Power play:

reducing the fallout of the US-China trade war.

China US Trade War effect on Australia - pointing fingers

Shifting power dynamics in global politics pose a major threat to Australia’s peace and prosperity.

In particular, the US-China trade war has the potential to create significant difficulties for Australia as two of our strongest trade partners go head-to- head, but also presents potential opportunities for strengthening regional relationships.

Associate Professor Renuka Mahadevan, an applied economist and Asia-Pacific expert, is using economic models to discover ways to minimise harm and explore opportunities in the wake of the US-China trade war.

“In recent years, the US has been rapidly withdrawing from trade agreements,” Associate Professor Mahadevan said.

“Tensions are increasing in trade relations between the US and China – and this has a flow-on effect in the Asia-Pacific.”

The two super powers are caught in a vicious battle of trade barriers and import tariffs.

“The US has slapped tariffs on US$250 billion worth of Chinese products and has threatened to impose another US$267 billion,” Associate Professor Mahadevan said.

“China, for its part, has set tariffs on US$185 billion worth of US goods and is threatening measures that would affect US businesses operating in China.”

Associate Professor Renuka Mahadevan sitting down

Associate Professor Renuka Mahadevan

Associate Professor Renuka Mahadevan

Associate Professor Mahadevan is working with Anda Nugroho from the Indonesian Ministry of Finance and together they are using data and economic modelling to analyse the effects of regional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP).

“In the wake of the US-China trade tensions and other events such as BREXIT that impact international trade relations, policymakers are turning to regional trade relationships,” Associate Professor Mahadevan said.

“There is the potential for China’s Asian neighbours to benefit from some trade diversion due to growing trade tensions with the US.

“However, using the imposed tariff schedules, we found the global gains provided by the RCEP are not enough to overcome the negative impacts of the US-China trade dispute,” Associate Professor
Mahadevan said.

“There is an opportunity for further investigation of regional trade agreements and we can use empirical economic research to explore the feasibility and potential impact of these deals.”

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