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News Corp Australia reported on July 25 that if Trump is successfully elected as United States president, it may trigger a trade war between China and the United States, which will have a "huge" impact on the Australian economy and may even lead to a recession.
China is grappling with a sluggish property market, slowing economic growth and declining consumer spending, the report said.
Given Trump's threat of tariffs and Australia's dependence on the Chinese market, experts believe that the impact on China's economy will also have an impact on the Australian economy.
(Image source: News Corp Australia)
If Trump takes office, he could impose 60 percent tariffs on Chinese goods. Greg Jericho, chief economist at an Australian think tank, said many people may think this has nothing to do with Australia, but this is not the case.
"It doesn't look like it's going to hurt Australia, because it's the Chinese economy that gets 60 per cent tariffs on Chinese goods, but it also affects Australia's exports to China."
"If a large-scale trade war breaks out, we will not be able to find other markets to compensate for the loss of mineral exports from China's declining demand."
"This is undoubtedly a matter of great concern to the Federal Government and the Reserve Bank of Australia. I suggest that if Trump wins, Australia should make a lot of diplomatic efforts to try to stop the US-China trade war, because that would affect us very quickly. ”
*China is facing the impact of the international economic situation*
Michael Shoebridge, founder and director of Strategic Analysis Australia, believes that China has not been immune to the widespread impact of changes in the international situation on the economies of various countries, including the impact of the war in Ukraine and the situation in the Middle East, but China's move to become a larger global player is also counterproductive.
"Part of the reason is that China wants to reduce its dependence on other economies and make others more dependent on itself, but this is becoming increasingly difficult to achieve and has provoked a growing backlash in Europe, the United States and other democracies."
In addition to Trump's huge tariff plans, a European investigation into middle-class electric vehicles is also an obvious response. But it's not just tariffs that are sounding the alarm, China's economy is also facing a number of problems, including a significant slowdown.
Greg Jericho (Credit: News Corp Australia)
"I think it's certainly a concern that economic growth is slowing to below healthy levels, and given our reliance on China for iron ore, lithium and coal exports, that will certainly have an impact on Australia as well," Mr Jericho said. ”
"These are all products that will reduce demand from China, and if their economy slows down, it will definitely have a knock-on effect on the Australian economy." *
Australia is one of the most vulnerable countries* A recent report by the Organisation for Economic Co-operation and Development (OECD) shows that "Australia is exceptionally vulnerable to global trade shocks due to its dependence on China".
The group warned that Australia would face a decline in national income if trade tensions with China worsened and more countries shifted to domestic manufacturing.
Jericho added: "Australia and Korea have been the most affected by China's economic slowdown. ”
"I think even if media coverage is focused on the United States election, people at the RBA and the Treasury will be watching China closely. If Trump comes to power and imposes 60% tariffs on China, it will hurt the Australian economy even more. ”
(Image source: News Corp Australia)
At the same time, Shoebridge was also harshly critical of Australia's current policy, saying, "The government should diversify its economy away from this risky economy." ”
"It's not just based on economic considerations, it's also political. The Albanese government's policy is deeply contradictory, with $370 billion spent on nuclear submarines to deter China and a big deal about the Australia-China trade relationship. ”
(Image source: Internet)
He said the world's two largest economies, United States and China, are moving away from global trade, a trend that will only accelerate if Trump is elected president for a second time.
"The United States makes it more expensive for any Chinese company that wants to export and sell to the United States and makes it harder for them to make a living; China, on the other hand, is driving United States and other foreign companies out of China unless they hand over all intellectual property to potential Chinese competitors. ”
"The policies of both countries are leading to economic decoupling."
He added that Australia needs to act quickly or the economy could face serious consequences. "If we continue to blindly believe in free trade and see our growing economic dependence on China as a good strategy, this could push Australia into recession."
(Image source: News Corp Australia)
*Australia's billion-dollar export darling threatened*
News Corp Australia reported that Trump's tariff threat also comes at the worst time for China, which is struggling to cope with an economic downturn, especially in the construction sector, which was once the main driver of its economic growth.
China's property market is also an important source of funding for the Australian economy, with iron ore exports bringing in $124 billion last year and are expected to jump to $131 billion this year. However, China's construction activity plunged 80% in May, while property developer financing fell by almost 25% in the first half of the year.
News Corp Australia reported that the housing market crisis shows no end in sight, which is also a wake-up call for Australia.
"Because there are a lot of materials needed to build apartment buildings, we need Australian minerals to make steel," says Jericho. This is undoubtedly a problem. "If Australia no longer supplies the Chinese domestic economy, we want to be able to switch to products that are made in China and exported to the world, especially to the United States."
(Image source: News Corp Australia)
Shoebridge said that Chinese people are also no longer investing in real estate, and they have been promised that investing in real estate will be profitable, but now they are watching the industry implode. But he also said it was uncertain when the golden age of Australia's iron ore exports would end.
"Therefore, it will still be a foolish game to predict the exact moment of the iron ore crash. Structurally, the real estate market is slowing down and there is a lot of overcapacity, so demand for imported products such as steel must fall. ”
News Corp Australia reported that at the same time, Chinese consumers have also turned to saving rather than spending.
Louis Vuitton、Bulgari、Dior以及Hugo Boss和Burberry Group等奢侈品牌,都 受到中国消费者消费意愿下降的影响。
LVMH reported a 14% drop in sales in the second quarter in the region, including China, while Swatch Group revealed that sales in China plunged 30% in the first half of the year and is therefore cutting production. In Australia, companies such as BHP Group and Rio Tinto derive more than 40% of their revenue from China.
(Image source: News Corp Australia)
*Australia is getting closer to recession*
Trump also said that he would impose a 10% tariff, which would hit Australian businesses in order to protect United States businesses from countries that "steal our jobs and wealth."
Jericho warned that in addition to international political implications, the Australian economy is already showing signs of pressure and unemployment is rising.
An ANZ report suggests that the unemployment rate could rise to 5% by the end of next year. "If that happens, I think Australia is going to be in a recession, so the risk is very high," he said.
"That's why the RBA should be cautious about raising interest rates, because we know that household spending has been low and private sector job growth has been very weak over the past six months. All this indicates that the economy has slowed down markedly thanks to the 3.25 percentage point rate hike. ”
"The risks of a recession are already there, but if a trade war breaks out, I think those risks will rise sharply."