The Winners and Losers of the Australia-China Trade War

The Australia-China trade war has cost Australia its dominant market share in China for beef, wine, and coal exports. Brazil, France, and the United States are working to fill that gap.

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For years, Australia has relied heavily on its trade partnership with China. Between 2019 and 2020, this partnership accounted for 39.4% of goods and 17.6% of services exported, as reported by research firm Capital Economics.

However, due to the current trade-war that is being waged between these two countries, a conflict that has only escalated due to the Covid-19 pandemic. Australian exports have seen their numbers plummet as Beijing imposes tariffs of up to 218% higher on Australian in-coming goods, taxing notably the beef, wine and coal industry.

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Australian Beef Farmers Take Another Weary Hit

Amongst the industries most affected by these trade tensions is undoubtedly the beef industry. Already ravaged by drought, the industry represents an annual A$2.6 billion ($1.9 billion), with a significant majority of this number coming from Chinese demand. In 2019, 24% of all Australian beef exports were to China. The country exported in total 300,000 tonnes shipping weight (swt), making China Australia’s largest volume market for the year. However, in 2020, Australia was China’s third largest volume market, importing 196,696swt. This represents a decline of 35% from 2019. This year, Australian beef imports to China plummeted by 15%, importing 1.039 million tonnes. China now represents 18.9% of Australia’s overall beef exports, down from almost 25% the year before.

A Far From Isolated Trend

The A$.6 billion yearly wine industry has also been affected by the negotiations between Beijing and Canberra. According to the first quarter wine imports data released by Chinese customs, Australia is no longer China’s top wine exporter, a position it has held since 2019 when the 14% import tariffs were completely scrapped because of the two countries’ Free Trade Agreement. According to Wine Australia, in the period between December 2020 – March 2021, Australian wine exports to China plunged from A$325 million ($241 million) to A$12 million ($8 million). This represents 4.23 million liters of wines to China, or a staggering decline of 81%.

New Contenders on the Market

Thanks to the Australia-shaped gap in the Chinese market, other countries have seized the opportunity to create their own trade relations with Beijing. At the beginning of 2020, a ‘phase-one’ trade deal was signed between then American President Donald Trump and Chinese Vice Premier Liu He. According to data from the U.S. Department of Agriculture,the US sold 48,292swt of beef to China from January to April 2021, up sharply from 3,255swt in the same period of 2020.

Brazil and Argentina also saw a significant rise in their exports to China. In the first four months of 2021, China imported more than 178 480swt of beef from Argentina, up from almost 152 780swt a year earlier, according to data from China’s General Administration of Customs department. Meanwhile, Brazilian beef exports to China rose to 76% in 2020, supplying 43% of China’s meat imports that year.

In Europe, France out-stripped Australia’s wine exportation to China from the beginning of 2021, to become Beijing’s new number one bottled wine supplier in volume terms (27.1 million liters), with a growth of 16% compared with the same period last year. Second to France was Chile, who saw a 23% growth (15.83 million liters). Coming in third at 10.61 million liters was Spain, down by 4% over the same period. Italy’s export volume to China slightly dropped by 1% to 7.38 million liters.

As Australia-China trade relations continue to disintegrate, experts fear that this trend will only continue to afflict Australian industries, particularly the cattle industry, which has already been severely crippled by drought and extreme other sorts of weather due to climate change.

These days, where trade has become highly politicized, these developments may be far-ranging. So far, Australia has been a net loser. While President Joe Biden wishes to rejuvenate a Quad approach that had failed to convince its allies under President Barack Obama’s tenure, the current US administration doesn’t speak about compensating its allies more than it used to do when Biden was vice president, and at the same times reaps the benefits more than when Trump was president. This raises concerns about sustaining the current trends.