Caught in the trade war

China is seeking to forge closer ties with the world through its Belt and Road initiative

They say no one wins from trade wars but looking at the US-China tit-for-tat tariffs spat there may be some benefits for Australia.

China this week announced it would impose tariffs on 128 US products in retaliation for the recent US imposition of tariffs on steel and aluminium imports.

Some of the US sectors that will be hit by the China tariffs are areas in which Australia sells to China and would like to sell a lot more.

China is increasing the rate of tariffs on imports of US pork by 25 per cent. It will also impose a new 15 per cent tariff on 120 other products from the US including wine, almonds, apples and berries.

The tariffs are estimated to ­affect US goods with an import value of about $US3 billion in 2017.

Australia’s Treasury Wines ­Estates has done well from its sales of wine to China, and Australian fruit exporters have also stepped up their sales to China in the wake of the free trade agreement.

The total amount of imports from the US hit by the new ­Chinese tariffs is small compared to the total US exports to China — a trade worth about $US116bn in 2016, which includes sales by ­aircraft manufacturer Boeing to Chinese airlines.

But the higher tariffs announced in China this week are in areas where Australian exporters can benefit.

The pain will fall mainly on US farmers who sold more than $US20bn worth of agricultural products to China last year.

China is the third-largest market for US pork, a trade worth more than $US1.1bn last year.

While Australia would be reluctant to be seen to be openly benefiting from the Chinese tariffs against US agricultural exports there is no avoiding the fact that it was President Donald Trump who started the trade war with his ­tariffs on steel and aluminium ­imports.

Trump then set about exempting imports from a range of regions, including Australia and Europe, making it clear the tariffs were deliberately aimed at China. Even worse, that the moves were being made for security reasons.

He is also threatening a much larger anti-China action as a result of an intellectual property investigation that could hit some $US60bn ($78bn) of Chinese ­exports to the US.

When Trump was unexpectedly elected to office in November 2016 there were fears that he would set off a trade war with China.

When that didn’t materialise in Trump’s first year in office it seemed the much feared trade war might not happen.

But Trump has fired the first shots this year with even those close to US politics not quite sure just how far he intends to take things.

For its part, China has emerged as officially pro free trade, while the Trump-led US is becoming ­increasingly protectionist, looking for new enemies to fight.

There are also concerns that Trump could also have the North American Free Trade Agreement, with Mexico particularly, in his sights.

While few in government will want to comment on what the ­export opportunities could be for Australia in the short-term, those in the Australia-China business community are also quietly ­hoping the escalation in US-China tensions can help deflect ­attention from a testy relationship between Beijing and Canberra, which has emerged under the Turnbull government.

While the Australia-China business community had taken a low-key approach to the situation last year, it has since become more outspoken.

Over the long-term, no one would benefit from a major trade war between the US and China.

Successive US administrations do love to have foreign enemies to blame for any economic woes.

In the 1980s, the Reagan administration relentlessly targeted Japan as public enemy No 1, with the US public blaming Japanese carmakers for the lack of demand for gas-guzzling Detroit-made cars.

Post 9/11 the US focused its attentions on enemies in the Middle East, before “the pivot” back to Asia under Barack Obama as Washington began to take note of the impact the rise of China was having, while courting Japan.

Trump’s foreign policy defies any neat category but it appears he is taking a stance, which is both protectionist and possibly isolationist. Certainly belligerent.

Meanwhile, China is advocating closer economic ties with the rest of the world through its Belt and Road infrastructure initiative.

Add to that China’s significant investment in developing regions from Africa to the Pacific Islands.

One can debate the motives and the specific benefit of these ­initiatives, but as China relentlessly expands economic ties with the rest of the world Trump is focusing on an inward-looking “America First” agenda, which has caused tensions with some of its closest allies.

Australia was forced to go cap in hand to Washington to get an exemption for tariffs on steel ­imports while Europe was drawing up a list of retaliatory measures on US imports until its steel was also exempted.

At the recent ASEAN conference in Sydney there were some quiet messages delivered by ASEAN leaders that Australia should be continuing to advocate for free trade and not gloating that it had been able to use its influence to get an exemption not open to everyone.

The mood in 2018 has suddenly become less optimistic.

Australia is only a small player on the world stage, but given the tensions between its two major trading partners it will need to tread carefully while continuing to advocate for the benefits of free trade.