Australian businesses can win in the US-China trade war with careful planning and execution of their trade strategy according to research by PwC Australia.
PwC’s modelling finds Australian technology businesses stand to gain the most from the trade war if proposed restrictions on Chinese investment in US technology companies are implemented.
Australia’s manufacturing sector is predicted to see increases of 5 per cent in investment and 20 per cent in exports, which will result in a AUD1.1 billion increase to Australia’s GDP over the next 12 months.
The Australian mining and resources sector will be the second biggest winner in the trade war according to the modelling, with income predicted to increase to AUD 766 million over the next 12 months as US steel and aluminium tariffs lead to increased investment and trade opportunities with China.
PwC Australia lead for international trade and excise, Ross Thorpe said when looking at the macroeconomic environment generated by the trade war, there’s no doubt the outlook is bleak.
“We started by modelling a modest 5 per cent decrease in economy-wide investment due to diminished investor confidence, which found Australia’s GDP could take a hit of AUD 3 billion per month; in line with findings of other analysts.”
“However, when we drilled down to individual industries, our modelling revealed there will be clear winners and losers from the trade war, and that with the right trade strategies in place, Australian businesses can be among the winners,” Mr Thorpe said.
Federal Minister for Trade, Tourism and Investment Simon Birmingham said Australia’s best form of defence against current trade headwinds was to ensure Australian businesses and exporters had more opportunities and greater market access around the world.
“With the current global trade uncertainty, willing nations can work together to safeguard the multilateral trading system and continue to promote the free flow of goods and services across the globe,” Minister Birmingham said.
“That’s why as a government we’re focused on pursuing new markets for Australian exporters as this will create more certainty for businesses, further strengthen our economy and create more jobs.”
“Australian businesses cannot continue to sit on the sidelines,” Mr Thorpe added. “Worryingly, our recent CEO survey found none of the Australian CEOs surveyed had adjusted their supply chain and sourcing strategy as a result of the trade war, compared to 45 per cent of their global counterparts who have made adjustments and contingencies.”
He said to be among the winners, Australian businesses must develop multi-faceted responses encompassing contingency plans, a thorough examination of their trade portfolios and an assessment of how vulnerable these are to protectionist tariffs and Non-Tariff-Barriers. A preparedness for disruption will be needed moving forward, one that is all too often lacking.
“It’s also important to note that as a nation we are exposed by any weakening of the international multilateral trading system we worked so hard to create and which has served our nation for 70 years. Australian businesses can’t continue to be complacent and assume this system will be there forever if we don’t individually and collectively stand up as a nation and defend it,” Mr Thorpe said.