Australia ready if Trump starts a trade war

“Australia is the best placed of any Western nation in the world to withstand a Trump-started trade war” says the UNSW Business School’s Tim Harcourt.

“We are now staring down the barrels of a global battle for free trade, thanks to Trump's protectionist trade policies. This would have potentially serious implications for trade-focused economies such as Australia. However the ‘Aussie Battler’ could come out better off.”

Trump made an election pledge to hit imports from its second-largest trading partner, China, with high tariffs, following plans for a 20 per cent tariff on imports from the US' third largest trading partner, Mexico.

Tim Harcourt is the JW Nevile Fellow of Economics UNSW Business School. He says “now, more than ever, what we don’t want to see is protectionism. We need cooperative trade to boost the world economy.”

Trump has however begun carrying out his campaign pledges to undo America's trade ties, including pulling the United States out of the Trans-Pacific Partnership.

By pulling the US out of the TPP Harcourt says it killed the deal with Australia, New Zealand and nine other Pacific nations. “The Trans-Pacific Partnership was a huge trade pact, five years in the making. To kill it now it was a massive blow to Australian producers, who had hoped to see the much more trade with the US. Instead they are now looking to China.”

China is now pursuing President Xi Jinping’s signature ‘One Belt, One Road’ initiative, which seeks to connect countries across Asia via trade. “This could give a massive boost to Australian-China trade. It comes just as Australia needs it, and everyone from miners in the outback to farmers in the bush and service exporters like architects who are building in the second and third tier cities are now eyeing up the possibilities of much more trade with China. The US could have had a slice, but instead it looks like China will be the economic winner - exactly the opposite of what Trump wanted.”

However Tim Harcourt has a warning for stability of the Asian & US region. “China may cut its holdings of American bonds - damaging the US economy. Meanwhile the US could engage in gunboat diplomacy in the South China Sea. It is unlikely he will withdraw defence protection from South Korea and Japan, however the rhetoric and tone of the administration will be ‘America first’, and that’s a worry for Australia and the Asia pacific,” he adds.

Tim Harcourt was previously chief economist at Austrade. As a trade specialist at UNSW he has studied the international trade landscape for many years, and can comment on all parts of the TPP.

For further comment call Tim Harcourt on 02 9385 3816, 0408 485 479, or email tim.harcourt@unsw.edu.au.

Media contact: Julian Lorkin: 02 9385 9887