Australia a likely loser in trade war

Australia a likely loser in US / China trade war


Farm Online News
Donald Trump, US president and China's Xi Jinping are battling it out on the trade front. Photo - Donald Trump - Michael Vadon.

Donald Trump, US president and China's Xi Jinping are battling it out on the trade front. Photo - Donald Trump - Michael Vadon.

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The ongoing trade tension between the US and China is unlikely to be good news for Australian agricultural exporters.

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THE COMPLEXITIES of the ongoing, fast moving trade war between the US and China are difficult to follow, especially given the propensity of US president Donald Trump to use Twitter as a platform for his announcements.

However, while the specifics are hard to quantify at present, most Australian grains industry analysts and participants agree it is not going to be good news for the sector.

There was a school of thought early in the crisis there may be a silver lining out of the upheaval for Australian producers as China looked to source grain from alternative sources, but evidence so far suggests it is looking to countries not so closely aligned with the US, such as Ukraine and Argentina, to fill the void.

At present, tit-for-tat measures have seen tariffs heading either direction sky-rocket in the past week.

"It is a worry from the Australian growers' perspective," said Grain Producers Australia (GPA) chairman Andrew Weidemann.

"China is obviously our most important grains customer and historically we've been close allies politically with the US.

"The Australian government needs to work out its position on this one, but from a grower perspective we would hope nothing is done to jeopardise our relationship with China."

Cheryl Kalisch Gordon, Rabobank senior grains industry analyst, said there were several causes for concern.

"Looking forward, President Trump's moves to start supporting US farmers with hand-outs generated from the tariff revenue," Dr Kalisch Gordon said.

"This could mean even greater surpluses of grain at a time when we see, according to this week's US Department of Agriculture (USDA) data, there is already plenty of grain globally."

"It is another layer of distortion in the market."

Dr Kalisch Gordon said at this stage China looked to be shoring up alternative supplies of grain out of the Black Sea and South America.

"Countries like Australia and Canada, which are seen as being too close to the US, are not the beneficiaries of the need for grain from a different origin."

"If China was to come to us it would have to be because they are having supply issues out of the Black Sea and that doesn't look likely, with the USDA forecasting another good harvest in that region."

"At present the only real positive you could find from an Australian grain grower perspective is the depreciating dollar."

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