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Australia Poised to Benefit From US-China Trade Volatility

Thanks in part to the Australia-United States Free Trade Agreement, Australia was spared from recent U.S. import tariffs on steel and aluminum. As one of seven exempt allies, Australia was extended the option of implementing a quota or other suitable means of protecting U.S. domestic steel interests. In addition to keeping Australian steel and manufacturing exports flowing to the U.S., the tariffs may benefit Australian wine and agriculture due to China’s retaliatory tariffs.
CNBC reports that “China is increasing the tariff on U.S. pork by 25 percent, and a new 15 percent duty will apply to other food commodities in addition to wine, including fresh fruits such as apples, cherries and citrus as well as dried fruit and nuts such as almonds and pistachios.” Australian exports of nuts, wine and fruit are likely to increase as we see “trade diversion to China’s other trading partners to fill in for what the U.S. loses.”
According to the Australian Department of Foreign Affairs and Trade, in 2016 the U.S. invested a total of $860.9 billion in Australia. The top five industries for foreign direct investment are: mining and quarrying, manufacturing, real estate activities, financial and insurance activities, and wholesale and resale trade. With additional industries positioned for growth due to recent tariff activity, investors may have the unique opportunity to capitalize on market volatility by investing in Australian companies.
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