Australia and China trade relations take a turn for the worse.

The relationship between Canberra and Beijing have taken a turn for the worse, with the first shot fired in a what looks to be the start of another trade war, this time between Australia and China. Australia’s position on wanting an international inquiry or an independent investigation into the origins of COVID-19 seem to have sparked an international feud between the two nations.

China’s Australian Ambassador Cheng Jingye had previously indicated that economic sanctions could be imposed if the pursuit of an independent investigation were to continue. Not heading the warning Prime Minister Scott Morrison has continued to lobby for an independent investigation alongside a variety of other nations across the globe who are feeling the loss of human life and the economic fallout brought on first by COVID-19 and subsequently the lockdowns that have been required to flatten the curve.

It is now apparent that the warnings of China’s withdrawal on investment will come to fruition, the yet to be finalised tariffs on Barley trade is the first of the measures to be imposed. Close to half of Australia’s Barley exports travel to China, with an estimated worth of 1.5B. Barley is one of the largest exports for Australian agriculture to China. At current the rumour mill is speculation that the imposed tariff could be as much as 80%, if true, then the viability to export barley and likely many other grains to China could dry up very quickly.

Beyond barley, China has further fuelled the fire, with an import ban on four Australian abattoirs, three based out of Queensland and one based out of NSW. The four-meat processing facilities account for close to 35% of all red meat exports to China, which equates to approximately 3.5B in exports just this year alone.

One of the abattoirs that have been banned, has direct Chinese investment, leaving an odd scenario to be played out. It certainly leaves an interesting picture, when considering the Australian recovery from lockdown.

What could happen if the ‘trade war’ continues? Australia has ultimately left itself in an over exposed position with its pants down. China accounts for over 30% of Australian exports, should tensions continue and an escalation of tariffs are imposed then the chance of a quick recovery for Australia basically disappears.

Right now, the Australian situation is already unhealthy, lockdowns have made for colossal economic data and its set to get worse in the second quarter of 2020. GDP is estimated to fall at least 10%, with the unemployment rate set to rise to 10%, should China withdraw its Australian trade, then these numbers are certainly likely to get much, much worse.

Alas at this stage it looks as if tensions will continue to rise. More political pressure on China is set to continue, with the U.S, Australia, Russia, and several European countries all wanting to see the results of an independent investigation. The tensions are only set to rise and further harm to trade relationships will continue.

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