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Donald Trump and Malcolm Turnbull have a joint press conference in the US. Just weeks later Mr Trump exempted Australia from new tariffs on steel and aluminium.

By THOMAS FOSTER

China announced today that it would impose new tariffs on a range of imports from the US as part of an escalating trade war between the two economic giants.

This will hit prices of imports to China of US meat, fruit, wine and other products.

While it is not yet known what impact these will have on Australia, economics experts have been speculating on the likely impact on the local economy of the original round of tariffs placed by the US  on steel and aluminium – whether Australia is exempt from them or not.

Monash Business School economics lecturer Dr David Treisman said Donald Trump’s tariffs on steel and aluminium could put downward pressure on household credit.

He said the profits of companies dependent on exports or global supply chains could decrease once tariffs were in place. “You’re probably going to see ongoing downward pressure on things like the stock market … and with that, it will slowly creep into the credit conditions,” he said.

A slump in credit conditions would make it harder for households to get loans from banks.

Mr Trump’s decision means steel and aluminium imported into the US will be taxed at 25 per cent and 10 per cent respectively.

His subsequent announcement that US$50 billion in tariffs (roughly $65 billion AUD) would be applied on Chinese imports, and the White House’s announcement that Australia's exemption from the tariffs could be temporary, sparked an immediate $38 billion sell off in the Australian share market, The New Daily reported.

Monash Business School international trade law lecturer Dr Giovanni Di Lieto said despite Mr Trump’s rhetoric about a trade deficit with China, the tariffs were unlikely to have a significant effect on steel trade between China and the US.

“[Trump] chose an industry that is unimportant in terms of global trade volume,” Dr Di Lieto said. Only 2 per cent of steel imports into the US came from China in 2017.

Dr Di Lieto said Australia’s reliance on exports to China could make Australia’s relationship with the trade giant tricky.

“It’s a step forward towards choosing between [the US and China] ... which would be very unsavoury,” he said.

Melbourne University American politics lecturer Associate Professor Timothy Lynch said Australia should not underestimate its enviable position in the world as a top trading partner of China and a staunch US ally.

“If the world’s most powerful economy is prepared to cut you a deal, I think you’d rather that state of affairs, than the opposite where an American president is not prepared to cut a deal for Australia,” Assoc/Prof Lynch said.

“If Australia is going through a sort of schizophrenia about its long-term role in the world, should it cozy up more to China or to the US, then I think this tariff is a way of making the choice clearer for us.”

Melbourne University American politics lecturer George Rennie said Australia’s exemption from the tariffs was never concrete, but as a close ally of the US, Australia was well placed to negotiate an exemption.

“Trump’s base are never going to accept China getting exemptions, but they might accept Australia, and so that’s why Australia had the chance of … being exempt from the tariffs,” he said.