China Fuels Trade War Fears With Australia

Trading Tips

China Steps Up Pressure on Australia

Away from its long running trade stand-off with the US, it seems that China is now in the process of commencing a new trade dispute. Following increased calls from the Australian government for an official investigation into the origins of COVID-19, with growing scrutiny over China’s role in the outbreak, China has begun taking punitive measures against Australia which, given its status as Australia’s largest trading partner, is certainly a cause for concern.

Last week, China announced the suspension of red meat imports from four top Australian providers, making up around 35% of Australia’s beef exports to China. Speaking with reporters during the announcement of the decision, Zhao Lijian, a spokesman for the Chinese foreign ministry said the decision was taken “to secure the health and safety of Chinese consumers”. However, Lijian went on to criticise Australia as a leading voice in the call for an inquiry into how the virus started.

China Angered By Inquiry Calls

Beijing has railed against calls for an enquiry which it claims are “politically motivated” and has threatened to further boycott Australian imports if pressure continues. China has now made good on threat and announced that it will impose tariffs of up to 80% on Australian barley imports for the next five years. Given that these exports account for around $ 1.3 billion annually, this could prove to be highly damaging to the Australian economy.

Commenting in response to the announcement, Simon Birmingham (Australia’s trade minister) said:
“We reserve all rights to appeal this matter further and are confident that Australian farmers are among the most productive in the world, who operate without government subsidy of prices. Australia is not interested in a trade war. We don’t pursue our trade policies on a tit-for-tat basis.”

Risks For Australian Economy

There is now a growing fear in the Australian business and political community over the trained relations between the two nations. With around $ 235 billion in two way trade done over the last year, China is by far Australia’s largest trading partner and an ongoing reduction in business levels could have severe repercussions for the Australian economy as it begins to try and look past the COVID-19 crisis.

Technical Views

AUDJPY (Bullish above 70.51)

From a technical viewpoint. AUDJPY continues to track the broad recovery in risk assets and is mapping a similar trajectory. Price continues to move within the bullish channel and is now testing the 70.15 recovery highs once again, with further resistance just above at the 70.51 yearly S1. With VWAP positive now, a break above here will strengthen bullish conviction.

China Fuels Trade War Fears With Australia

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