China has instructed cotton mills to stop buying Australian cotton, an Australian government source and two Chinese cotton traders briefed on the situation said Friday. This is the latest sign of deteriorating trade relations between China and Australia. China’s previous suspension of Australian coal imports sparked repercussions, but also triggered a surge in domestic coal prices in China. In May, China imposed anti-dumping and countervailing duties on Australian barley totaling 80.5 percent, effectively halting a trade of about $1 billion. China said on Tuesday that it has also begun an anti-dumping investigation into Australian wine imports.
According to Reuters today, citing sources reported that China instructed cotton mills to stop buying Australian cotton or face high tariffs. China is the largest buyer of Australian cotton, with trade amounting to about A$900 million ($637 million) in the 2018/19 crop year.
Reuters says that just a few days ago, reports emerged that China had ordered a suspension of Australian coal imports, forcing the Australian government to rush to verify the news.
According to an Australian government source, “Cotton mills will basically get a quota of cotton they can import, and they’re actually being told that if they buy our cotton, they may not get a quota next year.” Reuters says the source learned about the situation from Australian officials in China. According to the source, if Chinese mills continue to buy cotton from Australia, they could face a 40 percent tariff. The source did not wish to be named because he was not authorized to discuss the matter.
Australia’s Trade Minister Simon Birmingham said in an email that the Australian government is “aware of the changing (cotton) export situation” and warned China not to take measures that impede trade. According to Birmingham, “hindering the ability of producers to compete fairly could constitute a breach of China’s international commitments, and Australia will take this very seriously.”
The Chinese embassy in Australia did not immediately respond to a request for comment, the report said.
Two Chinese cotton traders said many mills had received verbal instructions earlier this week or last week. The move will hit supplies of high-grade cotton.
Customs data show China imported about 400,000 tons of Australian cotton in 2019.
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