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Trump tariff risks China trade war: HSBC

AAP logoAAP 11/11/2016 Prashant Mehra

If a Donald Trump administration imposes tariffs on Chinese imports to the US, the hit to China would be limited but the move would spark a damaging trade war, a leading China-focused economist has warned.

Mr Trump, who was this week elected as the next US President in a stunning upset of favourite Hillary Clinton, has threatened to label China as a currency manipulator and slap 45 per cent tariffs on Chinese imports.

If the US were to impose a 45 per cent tariff, Qu Hongbin, chief China economist at HSBC, says it is unlikely that Chinese authorities will sit on their hands and do nothing.

"There is a very good chance that Chinese authorities will take similar retaliatory measures, so we could be looking at a damaging trade war between the two largest economies in the world," Mr Hongbin told an HSBC conference on Australia and China in Sydney.

"The impact on China's total exports is probably around 10 per cent. In other words, the 45 per cent tariff on Chinese imports into US will likely hit China's total exports by 10 per cent.

"It is kind of big damage but its not disastrous."

The US has not been the major focus for China's exports in the last few years as the proportion of China's exports that go to the US has steadily fallen since the global financial crisis, Mr Hongbin said.

Currently, inter-regional trade within Asia makes up about 60 per cent of China's exports.

At the same conference on Friday, former Australian Prime Minister John Howard said Mr Trump's tariff proposal, if implemented, would create tensions between the US and China, and also Australia.

"Trade sanctions of that type are not all one-sided," he said.

"The last time I checked, there continued to be very heavy Chinese investment in US treasury bills. I can't imagine that will escape the attention of the Chinese authorities if these things were done by American authorities."

He labelled the US-China relationship as the most important bilateral relationship in the world, and called on Australia to pursue policies that harmonised its different relationships with those two countries.

China is Australia's largest trading partner, with total trade in goods valued at over $138 billion in 2014/15.

Earlier, HSBC's group chief executive Stuart Gulliver said Australian business had huge opportunities as China's economy continued to grow, albeit at a slower pace.

"China's need for Australian resources will not end any time soon. China continues to need high-quality new infrastructure to increase productivity and support future growth, which in turn will require secure channels of resources to achieve this," he said.

Mr Gulliver named health, education, tourism, agriculture and professional services as key sectors that will play a bigger part of the Australia-China investment story in coming years.

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