Analysts believe the recent move by China to impose tariffs of 107% to 212% on Australian wine signals deeper issues than meets the eye, according to Bloomberg. China is seen to act due to geopolitical purposes in what Beijing regards as provocative Australian statements encouraged by the U.S.  on Hong Kong, Taiwan, and COVID-19 origins. 

  • Australia-China trade tensions can be traced to the challenged China-U.S. relationship and could affect several other countries. 
  • Australia is one of the countries that rely on the U.S. for national security, including intelligence sharing but uses the Chinese markets for foreign direct investment, property investment, and tourism, in what has been termed as a “dual-option model.”
  • Analysts project that the Biden administration will not act differently on China’s threats, and countries running on the dual-option model that also includes Canada and Singapore will be affected.
  • The more the U.S. flexes its muscles and China reacts, the greater the risk that the dual-option countries will pick sides, especially on certain technologies

China’s and Australia’s stocks are currently gaining. HSI is up 0.86%, CSI300 is up 2.15%, ASX 200 is up 1.08%.