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Summary:
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AEGIS Thoughts & Strategies: Both have benefited from the economic partnership, and likely neither economy will benefit from an ongoing trade war. As we have recently commented (here and here), China's economy has been slowing. Australia's Q1 GDP, released June 1, was 1.8% q/q, which was higher than trade estimates of 1.5%, yet lower than the 3.2% reported the previous quarter. Both economies are still growing, but are still off-pace of pre-pandemic levels. If China ceases imports of Australian iron ore, a knock-on effect might be a drop in both iron ore and steel prices. Australia could easily find a Western market for its iron ore; however, it is likely none will match the demand of the Chinese. Hence, with supply outweighing demand, prices could be pressured lower. |