Suppose the US imposes prohibitive tariffs on all Australian exports (including Tim Tams), and in exchange, Australia retaliates on all imports from the US (including Twinkies). Assuming that this trade war lasts for at least one year, discuss policy implications. You should focus on variables such as exchange rates, balance of payments, output, inflation, interest rates, etc. but do not need to be exhaustive as you have time limits. You may discuss from a single country’s point of view (either Australia or US). You should also address briefly social and/or cultural factors and their implications as mentioned in the marking rubric.
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