Australian balance of trade data due
Australia’s balance of trade data for June will be released today.
Australia’s political relations with China, its largest trading partner, have recently deteriorated. After Australia launched an investigation into the origins of COVID-19, China imposed tariffs of 80% on Australian barley, effectively halting imports. Despite increasing tensions, Australia’s exports to China rose by 8% between April and May, while exports to the US and Japan—its other major trading partners—fell by 7% and 9%, respectively.
Australia’s overall trade surplus has been sustained by record high iron ore exports to China, worth $101.7 billion in 2019-2020. Due to China’s infrastructure boom, a weaker Australian dollar and a dwindling supply from Brazilian mines, Australia currently has a competitive advantage in iron ore production.
Australia-China relations will likely become further strained as Australia continues to speak out against China’s position in Hong Kong and the South China Sea. China is already constructing new ports that could boost its imports from Brazil and Africa, with which it has no political conflicts. If China continues to reduce its dependence on Australia for iron ore and the demand of other trading partners remains suppressed, the effect of Chinese tariffs will likely weigh upon Australia’s balance of trade in the medium-term.
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