Squeezing Our Exports !

It would be far too early to claim that the tariff war between the United States and China is over.  At best we could say that the deal that recently got inked has calmed things down and that has been welcomed by the commercial world.  The stock markets reached a new high, but we need to remember that what goes up has an uncanny knack of reversing direction with little warning.

The aspect of this deal which concerns Australia is the promise by the Chinese to substantially buy more from the United States.    China is Australia's biggest export customer and if China looks to increase purchases from America it is certain to cut the volume it buys from other countries.  It is almost certain that this will be detrimental to Australia's trading balance.

What we sell to China in a big volume is coal and iron ore and America is also a big coal exporter.  Donald Trump has every reason to welcome a surge in American coal exports because of the jobs they create in the heartland that voted him into office.   The timing couldn't be better because this is an election year.

Australia is fast becoming the major nation supplying the world with liquefied natural gas (LNG) and once again China is a major customer.  Because of " fracking " the United States has a surplus of  LNG and we can expect American sales to China to cut into our export market.  We can probably expand LNG sales to India but Russia is dominating the European market and its direct pipelines make this a hard market for us to crack.

Another market that has been expanding is the supply of Australian fruit and vegetables to China.  We have a huge advantage of being in the southern hemisphere so our summer contrasts with the northern hemispheres winter.   This seasonal advantage has worked in our favour but the giant American agricultural industry will be eager to grab a bigger market share and hydroponic production is fast eliminating seasonal advantage.

That increase in American exports to China has to come from somewhere and there are other market  segments that are important to Australia.  We sell China large quantities of beef, wheat, cotton and seafood and China may relish cutting out export quotas because of our criticism of their spy activity in Australia and rejection of Huawei to supply parts to our telecommunication industry.  Relations are frosty between Canberra and Beijing.

That deal between China and the United States calls for China to buy $290 billion more from the United States in exchange for the United States  cutting tariffs on $110 billion of Chinese exports.
It seems we may need to sharpen the pricing pencil and go after new markets to fill that void.  There is nothing like a challenge to get Australian ingenuity into play when we have a marketing hole to fill  !