Australia’s wool market has crumbled amid heightening US-China trade war. The dispute has led to a slowdown in the Chinese economy and a dip in consumer confidence. Another reason for the recent hesitation from Chinese mills is that stocks of garments, fabrics and yarn in the Chinese wool textile industry are rising. Chinese buyers are reluctant to buy the greasy commodity at auction. As China has a 75 per cent share of Australia’s exports, any reduction in China’s demand will hurt the Australian wool market.

Currently, wool clothing have not been included in the punitive tariffs imposed by the US on Chinese imports. A potential US tariff hike on wool imports from China would have a 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.

The US and China have been locked in a bitter dispute since July last year after the US enforced tariff increases on 818 categories of Chinese imported goods worth 50 billion dollars. Tensions threatened to reach boiling point last month when the US threatened to raise tariffs again.