Relations between the global super powers – the U.S. and China have deteriorated over trade barriers and South China sea war. This turns out to be dangerous for Australian equation with both its ally economies, considering Aussie’s stand on many occasions, against China’s use of coercion and aggression in cold war situation with US.
There has been a rising trade related dispute between the US and China slapping series of imports tariffs on each other. US has been accusing Chinese counterparts over rising trade imbalances, unfair trade practices, rusted international agreement, infringement of intellectual property rights, US technology theft and non- tariff barriers insulating critical sectors from foreign competition.
It was just lately when a deal has been struck between two global giants facing a growing squabble over trade disputes, wherein US tariffs would remain unchanged at 10% for 90 days to be able to reach to a trade agreement before raising it to 25%. Also, the tension over the last several years, between the two nations regarding South China Sea’s access and dominance is not hidden from the world. US is in cold war with China over latter’s militarization over the sea and has a keen eye over sea’s rich oil & petroleum resource, economic interests as well as naval dominance.
Australia was able to survive global economic meltdown of 2008 and has showed unprecedented growth since then, enjoying high consumer demand from superpower China. Also, it has optimistic presence in the world economy, enjoying US security guarantees. However, with its major trade partners exchanging threats, it faces a serious risk to its immunity. Australian government has often accused China over reckless harassment of US Navy in the water and unfair trade barriers to gain global competitiveness, for which it has also received severe backlash and criticism from China. Political actors emphasize the graving need for adoption of rule-based global norms by Chinese economy.
The Aussie economy is largely dependent on commodity demand from China which makes the entire high growth setup highly linked to China’s growth and demand for exports. Australian business environment is quite negative and anxious about potential impact of US-China tension over their trade and investment relations with China. The probable slowdown in Chinese economy and its import demand, owing to global trade & water issue and Aussie’s political stand against China’s global trade practices, is likely to have cascading impact on Australia’s current account balance and national income. The resultant unemployment and lower income levels are bound to have impact on household debt payment and thus leading to property bubble burst.
Australia has another vested interest in peaceful resolving of Indo-China sea tension which is the fact that its major energy and resource exports are channelled through this world’s largest shipping lane.
There is no denying of the fact that Australian high growth trajectory, being an export dependent economy, is vulnerable to slowdown if South China sea issue is not addressed and if import tariffs are raised by Donald Trump. The nation is facing a dilemma between its military support on one hand and trade & economic support on the other hand.
This overall scenario had impacted the equity market as well, across the globe and at domestic level. But with some relief coming in from the US – China front at the G20 Summit, Aussie stocks were seen to have moved up.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.