The Chinese-Australian Trade War

China has placed numerous tariffs on various Australian goods, which have negatively impacted both economies. These trade disputes are a result of politics. Like most Asian nations, Australia became increasingly worried and vocal about China's aggressive policy in the South China Sea. China's aggressiveness took a political tone when Australian politicians were involved in a political donation scandal involving Chinese business people. After that incident, Australia swiftly passed the foreign interference legislation in 2017, a move seen as an effort to counter Chinese influence. Australia then went on to block several Chinese investments on the grounds of national security, including rejecting Huawei's bid to build Australia's 5G network.

In response, Beijing released a list of grievances against Australia in November 2020. The Chinese government imposed restrictions on a range of Australian products, including timber, sugar, barley, lobsters, and copper ore, along with 107% to 200% "anti-dumping" tariffs on Australian wine. China also unofficially restricted imports of Australian coal out of the belief that Australia initiated 106 anti-dumping and anti-subsidy investigations against Chinese products.

While the relationship between the two countries had initially grown under Australian Prime Minister John Howard's stewardship, world events shifted their relationship starting in 2011 when former US President Obama made a pivot to the Asia-Pacific region. President Obama's term was then followed by the Trump administration, which launched the trade war against China.

Unfortunately, China is Australia's number one trading partner. The Australian Bureau of Statistics estimates that China accounts for 39% of Australian exports and 27% of imports for 2019-2020. Australia also provides 60% of China's iron ore, which equates to $74 billion annually. Thus, a disruption in supply would be damaging to both nations.

Australia has received support from Japan and Western nations, namely the US, New Zealand, France, Germany, and Britain, which have criticized China's behavior as well. It has also passed legislation that gives the federal government veto power over agreements between individual states and foreign countries. The legislation will most likely affect the Belt and Road Initiative memorandum of understanding.

However, China can inflict more harm on the Australian economy than Australia can inflict on China. Experts estimate that an all-out trade war with China will cost Australia around 6% of its GDP. Australia does not want to counter-attack Chinese tariffs by adding their own and wants to hold a moral high ground and pursue their case through the WTO instead. As a result, Australia is taking China to the WTO over these trade disputes, starting with the 80% tariff on barley imposed in May 2020, after Chinese trade officials accused Australia of illegal dumping practices.

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