Australia is likely to gain only minimal benefits from a tariff war between the United States of America and China, according to one of the country’s leading economists.
Independent economics consultant David Vanzetti, who is affiliated with the University of Western Australia, was speaking at the Australasian Agricultural & Resource Economics Society annual conference, Melbourne.
Dr Vanzetti said the proposed tariffs would mostly affect machinery, chemicals, rubber and plastics, electronics and motor vehicles.
“Third countries are likely to benefit from the trade war, but the effects are quite small,” Dr Vanzetti said.
“There is little impact on agricultural exporters, primarily because China removed soya beans from the list.”
The major beneficiaries of any trade war would be suppliers of manufacturing goods, the European Union, Japan, Korea, other developed countries and Latin America, excluding Brazil.
“The benefits to Australia are minimal, $710million, as we don’t export soya beans,” he said.
Read more: US / China Trade war could benefit Australia
To date, each country has imposed tariffs on imports worth $34 billion on each other, although further increases on imports worth $200b were under consideration.
“Bilateral tariffs have only a limited impact on trade, welfare (a measure of consumption) and real wages,” Dr Vanzetti said.
“This is because both countries can source imports from alternative sources, and, likewise export to alternative destinations.”
The greater uncertainty was on the effect of any trade war on the global economy, given the full range of proposed tariffs had not yet been implemented.
“The tariff war is still going on, and we’re not sure how it’s going to play out; the magnitude of the effect is somewhat speculative.
“Perhaps of greater concern is the negative impact of uncertainty on confidence and investment,” he said.
“Both the World Bank and International Monetary Fund have suggested a half a per cent drop in GDP could be expected, based on the magnitude of previous recessions.
“They are short run, and somewhat speculative, and that’s what upsets the markets.”
But he said, “in terms of fundamentals” there didn’t appear to be a substantial impact in the medium, to longer term.
Dr Vanzetti said researchers had done a detailed analysis, by dividing the tariffs into 10,000 different types of goods, then aggregating them into 20-30 sectors.
“From the tariff changes, we don’t see much impact on Australia, particularly in terms of agriculture,” he said.
“Australia does have a lot of agricultural exports to China, but they are in terms of livestock, and things like wheat – exports that are not on the Chinese list.”
He said talk of increased Australian exports was based on the size of the Chinese market.
“It’s a big exporter and a big market, but they haven’t looked at the listings in detail and how it will pan out,” he said.
Countries could easily switch from one supplier to another.
“We saw that with soybeans going from the USA to Brazil. We could see, in quite good detail, how prices did change on a monthly basis from the US Department of Agriculture.”
Andrew Miller
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
