What’s Behind Australia’s Trade War With China?

China’s trade war with Australia has really been escalating and tensions between the two countries could continue to get worse. But why is China stopping our trade, and what should Australia do about it?

When 2 million dollars’ worth of Australian lobsters were left on the tarmac at Shanghai airport back in November, suppliers were pretty shocked.

China is easily Australia’s largest trading partner, but since May they’ve been putting huge tariffs on a lot of our exports – like beef, sugar, coal and wine.

Why Doesn’t China Want Our Wine And Lobsters Anymore?

So, what’s this all about?

Tensions between China and Australia have been bubbling away for years now, for a few different reasons.

Australia has always been pretty vocal about China’s position on human rights.

Former Prime Minister Kevin Rudd called out their human rights abuses in Tibet, and there’s been heaps of media coverage just this year about the protests in Hong Kong and the atrocities being carried out against Uighur Muslims in northwest China.

We’ve also been pretty fearful of China’s ruling communist party, whose alleged spy presence in Australia led the government to ramp up our foreign policies for fear of national security risks.

But up until now, our trading relationship hasn’t really been affected by any of this.

China’s economy has been growing since the late 1970s, and Australia has benefited hugely from that. So, what’s changed now?

Politically, Australia has been increasingly aligning with the United States, and while Trump was in the White House, China reportedly wasn’t too happy we were supporting a presidency that blamed them for Covid and the US economic crisis.

Then Australia called for an inquiry into the origins of Covid, and some people think China took it really personally.

Hans Hendrischke: “China then thinks Australia is not a reliable partner because either we go with the United States in political things or in economic terms. They don’t know – ‘will Australia be reliable over time if tensions get worse?’. So, out of this we started to have these trade tensions.”

What Are The Consequences Of This Trade War?

While it’s too soon to quantify the cost of all the trade war tariffs, Australia’s already feeling the impacts of an economic recession because of the pandemic. So, losing our biggest customer is not good news.

Totally replacing China as a customer isn’t a viable option because China is just so huge.

It has a population of 1.3 billion who buy a third of our farm exports, and that means they’re hurting themselves as much as Australia by stopping trade with us.

HH: “We have things that they don’t have and what they have largely is demand, right. That’s why we have a huge trade surplus with China.

We’re not competing, we’re very much providing things that they need – such as iron ore, coal – and we’re providing things that they really like – lobsters, red wine, tourism, education. So these are things where we are kind of complementary, we would say.”

Should We Patch Up Our Relationship?

Professor Hendrischke thinks it’s really in the best interests for both sides to patch up our fraught trade relationship.

Relying on one country for export income is really risky business, and it wouldn’t be a bad idea for Australia to look into diversifying where our exports go. But totally cutting ties with China isn’t an option, simply because there are no alternative markets as big as theirs.

The Takeaway

China’s trade bans could get worse before they get better.

But the attack on our trade is really about issues that exist outside of our trade economy, which both parties need to work on resolving.