Australian food exporters could benefit from China-US tariff war

Posted by Andrea Hogan on 11th April 2018

Australian food exporters have the chance to seize market share as China and the United States increasingly impose tariffs against each other.

Analysing China and the US’ current trade relationship, Senior Analyst at IBISWorld market research firm, Jason Aravanis, said Australian industries like wine, grain and meat could take advantage of China’s decision to increase tariff on US food imports.

“The Australian agricultural sector is likely to be one of the largest winners, as China has enacted tariffs on popular US food products,” Aravanis said.

In 2017-18, China is expected to account for 25.1 per cent of export demand in the Australian Wine Production industry. The industry is forecast to grow further in response to a 15 per cent tariff imposed on US wines in April 2018.

Similarly, a 25 per cent Chinese tariff on US soybeans will create opportunities for Australian grain growers, especially as China consumes approximately two-thirds of the world’s soybeans annually.

An expected 25 per cent tariff on US meats to China is predicted to assist Australian meat exporters to China, even with China’s increasing demand for Australian meat already underway.

Seed and fruit industries have also been identified by IBISWorld as likely to benefit from increasing US-China tariffs.

Not all good news

Despite all the seemingly good news for the Australian food exporters, IBISWorld said high tariffs between the US and China could ultimately lead to economic downturn for Australia and impact food businesses within the tourism sector.

“On a macro-economic scale, a downturn in either Chinese or US GDP growth is highly likely to undermine the growth of Australia’s GDP. This could lead to an increase in unemployment, as well as a sustained hit to business confidence as the stability of trade liberalisation in undermined,” said Aravanis.

“Some industries are highly exposed to the risk of a trade war. Major mining industries such as the Iron Ore Mining industry could be affected by a slowdown in Chinese economic growth, which would lead to far lower export prices and total demand. Tourism in Australia would also likely be negatively affected, as a hit to consumer confidence in both China and the United States would encourage consumers to postpone luxury expenses such as international holidays.”

Despite these challenges, IBISWorld believes the overall Australian economy is well placed should a trade war eventuate, at least relative to the conditions of other global economies.

However, a trade war would likely lead to an overall decline in economic prosperity for Australia says IBISWorld.


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