Analysts at JC Rothchild General say Australia could be winning the first round of the trade war with China.
After the coronavirus outbreak that originated in Wuhan, China last year became a global pandemic, Australia called for the origins of the virus to be investigated. This call for an international probe came without preliminary diplomatic discussions between Australia and China, which is one of the country’s largest trading partners. The move prompted China to impose coercive restrictions on a range of Australian exports including beef, barley, coal, lobsters and wine.
Australia responded by lodging a complaint with the World Trade Organization over China’s exorbitant tariffs on Australian barley exports, alleging that China had violated WTO regulations numerous times.
Although informal discussions commenced in January between the Asian Pacific trading partners, the issues were not resolved, and Australia has called on the WTO to assist with accelerating the resolution process. Last week China threatened, via a state-owned media outlet, to cause further carnage for the Australian economy.
However, analysts at JC Rothchild General say that Australia’s economy is faring well despite the trade restrictions China has imposed.
For last year, Australia’s exports to China were worth $145.05 billion, down just 2.2% from the record high reached in 2019. This was helped by a surge in iron ore prices, stemming from increased demand from China for steel as the country’s construction sector recovery gets well underway.
Although the restrictions imposed on wine, lobsters and coal have hurt Australian exports, China’s massive demand for iron ore and LNG has largely offset any losses.
There seems to be no end is sight to the trade spat between the two countries. China insists that Australia must exhibit a higher level of trust and respect in its dealings with China. China has also criticized Australia for working with the US to interfere in Chinese domestic issues and tarnish its reputation.
Although Australian officials have expressed a desire to repair trade relations with China, Australian exporters have looked elsewhere for buyers for many of the exports now banned by China. This could be a good move for Australia’s economy as it will ultimately reduce its dependence on China.