Market Spotlight: Australia/China Relations Improving As Barley Dispute Ends

Barley Dispute Ends

An agreement was reached between Australia and China to resolve their dispute over barley imports, the two countries said on Tuesday, a latest sign of improving ties between the major commodity trade partners.

In a welcome sign that trade relations between China and Australia are improving, the two countries have this week reached an agreement to end the current trade restrictions around Australian barley exports to China.

The two countries had been strained for years, and worsened after Australia called for an inquiry into the origins of COVID, triggering trade reprisals by Beijing including anti-dumping duties on Australian wine and barley.

The two trading partners became locked in a vicious trade dispute in 2021 stemming from Australias role in calling for China to be investigated and held accountable over the outbreak of COVID. However, according to Australian Foreign Minister Penny Wong, Australia AND China have now reached an agreement whereby China will review the levies on Barley exports.

Hope For Further Tariff Reductions

China's ministry of commerce, which had imposed the barley tariffs for a five-year period, later confirmed it had reached a consensus with Australia to settle the barley dispute, adding China was willing to work with Australia to address concerns about each other's industries.

The news has spurred hopes for a broader removal or reduction in existing trade tariffs and barriers between Australia and China. While the

news has been well reflected in a higher AUD so far today, the news also has broader positive implications for global risk sentiment, lifting the global trade outlook and signalling the likelihood for further such agreements to be made between China and its other trading partners.

Aussie Exporters Told to Diversify

Nevertheless, despite the positive development, Wong said on Wednesday that Australian exporters should look to diversify away from relying on Chinese business. Wong said that as China operates as a greater power within the world there would clearly be areas where the two countries interests did not match and it is important for Australia to be able to separate its strategic and economic relationships, to bolster national resilience.

Technical Views

AUDUSD

The recent rally in AUDUSD was seen reversing on approach to the .6857 level with price breaking below the corrective bull channel and the .6681 level. While below here the risk is that we see a further push lower towards the .6535 level next. To the topside, .6857 remains the key level for bulls to break.