In The Beginning Was Trump's Deal with China

US President Donald Trump and Australia PM Scott Morrison visit Pratt Industries during the plant's opening in Wapakoneta, Ohio on Sept. 22, 2019. (AFP)

  

Mr Trump deal that entered into force on 14th February 2020 is an unprecedented blow to the Australian economy.

 

When Prime Minister Scott Morrison sat at a table with the US President Donald Trump in the Rose Garden at the White House the Dover sole with parsley crisps, zucchini squash blossoms, fennel mousseline, and baby garlic had to be delightful. Mr Morrison raised a toast to “100 mateship” with the United States while Mr Trump, holding to the prepared remarks, emphasised “more than a century” of loyal friendship. On the third Friday of September last year, the elegance serenity and calm of the State Dinner for the honour of Australians were momentary episodes that overshadowed of the saga of the brutal trade war, in which Australia was the casualty.
 
About two weeks before Australian Prime Minister visit, Mr Trump imposed new 15 per cent tariffs on about $112 billion of Chinese imports. A year earlier, the US introduced 10 per cent tariffs on $434 billion of the Chinese goods. Mr Trump’s Trade Representative Robert Lighthizer, who favours tariffs himself pressured Beijing with them to increase the purchases on the American market. Beijing surrendered, and the Allies paid a high price. On October 11 last year Mr Trump did not hide his pride in the negotiated agreement. Indeed, he has many reasons to celebrate it.
 
But Australia will suffer. The US-China Economic and Trade Agreement (ETA) entered into force on 14th February 2020. It includes specific targets for increased Chinese imports of US goods and services, amounting to USD 200 billion over 2020 and 2021. China will have to shift from its traditional markets like Australia to meet quotas imposed by the United States. The economists emphasised the deal is highly unusual in several respects. It obliges China to purchase a certain amount of US agri-food, manufacturing goods, energy products and services over 2020 and 2021, and until 2025. It is unclear how these targets may be achieved. But Australia will be affected in key sectors.
 

Source: Institut für Weltwirtschaft, Kiel, Germany.

  

 
Australia will loose USD 1.82 billion in exports of energy products as crude oil and coal to China. In 2017 Australia imports were at USD 15.22 billion. Australia will also loose nearly USD 1 billion in manufacturing and USD 650 million as well as USD 880 million in the exports of the agricultural products and coal respectively. Mr Trump deal will also affect meat, oilseeds, seafood and pharmaceutical exports.

Mr Trump forced China to redirect its imports toward the United States.
 
“This agreement is marking a new phase in their protracted trade and geopolitical rivalry”, stated Dr Sonali Chowdhry, and Dr Gabriel Felbermayr from Institut für Weltwirtschaft in Kiel, Germany.
The economies of other US allies will also be affected. The market share of Germany, Japan and Korea will decrease significantly in their strategic sectors. Germany is likely to experience loses in vehicle, aircraft and industrial machinery exports. The most powerful economic engine of Europe may loose over $ 3 billion. Japan’s exports to China will shrink by $ 2.61 billion and Korea’s $ 1.87 billion.
 
When Mr Morrison with an entourage of the real architects of economic policies of Liberal Government including Mr Forrest, Mr Stokes and Mr Murdoch met Mr Trump in Washington, the trade agreement was not an issue. The trade war “hasn’t had a big impact yet in Australia, except maybe to dampen some business confidence,” told Alan Tidwell, director of Georgetown University’s Center for Australian, New Zealand and Pacific Studies in an interview with New York Times.
 
Thanks to the pressure exerted by Mr Turnbull on Mr Trump, Australia’s economy was almost untouched by his trade wars. Some US officials in the White House were impressed by Mr Turnbull’s decisiveness. A former official revealed in an interview with The Owner that even Mr Trump himself was impressed. But after Mr Turnbull left government, the US President did not have to be concerned anymore. Mr Turnbull’s successors expressed only admiration for Mr Trump, which he takes for granted.
The deal that Mr Trump negotiated is unjust and harmful for the US relations with the Allies. It violates the long pursued by Washington diplomats principle of common interest. "This agreement may be interpreted as evidence that the US does not value its Allies anymore," stated Dr Mark Polkinghorne, the political scientist from University of Cambridge. "At least that its interest matter more than equitable growth of its close friends."
It is unclear whether Mr Morrison joined the other concerned Allies and protested against the US deal which harms the interests of Australian people.

Go back