A research note by economists at Citi on the impact of a trade war on the Australian economy
They say that Australia isn't as trade exposed as others and has far less exposure to the US, arguing that the impact to the country will be less than the GDP reduction in China, Korea, Singapore, India, and New Zealand.
Adding that in a worst-case scenario - where the US, China, and EU increase tariffs by 10% - then Australia's GDP may be 0.5% lower after one year and 1.25% lower after three years.
Meanwhile, the other impacts include:
- Inflation rises by 0.75% after one year, but will be 0.25% below the baseline after three years
- Unemployment rate to rise by 0.25% after one year, and to a maximum of 0.50% higher after three years
- AUD real exchange rate to fall 6% after one year, and remain 4% lower permanently thereafter
