China booms as Wall Street at record high – but what of a trade deal?

US shares have hit an all-time high, marking the stock market's complete recovery from a nosedive at the end of last year amid fears of a global recession, an escalating trade war between the US and China, and concerns that raising interest rates could slam the brakes on tentative green shoots of economic growth.

The stock market in the US has never had it so good, and trade figures from China look amazing – but we can’t get complacent,” says Tim Harcourt, the J.W. Nevile fellow in economics at UNSW Business School.

“Economic gloom and trade wars could be just around the corner.”

“We must be careful about expecting light at the end of the tunnel, while keeping our feet on the ground," Harcourt says.

"That light could be snuffed out in an instant by a global economic shock.  And right now, that economic shock could be the forthcoming US and China trade deal.”

The US and China are making progress on a trade deal.

“I’m cautiously optimistic,” Harcourt says. “But it's a paradox that Australia will lose out on if the US-China deal goes too badly or too well. If it goes south, this could lead to a global trade war, and the worst possible scenario for an open economy like Australia's. Come to that, the world economy would take a hammering too. There are no winners from trade wars.”

Ironically, China’s economy is booming, with the country's GDP steady at 6.4% in the first three months of 2019.

“It’s driven by the web, with Chinese consumers driving online retail sales of physical goods up 21% in the first quarter of 2019.”

Harcourt, a former economist at Austrade, says this may lead to a trade deal going through, with the US eager to tap this growth.

“If a trade deal goes too well, the US and China would opt for managed trade locking out Australian exporters in beef, coal, iron ore and LNG.” 

According to Harcourt,  the best result would be an opening up of China with best market access for the US and other countries including Australia, and support for a rules-based global trading regime spearheaded by the World Trade Organisation.

Media contact: Julian Lorkin: 02 9385 9887


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