China-Australia trade tensions

China imposes more tariffs on Australian imports, leading to heightened tensions

Photo by Michael Liu on Flickr.

— 2 minute read — by Sam Feierabend

Tensions have been rising between historic trade partners Australia and China after the Chinese Government imposed high tariffs on Australian barley imports, marking a further sign of deteriorating relations between the two countries.

Australian Trade Minister Simon Birmingham announced on 16th December their intentions to open talks with the World Trade Organisation to challenge China’s decision, a process that may take months or even years to resolve. China accounts for 39 percent of Australia’s goods exports and 18 percent of service exports, and increasing tensions between the two countries have led to fears in Australia that the national economy could contract by up to 3 percent as a result.

The tariff on barley was imposed in May 2020 with China accusing Australia of dumping barley grain and subsidising its growers – a move which is expected to cost producers around £1.4 billion over the next five years. This has only added to existing tensions between the countries which have been bubbling since 2018, after Australia barred Huawei from implementing its 5G network over security concerns, and further exacerbated when Australian PM Scott Morrison called for an inquiry into the origins of coronavirus.

A free trade agreement between the two Pacific nations was established in 2014 and helped to forge a strong link but this has seemingly broken down. China hit Australia with various trade restrictions in 2020, most notably on copper, wine, timber and lobster, for a host of reasons including resistance to dumping, government subsidies, and inspections for pests. China have claimed this has stemmed from the ban of Huawei and the government’s halt of a dozen investments by Chinese companies in Australia.

China’s tariffs have perhaps affected Australia’s beverages industry the most. With a tariff of 212 percent imposed on Australian wine, making imports over four times as expensive, exports to China have plummeted to 5 percent its prior level. Australian wine is popular worldwide and especially in China where wine is traditionally a drink of choice for the population. Yet Chinese wine production is on the rise and the move to tariff Australian alternatives could be seen as a political move to boost consumption of homegrown produce. The move leaves Australia to compete for better trade deals with America, Britain and the developing world where domestic wine already represents a large market.

Whilst the outcome of the WTO investigation may take time to be published, the political move by China is a key event between two of the largest influences in the Pacific Ocean. What remains to be seen is if any of Australia’s western allies step in to bring peace to this ongoing tariff war.