US-Chinese trade war leaves wool buyers wary

Zach RelphCountryman
President Donald Trump’s trade feud with China is impacting Australia’s wool market.
Camera IconPresident Donald Trump’s trade feud with China is impacting Australia’s wool market. Credit: AP/Carolyn Kaster

Australia’s wool market has again crumbled amid the heightening US-China trade war, dropping 60¢ as Chinese buyers remain reluctant to buy the greasy commodity at auction.

The Eastern Market Indicator shed 60¢ to close at 1833¢/kg clean last Friday after the Chinese currency pushed lower against the US dollar in response to the two countries’ ongoing trade dispute.

It came as the Northern Market Indicator notched a 68¢ fall to end at 1869¢/kg, the Southern Market Indicator dropped 54¢ to 1810¢/kg and the Western Market Indicator spiralled 52¢ to 1937¢/kg.

National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said the US-China trade dispute had led to a slowdown in the Chinese economy and a dip in consumer confidence.

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“Another reason for the recent hesitation from Chinese mills is that stocks of garments, fabric and yarn in the Chinese wool textile industry are reported to be rising,” he said.

“The Chinese Government has responded to this slowdown in the Chinese economy by loosening monetary policy. Media reports point to lower interest rates on consumer debt, notably mortgages, this year.”

The US and Chinese governments have been locked in a bitter dispute since July last year after President Donald Trump enforced tariff increases on 818 categories of Chinese imported goods worth $50 billion.

Tensions threatened to reach boiling point last month when President Trump said the tariffs would be raised again.

Currently, wool clothing products have not been included in the punitive tariffs imposed by the US on Chinese imports.

Mr Wilcox warned a potential US tariff hike on wool imports from China would have severe knock-on effects for Australia’s wool trade.

“If the US imposes a 25 per cent duty on imports of wool clothing from China, that will flow-on back to Australian wool growers given that Australia supplies around half of China’s raw wool requirements,” he said.

“Of course, as China has a 75 per cent share of Australia’s exports, any reduction in China’s demand will hurt in the Australian wool market.”

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