Trump Probably Ends Global Trade: And Force The Choice Between China And US

Donald Trump could change the dynamics of global trade and further breakdown the trade into trading blocs based on currencies. Likely, to force Australia to make choice between China or USA for trading purposes.

Economist Michael Every who is the head of financial markets Asia pacific region in Rabo Bank at Australian Bureau of Agriculture and Resource Economics and Sciences ABARES. In a conference on Tuesday, Michael expressed these concerns about forced international trade.

According to statistics Australia has shown increasing agriculture growth in the past, by envisioning Trumps protectionist approach to the international trade the world could see very different landscape of global trade.

Whereas, BREXIT caused turbulence, Michael Every also believed that due to reliance on US dollar as consolidate currency for international trade. Trump could also affect the international trade by leveraging this reliance.

Every says Trump is pushing the United States as a businessman and in the business world, it absolutely makes sense to buy less and sell more. But, in global economic scenario, with the international system priced in US dollars, all the countries will be considering who will fill the potential US dollar vacuum and, by extension, which currency is used to do so.

“Free trade as we understand it is under extreme pressure,” While talking to Guardian Australia. “If the US doesn’t run a huge trade deficit, the world trade system as we understand it today breaks down.”

Every believes it is highly unlikely that the world can expect to just “ride out Trump”.

“People expecting to ride out Trump are naive,” he said. “He is the leading edge of where we are going, based on what we see elsewhere too. It’s a global trend, driven by weak demand and rising inequality.”

He said Australia, with cultural ties to the United States and economic ties to Asia, might eventually have to choose. There was no currency to rival the US dollar in Asia as yet, he said, but if Australia chose to enter an Asian trade bloc based on Chinese currency, even if it could work without the US dollar to cement it, over time that would have potential political implications.

Every said it was unrealistic for Australia to step back without making a choice between China and the US at some point if present political trends were to continue.

“The historical lesson is that world trade has fractured before – and we must recall that Australia is propped up under Chinese demand … under a US security umbrella.”

Every said, Australian farmers and exporters should get ready for exchange rate volatility, including a higher US dollar and fall in the Australian dollar by up to 15%, with Asian currencies falling even more viciously.

Every said policy makers need to be realistic and accept that selling the free trade message did not solve the underlying problems.

“Australia is a naturally abundant food exporter and there is still large food demand but the issue is going to be how food will get there.”

The deputy prime minister, Barnaby Joyce, will open the conference on Tuesday.

More: Governments Are Behaving Like Donald Trump: Penalizing Tech Companies


Via: Guardian, image via: cnn


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