World News – AU – Just like Trump’s tariffs, China’s trade attack will backfire

China’s effective bans on a growing selection of Australian products in retaliation for the insolence of Australian politicians in calling for an independent investigation into the origins of the coronavirus, including exceptions to which China has made an exception, are China’s version of Donald Trump’s tariffs.

Trump’s pretext for his first tariff break was « national security ». although they were even imposed on the imports of some of America’s oldest allies. Were Canadian steel and aluminum imports really a threat to America’s national security?

China is more creative, taking advantage of everything from investigations into the contamination of our lobsters to environmental standards that have affected coal exports, to allegations of dumping against our wine exporters or the combination of dumping and subsidy fees against Australian barley producers.

Chinese diplomats in Canberra, of course, made it very clear that China’s war on Australian exports stemmed from comments made by the Morrison government on the virus in Hong Kong, Taiwan and southern China. As did China’s espionage and influence programs in Australia and Huawei’s ban on 5G rollouts and the blocking of proposed acquisitions of Australian companies and agricultural assets.

Trump’s tariffs, particularly those he introduced on China’s exports to the US during the American-sparked trade war last year, were initially misunderstood. They were the product of Trump’s lack of understanding of international trade and the importance or otherwise of trade balances. and then turned into a broader and more complex attempt to harm China’s ability to challenge America’s economic, technological, and geopolitical leadership.

China’s actions are a punishment for Australia’s openness and an attempt to intimidate and prevent the Morrison administration from voicing their views and stimulating a broader Western consensus and alliance that could have a significant impact on the problems their Visibility Australia has raised.

Like Trump’s tariffs and attacks on the multilateral organizations that America played a vital role in creating and that alarmed America’s traditional allies, China’s attempt to intimidate Australia is likely counterproductive, forcing other Western nations to rethink what China’s new readiness to fight could mean for them.

Just like Trump’s tariffs, China’s businesses and consumers also incur costs from their actions.

The Trump trade war may have harmed China, although it largely diverted exports affected by the tariffs, but was paid for by US companies and consumers in the form of higher prices. Similar results could be expected from China’s bans on Australian products.

In addition to its proximity, Australia has developed into one of China’s most important trading partners because it is reliable, high quality and competitive.

Take coking coal. Australia â ???? mainly BHP â ???? supplies about half of China’s metallurgical coal imports from steel mills. While China has a massive domestic coal industry, its steel mills require the premium coal produced by Australia.

Raw materials of higher quality make the mills more productive, lower energy costs, cause fewer environmentally harmful emissions and contribute to higher quality end products.

Since China first banned Australian coal, it has been around 7 million tons â ???? An estimated $ 700 million ($ 950 million) coal has been stranded in Chinese ports awaiting unloading. The price of coking coal excluding Australia has fallen to around $ 100 per ton, its lowest level in four years and almost 30 percent lower than two months ago.

That would suggest the « ban ». one???? China says the import restrictions on Australian coal are due to the fact that many Australian producers have failed to comply with environmental standards. is working to hurt Australia.

However, Chinese domestic coal prices have risen sharply. They are now roughly twice as expensive as imported coal. and the prices of the US and Canadian coking coal, which is replacing the Australian product, have also increased.

So, Chinese steel mills pay much more for lower quality coals, which reduce the productivity of their operations, cause more polluting emissions and result in lower quality products.

The market for coking coal is far more diversified than, for example, iron ore, where China takes over up to 80 percent of Australian production. Japan, South Korea, India and even Europe are existing customers. India in particular is experiencing a steel boom and is buying more Australian coal.

To punish Australia, China is damaging the competitiveness of its own steel by giving its competitors access to higher quality but cheaper raw materials that of course meet Japanese, Korean and Indian environmental standards.

The massive tariffs on Australian wine for alleged dumping ???? Selling products below manufacturing cost? is equally absurd, although the cost of this move is being borne by reduced choice for Chinese consumers.

Australia is the largest exporter of wine to China and Treasury Wine Estates is the heavyweight among those exporters. The 169. A 3 percent tariff for his wines will effectively drive them off the market.

Perhaps targeting Australian wine and coal is as much a protective bat as it is punishment for Australian politicians who violate Chinese sensitivities.

When the Treasury Department dumps wine in China, it is not at all apparent in its financial data. The Treasury EBITS (earnings before interest, tax and accounting for wine inventories) margin in Asia, where China accounts for more than two-thirds of the division’s earnings, is below 40 percent.

This is comparable to a margin of 22. 5 percent in Australia, 13. 8 percent in the US and 14 percent in Europe, the Middle East and Africa and looks more like profit than dumping.

China is trying to revive its domestic wine industry, where production has more than halved in the past three years. There have also been a number of defaults on corporate bond issues by Chinese state-owned coal producers.

Perhaps targeting Australian wine and coal is as much a protective bat as it is punishment for Australian politicians who violate Chinese sensitivities. In any case, it will harm Australian producers, but there will also be self-inflicted harm. Just like Trump’s tariffs.

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Stephen is one of Australia’s most respected business journalists. Most recently, he was the co-founder and co-editor of the Business Spectator website and co-editor and senior columnist for The Australian.

China, Australia