Fitch is relatively upbeat on the strains between China and Australia:
- Economic co-dependencies between Australia and China will restrain Chinese policymakers from targeting products such as iron ore that are core to the bilateral trade relationship, even if political and trade frictions between the two countries continue to escalate
- We expect any further punitive trade measures imposed by China to target Australia’s smaller export categories. This would reduce the risk of adverse effects on China’s labour market or near-term growth prospects, in contrast to targeting products like iron ore – Australia’s largest export to China – which are critical inputs for China’s industrial development. This suggests that the potential economic spillovers to Australia’s growth outlook from Chinese trade restrictions would be modest.
Yeah, dunno. If China can replace iron ore from Australia they’ll do so in the blink of an eye. Which, admittedly is probably not a short-term risk. Developing mining operations, especially in Africa, has the potential to replace some of Australia’s exports to China, and this may grow in time.