By Will Koulouris

The looming prospect of a trade war between the United States and China, has a leading Australian expert concerned about the impact on Australia, especially considering both nations are Australia’s most major trading partners.

James Laurenceson, deputy director of the Australia-China Relations Institute (ACRI), told us on Wednesday, Trump’s behaviour towards China is increasingly volatile and erratic; and could lead to a trade war.

“The difference between Trump’s pre-election rhetoric and the policy decisions since taking office have narrowed, not widened,” Laurenceson said.

“Most notably, the people he has surrounded himself with are extreme China hawks, particularly on the trade side.”

The primary concern with the Trump administration has always been whether his subordinates were acting on his behalf to further his real policy motives, or whether their actions are being guided as a means of negotiating a stronger position from which to negotiate with China on trade.

Laurenceson was adamant that Trump’s comments about Taiwan, and currency valuations, prove he is trying to use any means necessary to bargain, but there needs to be real concern that he may attempt to follow through with his controversial words.

The ACRI deputy director highlighted the way in which experts had speculated regarding Trump posturing on refugees, only to be flummoxed as he signed an executive action order to halt their entry, something he warns could be up next in terms of trade.

“There are U.S. domestic laws that will allow a President to put in place a blanket tariff for a period of time, they would be WTO illegal, but I don’t think he cares.” Laurenceson said.

Australia would be one of the major nations to be impacted by any form of trade war occurring between its two largest trading partners, and Laurenceson says Australia must turn even further towards Asia.

“Australia would look on the U.S. imposing a blanket tariff on China in horror. First of all it damages our own economic prospects, but even worse, it’s inconsistent with the international rules of trade,” Laurenceson said.

“Australia needs more free trade, not less. Australia very quickly, without hesitation, would line up behind the likes of China and support a more open economy, rather than a closing one.”

There is concern however, that Australia could be squashed between the two nations, as we are heavily reliant on capital from both nations, and any movement by the U.S. to initiate impositions on trade could be catastrophic for Australia’s economy.

“We are in an awful position, but I am quite confident we would not come out on the side that is proposing more protectionism and less free trade,” Laurenceson said.

“It would be awkward, it would be horrible saying the U.S we condemn your actions, they are inconsistent with international laws, it’s not in our national interest in any sense; but I think we would do it,”

“If the U.S. continues down the path of advancing policies based on the rhetoric we have heard, its authority to lead will vanish.”

@willkoulouris