable 125 percent tariff on American exports. This tit-for-tat increase in tariffs will likely reduce Chinese demand for a broad range of American exports, including ag commodities such as soybeans. Independent economist Saul Eslake noted that while this might lead to lower prices for consumers in other markets, it introduces uncertainty:
“It would result, all else being equal, in lower inflation, and that could in turn result, all else being equal, in lower interest rates than we would otherwise have.”
Meanwhile, China has been busy looking for new trading partners. Most recently, it adopted two agricultural trade protocols with Spain, covering pork and cherries. This action further demonstrates China’s attempts to diversify its sources of imports and lessen its reliance on American-made goods.
Opportunities Amidst Challenges
The tariff war — which is inflicting pain across most industries — creates opportunities, particularly for Australian consumers. Imposing tariffs on Chinese goods coming into the US market would produce a huge surplus of products looking for new markets. That surplus could come from things such as Chinese-manufactured vehicles and cell devices. Eslake remarked on the potential benefits for Australian shoppers:
“That would be a good thing if, for example, the result was cheaper Chinese-made cars, cheaper Chinese-made mobile phones, toys, clothing, and any of the other sorts of things that we import from China.”
As products that were originally destined for the US become available elsewhere, Australian consumers might find themselves benefiting from lower prices on electronics and vehicles.
Leave a Reply