Trump’s touted tariffs threaten to sweep up Aussie lobsters

Shanghai: At the world’s biggest trade expo in Shanghai, as thousands of businesses jostled for a foothold in the lucrative Chinese market, there was no obvious sign of the consequential election unfolding thousands of kilometres away and the new trade war it could usher in.

A South Australian rock lobster cooking demonstration at the China International Import Expo in Shanghai on Tuesday.Credit: Lisa Visentin

Countless TVs blared garish ads for products and wares across 360,000 square metres of brightly lit convention floors at the China International Import Expo this week – a mini-city of commercialism that pops up annually and attracts some 150 countries, including Australia.

But none seemed to be broadcasting the American people’s decision to return Donald Trump to the White House – a victory he has promised will reshape global trade through a new era of US protectionism that will reverberate around the globe.

Trump has pledged to slap an across-the-board 60 per cent tariff on Chinese imports, as well as 10 to 20 per cent tariffs on all other imported goods, a blanket measure that threatens to sweep up Australian products too.

Many economists are concerned a new trade war between the world’s two biggest economies will have flow-on consequences for Australia, including potentially slowing China’s growth and dampening demand for Australian exports.

For Australian industries looking for a pathway back into China after four years in the wilderness due to trade bans, the prospect of US tariffs shaking an already sputtering Chinese economy is an added hurdle.

Peter Drayton Wines’ Peter Lucas at the company’s stand at the China International Import Expo in Shanghai on Tuesday.Credit: Lisa Visentin

The China that Australia’s wine, lobster and beef businesses are coming back to is different to the one they were forced to leave in 2020.

China’s economy is now flagging below growth targets, rocked by the collapse of its property market and a construction slowdown, as the government struggles to convince consumers to spend their cash.

For many winemakers, the path is paved with tentative steps and new strategies.

“The China market has changed quite dramatically,” said Peter Lucas, managing director of Peter Drayton Wines, a boutique winery in the NSW Hunter Valley.

“For us, it’s now about finding a niche. I don’t see us building a brand over the next five years – I’d like to, but we need to make money from the first container.”

Chinese consumers are drinking a third less wine now than in 2017, a trend that has spearheaded a global decline, while imports have plunged more sharply, by 60 per cent, since then.

It is Drayton’s first time at the expo and follows the closing of its warehouse in Foshan, near Guangzhou, after Beijing imposed tariffs of up to 220 per cent on Australian wine in 2020.

Where it once made a wine specifically for the Chinese wholesale market and targeted big cities, this time around the winery is looking for reliable buyers in smaller cities for its Australian-branded wines. It hopes to send the first container of 1200 cases to a local business chamber in Jurong, in Jiangsu province, by the end of January.

The sanctions on the wine industry were part of $20 billion of trade bans slapped on a dozen Australian export industries by Beijing in retaliation for the then-Morrison government’s call for an investigation into the origins of COVID-19. They have gradually been lifted through negotiations with the Albanese government – restrictions on wine and beef were among the last to be removed this year, while the final ban on the live lobster trade is expected to be lifted by year’s end.

For its part, China’s reaction to Trump’s victory has been fairly muted. President Xi Jinping called the president-elect to congratulate him, CNN reported, while Foreign Ministry spokeswoman Mao Ning brushed off questions about the impact of high tariffs on China as “hypothetical”.

“The presidential election of the United States is its internal affair. We respect the choice of the American people,” she said.

As for Australia, China is its biggest trading partner, buying more than a third of its exports, particularly agricultural products and resources such as iron ore, coal and gas.

This week, Trade Minister Don Farrell said he wanted that to increase, from a record of $327 billion in two-way trade last year to $400 billion next year.

Trump’s tariffs would throw in a wildcard.

“In terms of tariffs, we just don’t know how big and whom it’ll be applied to,” RBA Assistant Governor Christopher Kent told a Senate estimates hearing in Canberra on Thursday. “The big concern is large tariffs on China, which may have an adverse effect on us.”

ANZ chief China economist Raymond Yeung said it was too early to determine how much any new tariffs would affect the Chinese economy, and it would depend on what further stimulus measures Beijing would introduce in response to boost consumer demand. But there could be opportunities for Australia too.

Residential buildings in Shanghai: The government has introduced some fiscal and monetary stimulus to revive the property market and some confidence in the economy.Credit: Bloomberg

“In terms of trade, China would love to be closer to other countries and diversify its trade mix, especially for energy and agriculture products. This could be good for Australia,” he said.

South Australian rock lobster supplier Ferguson Australia returned to the trade expo this year for the first time since 2018, as the company plots its path back to the market that once accounted for more than 90 per cent of its exports.

“We can start selling live lobsters here within a day or two. We’ve just got to get the air freight organised, and then we can get back to what we were doing four and a half years ago,” company founder Andrew Ferguson said.

The industry is still waiting for the green light to start the live shipments, but this market too has changed. Canadian lobsters have filled the vacuum triggered by the years-long absence of high-end Australian crustaceans, while Russian king crabs have also become mainstays in tanks at wet markets.

“A lot of that wasn’t there before,” Ferguson said. “Now they are everywhere, tanks are filled with them, and both of them are cheap.”

But China’s economic woes are expected to depress consumption, and Ferguson pointed to another factor that could have an impact: the 17 per cent drop in marriages this year compared with the same period last year, to a 12-year low.

“A lot of our product would get used in the wedding market, so that [decline] affects us,” Ferguson said.

But a 1.4 billion-strong population market is still well worth chasing.

The Victorian-headquartered Australasia Pacific Dairy Company was among numerous suppliers of powdered infant formula spruiking their products at the expo.

The company is undeterred by the plunging birth rate, which this year caused the population to decline for a second year in a row and triggered the closure of thousands of kindergartens across the country.

“In China, the sky is the limit. There is room for everyone,” said chief executive Manny Panourakis, who expects to start selling products through Chinese e-commerce platforms by the end of the year.

More than 250 Australian businesses are exhibiting this week, hoping to crack into the market or strengthen their existing footprint.

“China is going through tough times, but anyone can make money in good times. It just means we have to change our strategy and be agile,” Drayton’s Lucas said.

Back at the Australian pavilion, the tantalising aroma of barbecued lobster drew in throngs of social media influencers and potential Chinese buyers.

Ambassador to China Scott Dewar, whose diplomacy skills are usually deployed to navigate the tensions of the bilateral relationship, was chief salesman for Team Australia as he toured the pavilion.

“The lobster is amazing,” Dewar said, sampling a plate fresh from the hotplate.

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