US president Donald Trump has stared down the mandarins of China and sealed a huge first win in his trade war with the communist state. The Chinese have blinked and handed the US an enormous range of concessions. But, while the deal is a yuge deal for America, it contains an implicit threat for other Chinese trading partners, especially Australia and New Zealand.
Australian energy and agricultural exporters face a hit to their multi-billion-dollar Chinese market from the trade deal signed between the US and Beijing that sparked a worldwide share rally and pushed the Australian bourse to a record.
China committed to buy $US200bn ($290bn) worth of extra goods from the US over the next two years in the phase-one agreement that was lauded by Donald Trump as “momentous’’.
Trade Minister Simon Birmingham played down the implications of the deal for Australian exporters but Commonwealth Bank commodity analyst Vivek Dhar predicted up to 10 per cent of $50bn worth of LNG exports could be lost to US competitors […]
The deal unleashed a wave of optimism on world sharemarkets, pushing Australia’s S&P/ASX 200 above 7000 for the first time.
However, energy stocks such as Beach Energy, Santos and Oil Search fell. Agriculture giant Graincorp fell 1.7 per cent on Thursday after the deal contained a promise to buy an extra $US32bn in “agriculture” products from the US. Australia exported $900m of beef and $1.7bn of dairy to China last year. Sydney Airport Corporation shares also fell on the Chinese pledge to encourage more tourists to visit the US.
New Zealand will face similar challenges: China is NZ’s second-biggest trading partner. The value of NZ’s exports to China hit an all-time high, late last year. Moreover, NZ’s exports are precisely the sort of agricultural goods which China has promised to buy in increasing quantities from America.
But, there are opportunities, too.
In addition to buying $US200bn more US goods over two years, the deal required China to remove unfair trade practices […]The Australian Minerals Council challenged whether the US had the physical capacity in terms of production and export infrastructure to meet the targets set out in the deal.
Others commentators argued the zero tariffs now on many Australian exports as a result of the free trade agreement with China would still give Australian exports of beef, wine and other products a major advantage over goods from the US which would continue to underwrite demand from China.
The other opportunity is to market Australian and New Zealand produce as premium. As China’s middle-classes grow increasingly wealthier, they’re becoming more discerning. Australian-made infant formula is a high-premium product in China, following scandals regarding tainted Chinese products some years ago. Milk preparations have also been one of New Zealand’s fastest-growing exports.
Some are also arguing that the trade deal will “lift all boats”, as global markets react to a de-escalation of the US-China trade war.
Australia’s major LNG exporter, Woodside, which is a major exporter to China, and the Australian Minerals Council both stressed the positive impacts of the deal for world economic growth that would assist Australian energy exports.
MCA acting chief executive Gavin Lind said: “The trade war between the US and China has shaken markets across the globe, so any easing of trade tensions between those countries is good for business confidence, the world economy and financial markets.”
He said the increased confidence following the deal “should lead to greater demand for Australian products, especially from growing Asian economies who rely on our world-class minerals for infrastructure, energy, transport and communications”.
theaustralian.com.au/world/donald-trump-signs-momentous-trade-agreement-with-china
Australia and New Zealand are going to face both challenges and opportunities from this trade deal. But one thing, at least, is certain: China is finally being forced to play fair. If Trump keeps up the pressure on China to curtail its predatory practices, there should be benefits for all.
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