The Impact on Australia of Trump's 45 per cent Tariff on Chinese Imports

Abstract

Should Australia be concerned about the consequences of a possible outbreak of protection between the US and China, two of Australia's largest trading partners? Using the Global Trade Analysis Project model, this paper describes the impact of a 45 per cent tariff imposed by the US on Chinese imports, as flagged by US president‐elect Donald Trump during the election campaign. Gross Domestic Product (GDP) is reduced in both the US and China, with no appreciable revival of US manufacturing. Terms‐of‐trade effects cause only minor macroeconomic impacts on Australia. In itself, a US‐China tariff would not cause significant global economic damage but could have important demonstration effects. Worldwide tariff hikes would take many economies into recession and reduce world trade volumes by a third.