(Bloomberg) -- Australia’s real exchange rate could jump 6 percent and gross domestic product be cut by 2.5 percent in the event of an all-out global trade war, Reserve Bank research conducted in March showed.

The study, released Wednesday under a Freedom of Information Act request, ran three scenarios. Under the worst-case, the U.S. has applied a 20 percent tariff on all goods imports from all countries, including Australia, and all countries except Australia had retaliated with a 20 percent fee on all U.S. goods imports.

It found Australia could be less exposed under this scenario than other economies that rely more on global trade flows for demand and have larger manufacturing industries. As a result, it said, the Australian dollar could appreciate and the downside risks would be greater.

“When we allow the exchange rate to respond to the imposition of tariffs in the Scenario 3, it suggests that the real exchange rate would appreciate by 6 percent,” according to an analysis dated March 21. “GDP would then fall by an additional 2.5 percent. A lower cash rate could largely offset these effects in the long run.”

On key protagonist China, the analysis finds that net exports have contributed little to its GDP growth in recent years and that exports from the world’s second-largest economy have declined as a share of nominal GDP.

“Nonetheless, rough calculations based on the U.S. trade share and the ratio of exports to GDP suggest that if Chinese export volumes to the US fell by ¼- ½, that would subtract 1-2ppts from Chinese GDP growth, which is not insignificant,” it said.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke

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