Increasing economic sabre rattling and tit-for-tat tariffs are pitting Australia’s biggest trading partner against its closest strategic ally.
China and the United States are increasingly hostile toward one another on the trade front, a dispute that could have profound implications for our region.
Greater Shepparton exports about half-a-billion dollars worth of local produce and manufactured goods annually, much of it to China. The US also buys local products, such as irrigation system components manufactured by Rubicon.
Our local industries stand vulnerable to an escalating trade war between the world’s great powers.
It is difficult to understand what US President Donald Trump hopes to achieve by slapping billions of dollars worth of tariffs on Chinese products, or on the products of US allies such as Canada and Europe.
But it was entirely predictable that those countries and trading blocks would retaliate, which they have done.
Now the rhetoric and counter-measures are rising and there is little certainty in where it will all lead.
Fortunately the US has not seen fit to levy tariffs against Australia, yet. Nor has China sought to punish Australia for its close strategic links to the US. But all of this could change in an instant in this rising era of uncertainty.
Analysts have outlined several scenarios in which a trade war could benefit local export industries and Australia in general.
As China and the US artificially increase the price of each other’s products, there could be room for our own products to become far more competitive and increase local sales.
But there is also potential for harm. China has placed tariffs on soybeans, causing US growers to seek other markets.
Should similar trade restrictions be placed on goods locally grown or manufactured, we could suddenly find ourselves competing in a market saturated with dumped products.
In the last significant trade war started by the US in 1930, Australian incomes reportedly fell 14 per cent as international trade plummeted.
Let us hope President Trump does not intend to follow that example.