The potential trade war between China and the US affect many countries like Australia in this era of globalization. Any tariff which is a tax imposed on imported products will increase costs to the importer, as well as the exporter, and usually the buyer of the product. Tariffs may discourage imports of products while at the same time generate government revenues. However, the effect of this trade war makes Australia the ‘lucky country’ once again in many ways.

China and the US are very important countries to Australia as they serve as its largest trading partner and largest investor for security respectively. As Australia is protected by free trade agreements with the US and is a small exporter of steel and aluminium, import tariffs have bare minimum effects. China and the US both heavily rely on coal to blast furnaces for steel production, but the current 25 percent tariff imposed by the US on Chinese steel means China will look to its largest trading partner Australia whereby the Scott Morrison government need to ensure it has the right trade policies in place to take advantage of this opportunity.

Australian exporters in beef, wine and sorghum will have a strong competitive advantage in the US-China dispute with large tariffs slapped on American products. Australian exporters thus become the primary source of supply for both China and the US. Increased tariffs on soybean by China means Australia could purchase it cheaply from the US. These potential benefits to Australia may however be temporary.

With globalization come interconnected markets. The Australian market is an open one thus it is intertwined with so many markets such as the United Kingdom, Singapore etc. A collapse in one of the markets adversely affects the Australian market subsequently affecting Australian exporters. The imposition of tariffs by China and US as estimated by economists conclude that every $100 billion dollars of import tariffs erode 0.5 percent of global trade. That said, Asian countries like Taiwan, South Korea, Malaysia, Thailand and Singapore are at a high risk due to exposed supply chains and trade openness. In Singapore for example, 40.3 percent of its beef and 84 percent of its lamb are supplied by Australia. This makes Australia its top supplier in both products. While this might seem perfect for Australian exporters, as argued earlier, this is short term.

If the trade war between China and US does go into full effect, Australia may no longer be viewed as the lucky country. Countries across the globe will be forced to resort to trade protectionism which will gravely hurt the Australian economy, exporters and consumers. Bilateral trade agreements between countries further complicates the issue for Australian exporters because a third of Australia GDP growth stems from exports to markets such as the EU, Canada, and the UK. Bilateral trade agreements may force Australia to choose between its largest trading partner and its largest investor (and source of security), as vicious cycles of suspicion will arise from these countries. Any poor decision by the Trade Minister and the Australian government will result in a detrimental outcome for Australian exporters.

AUTHORS
Dr Daniel Ringuet is an International Political Economist and Lecturer on International Trade in the Department of International Business and Asian Studies and member of the Griffith Asia Institute.
Ama Oforiwa Mante-Akrofi is studying a Double Masters in International Business/International Relations at Griffith University.