China recently went all out with its tariff war with Australia. Beijing thought that it can create an example out of Australia, for how costly it can be to go against the will and wish of Xi Jinping. However, it is turning out to be counterproductive, and as the trade blockade with Australia keeps on extending, Beijing is facing the heat as its liquor and steel industries are failing as a repercussion.
The Chinese in the fit of the moment banned multiple goods from Australia and thought that it would grossly impact an already pandemic-ridden Australian economy. But, as per the latest trends and studies, China is the one, which is going to suffer bigger loss here. Beijing was highly dependent on Australian quality Barley, Iron ore as well as coal for its secondary sector to flourish and as soon as it imposed tariffs and banned imports from Australia, it impacted the Chinese secondary sector way more than the Australian primary sector as the value addition used to happen in China where the producers used to make the larger chunk of profits, however, as it has decreased the supply of raw materials, the secondary sector and the processing units are facing the brunt of the losses. This is not something China had thought of or calculated while imposing blanket bans on Australian imports.
Other than that China had bet on the big infrastructural push as a solution to the current economic downturn due to the pandemic, however, with the main ingredient Steel requiring coal and Iron ore as the basic ingredients, banning them from the largest supplier is neither a good economic decision nor a good strategic decision. For context, as per news reports, the price of coking coal reached a four-year high in China, which was blamed on delays in supplies of coal from other countries, but one just cannot deny the impact of import ban from the largest supplier of high-quality coal to China, that is, Australia.
The Australian Trade Minister Simon Birmingham has suggested that these bans will be more detrimental to Chinese businesses than to the Australian farmers. Australian farmers would likely see a loss of about A$330 million, while China could potentially see a loss of A$3.6 billion due to its reliance on Australia’s quality barley for brewing beer. “With Australia’s agricultural production diverted to other activities, exports of other agricultural products in 2025 are estimated to increase, this means the value of Australia’s total agricultural exports (to all countries) would fall by less than what is lost in the trade with China,” as per the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report.
China is the world’s biggest producer and consumer of steel, given it is the backbone for its plan for economic revival, the absence of Australian coal will hurt the Chinese steel industry heavily; it surely is suffering the consequences with the production in a downturn. The biggest gainers because of this self-inflicted wound by China will be India, Japan, and Korea. The three powers look ready to reap the benefits of the Australian coal which has become cheaper because of its fall in demand in the Chinese market.
India is also helping Australia, by becoming the alternative destination for its exports. And this has been a big reason why the impact that Canberra was supposed to face, did not become a reality.
The Chinese are the ones suffering because of the tariff war that they themselves started. Australia has fared well, because of its exports being raw material and primary sector products, as well as India and Japan, have become alternative destinations for these goods and are fast turning into a more reliable option for sustained exports from Australia.