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What if …? Economic consequences for Australia of a US-China conflict over Taiwan

By David Uren

What if China were to attempt to seize Taiwan by force and the US and allies responded militarily? One consequence would be the disruption of China’s trade with many countries, including Australia. While strategic analysts have been working over such scenarios for years, there’s been little study of the likely economic consequences.
This study is focused on the short-term shock to Australia’s economy. The objective is to contribute to an understanding of the nature of Australia’s economic relationship with China and the likely paths of adjustment should that trade be severed. It also explores the options available to the Australian Government to ameliorate the worst of the effects of what would be a severe economic shock.
The conclusion of this report is that the disruption to the Australian economy would be significant. There would be widespread loss of employment, along with consumer and business goods shortages that would be likely to necessitate rationing.