Australia-China relations in freefall as Beijing hikes wine tariffs

China has said it would impose anti-dumping measures on Australian wine, in a further ramping up of tensions between Beijing and Canberra.

China – Australia's biggest trade partner – has threatened economic retaliation since Canberra called for an inquiry into the Covid-19 pandemic, and has already suspended some timber and beef imports.

From Saturday importers will have to pay deposits of 107.1 percent to 212.1 percent, China's commerce ministry said.

The ministry said it was making the move in response to "substantive harm caused to the relevant domestic wine industry".

China frequently leverages its huge market in diplomatic disputes, cutting off or limiting access when angered.

Wine exports to China hit a record $900 million (A$1.3 billion) last year, according to Australian government data, making it the biggest market by value for the product.

Shares in Treasury Wine Estates Limited – which owns the popular Penfolds brands – sank more than 11 percent on the news before trade was halted.

Government subsidies?

China's wine industry has complained Australian wines benefit from government subsidies that give them an advantage over Chinese products, the commerce ministry said in August when it launched its probe.

Australian Trade Minister Simon Birmingham said at the time "we strongly refute claims" that government programmes supporting research and development amounted to a subsidy of the country's wine exports.

Australia to 'vigorously defend' wine industry

Australia will "vigorously defend" its multi-billion-dollar wine industry from new punitive Chinese tariffs, its agriculture minister said Friday, raising the threat of countermeasures through the World Trade Organisation.
"The Australian government will vigorously defend the industry," David Littleproud said. "Obviously we'll exhaust all avenues available to us through the WTO."

Deteriorating ties

In recent months, Canberra's relationship with Beijing has gone from bad to worse.

Beijing has produced a laundry list of complaints about Australian policies – from banning Huawei's participation in 5G to its call for an investigation into the origins of the coronavirus pandemic.

A Chinese official gave a dossier to Australian media containing 14 grievances earlier this month, reportedly telling the outlets "If you make China the enemy, China will be the enemy."

Australian Prime Minister Scott Morrison hit back, saying Australia "won't be compromising" on issues including foreign investment laws and 5G networks.

READ MORE: China decries 'barefaced lies' over its handling of virus

In May, China suspended imports of beef from four Australian slaughterhouses and imposed 80 percent tariffs on Australian barley imports.

Two Indian merchant ships carrying Australian coal have been stuck at Chinese ports since the summer, with Chinese foreign ministry spokesman Zhao Lijian on Wednesday saying Chinese authorities had in recent years found "many cases where imported coal didn't meet our environmental protection standards".

Beijing has also warned people not to visit Australia for study or tourism, alleging anti-Asian racism in the wake of the pandemic.

READ MORE: Australian PM Morrison : World needs to know origins of Covid-19