Australia is overexposed to a full-blown trade war between the US and China, business leaders have warned, as the Trump administration increases sanctions on Chinese products.
The Turnbull government moved quickly to put itself at the front of negotiations on Saturday after it was revealed a 25 per cent tariff on $US50 billion ($67 billion) worth of 1102 Chinese imports would take effect from July 6.
Foreign Minster Julie Bishop urged the world’s two largest economies to take their dispute to the World Trade Organisation before it hit global standards of living and economic growth.
“Free and open trade and investment is of great benefit to our country and the world,” she said. “It’s a position that we have made very clear to our American friends and we’ll continue to promote it.”
Prime Minister Malcolm Turnbull said he would not stop lobbying for free trade despite the fifth hit to the dominant world economic order in as many months.
“My job as your prime minister is to ensure more Australians have well-paid jobs,” he said. “That’s why we’re supporting free trade; we don’t give up on it.”
Labor trade spokesman Jason Clare said the signs were ominous.
“This is not good – no one wins from a trade war,” he said. “The US and China make up almost half the world’s gross domestic product. If this escalated into a full-blown trade war, everyone will suffer – including us.”
The Chinese Commerce Ministry struck back at the US immediately on Saturday, stating it would “fight back strongly” against “the short-sightedness of the US”, by imposing an additional 25 per cent tariff on 659 US goods worth $US50 billion.
Industrial machinery, communications technology, orange juice, whiskey, beef, poultry and soybeans are among the products in the middle of the trade battle, which comes just weeks after the US slapped tariffs on steel and aluminum imports from Canada, Mexico and the European Union.
The crackdown is the next step in US President Donald Trump’s election pledge to protect US manufacturing jobs. He has also accused China of undermining Silicon Valley-produced technology and intellectual property.
The development hit markets on Friday in the US, with the Dow Jones falling 220 points by mid-afternoon trading. Wall Street is growing increasingly concerned that the looming trade war could stifle economic growth despite the benefits of Trump company tax cuts.
The Australian Chamber of Commerce and Industry warned Australia was exposed through its significant interest in many of the economies involved.
“Bilateral tit-for-tat trade sanctions can end up distorting global supply and demand, restricting trade,” the chamber’s chief executive, James Pearson, said.
“Ultimately it could lead to the thing that we all fear: a full-blown trade war from which no one wins.”
He urged the Turnbull government to continue to use its influence as a respected free-ttrade advocate to ease tensions.
“Australia as a trading nation is more exposed than most to the risk of bilateral trade sanctions escalating further and has a strong interest in doing what we can to reverse this trend,” he said.
Mr Pearson said that while there could be some short-term gains for Australian producers gaining increased access to markets in China or the US, such as beef exporters, it was not worth the long-term pain.
“It’s an ill wind that blows no one any good,” he said. “The manner in which tit-for-tat trade sanctions are starting to spread presents a real risk which is more significant than the temporary opportunities that might be presented to individual firms or industry.”
Consumers might see short-term benefits from an increased supply and cheaper imports leaving the US or China and heading to Australian shores, Mr Pearson said, but Australian goods made in China might struggle to find a home without open access to the US.
Local exporters are already facing problems getting their products into China, with six Australian wine companies being hit by bureaucratic delays at customs, linked to the Turnbull government’s concerns over Chinese political interference.
Trade Minister Steve Ciobo said the Australian government would look to new markets to shore up trade prospects beyond the US.
“A full one-third of Australia’s GDP growth has come from extra exports because we have opened up markets like Singapore, China, Japan, Korea, Hong Kong, the European Union and the UK,” he said.
“All of this is dedicated to boosting opportunities for Australian businesses.”
By Eryk Bagshaw
SMH With AP