The paper, written by QIC analysed the impacts of the US/China trade wars and believe that the trade war is more than just rhetoric and will continue.
One of the paper’s authors Katrina King said QIC had been watching the trade wars and said that they disagreed with the theory that it mostly rhetoric.
“Whilst there may be some thought that it may die down with the November midterms I do think it’s fairly well entrenched and certainly see its continuing for some time,” Ms King said.
Ms King said the reason for the trade war has a lot to do with who would dominate the world trade in terms of technology.
“China has a ‘made in china’ policy, where they are hoping by 2025 to own 70 per cent of the world's industrial robots and 80 per cent of the world's renewable energy equipment. So, I think these are pre-emptive strikes by the US to make sure that they are involved in that as well,” she said.
The market so far hasn’t responded dramatically to the trade wars and Ms King said that’s partially down to China’s modest retaliation.
“Between April and now China has depreciated its Yuan versus the US dollar by 9 per cent so you have those tariffs put on goods and if you have a 9 per cent depreciation of the Yuan versus the US dollar, it undoes what that tariff does anyway. It neutralises it,” she said.
While a trade war negatively impacts everyone, Ms King did think that it would be a lot less negative for Australia.
“The Australian dollar will depreciate which helps our inflation and makes our exports a lot cheaper for other people, so we continue to be able to grow on that front. Secondly, we would expect some sort of reorientation of what a China/US product might be particularly in agriculture towards a Chinese Australian export product,” she said.
Ms King said that QIC would be watching the midterm elections as many people anticipate that Trump is using the trade wars to buy votes for those elections.
“We see the risk of it sticking around a bit more after the midterms although there may be an opportunity for the Trump and Xi to have a presidents’ summit after the midterms, which may slow things down and get both sides back to the negotiation table,” she said.
