Read time: 4 mins
Based on Locking in overseas buyers amid geopolitical conflicts by Di Fan, Pengcheng Ma, Lin Cui, and Daphne Yiu, published May 2024.
The risk of protectionism adversely affecting Australian businesses has increased in recent years. But trade policies that help suppliers differentiate their products would help them weather a tariff storm, according to new ANU research.
Read time: 4 mins
Based on Locking in overseas buyers amid geopolitical conflicts by Di Fan, Pengcheng Ma, Lin Cui, and Daphne Yiu, published May 2024.
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Tariffs have been increasingly weaponised in geopolitical conflict, creating a need for policies that mitigate their impact on exporters.
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A new ANU-led study found that when the United States introduced protective tariffs on Chinese suppliers in 2018, businesses with well-differentiated products were the least affected.
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The results indicate that if Australian exporters can demonstrate stronger corporate responsibility, technological capability and brand identity, it would help them ‘lock in’ buyers during a dispute, easing the pain of tariffs.
With tariffs used as a tactic in geopolitical conflict, Australia needs a plan to minimise their negative impact.
New research co-led by ANU has revealed the important business-level characteristics that can mitigate the impact of tariffs in a trade dispute.
Although the study focuses on the adverse effects of the US-China trade war, it provides insight for Australia. Specifically, it offers a method for measuring loss of revenue in response to tariffs that could be used to help policymakers and businesses adapt to protectionist trends.
Applying this method to the tariffs that were introduced between Chinese suppliers and buyers in the US in the 2018 US-China trade war, it revealed that the value of their transactions fell by more than 18 per cent.
However, it also showed that businesses with strong innovation capabilities and better corporate responsibility performance lost the least revenue.
These businesses were able to lock in international buyers despite tariffs pushing up the prices of their goods and services. This is because they had successfully differentiated themselves with stronger technology, social legitimacy, and brand identity, according to the evidence.
Conversely, businesses offering undifferentiated goods with many alternative sellers, such as commodities and agricultural products, were found to be the most vulnerable to the impact of trade conflict.
The findings suggest that policies that encourage exporters to invest in innovation and demonstrate corporate social responsibility would also improve their resilience to tariffs.
“Businesses offering undifferentiated goods with many alternative sellers, like commodities and agricultural products, were found to be the most vulnerable to the impact of trade conflict.”
