How the Australian Trade Spat Could Affect Your Beer and Steak in Beijing

Citing health and environmental concerns, China has slapped a heavy tariff on Australian barley and banned the import of Australian beef from certain slaughterhouses. Australia denies the validity of the claims against its producers, saying it will take the case to the World Trade Organization, and even China’s ambassador to Australia has suggested there might be broader reasons for the policies, alluding to the fact that Australia is one of several countries pushing for an independent inquiry into the origins of the coronavirus.

Regardless of the reasoning, however, the fact remains that Australian beef and barley will be harder to come by in China, and as a result, Beijing’s food and beverage industry will likely be affected, a situation reminiscent of the tariffs imposed on American imports at the beginning of summer last year.

Uncertain outlook on the future of brewing

Fortunately, the majority of Beijing’s craft brewers are not likely to see the effects of the tariffs immediately, as long as they are not currently using malt made from Australian barley. For example, Chandler Jurinka, founder of Slow Boat, told the Beijinger that he switched from Australian malt to Dutch malt a number of years back for better reliability and quality.

For those who do rely on Australian malt, though, the tariffs are a major hurdle – and they add no small uncertainty to the mix. Li Wei, founder of Peiping Machine Brewing and Taphouse, says that a portion of their malt is imported from Australia, and his brewery had to order a three-month supply in advance upon hearing the news of the tariffs. Li says that if the taxes are sustained, Peiping Machine might have to switch to another supplier.

Price hikes might fall to the consumer

Even if the craft breweries, by and large, do not suffer from tariffs at first, the question remains: will the policy result in overall hikes in barley prices? As Jason Smith, economist and co-founder of Prodigy Brewing, points out, “Using data from 2018, 60 percent of all barley imported to China is from Australia.”

Crafter’s Brewing Co. does not rely on Australian products either, but co-founder Jon Parry reckons that price variance will depend on the moves of bigger brewers. "It all depends on how long this lasts and if those companies can replace all that barley with another supplier," he says.

However, Smith says that a switch is less likely than it seems. “It's clear that Chinese brewers prefer Australian barley over other countries', and it could be the case the beer formulas and flavor profiles will change should brewers use other sources for barley in their beer,” adding, “No matter how you cut it, this is not good news for beer.”

Smith also says that higher barley prices could fall to the consumer. "Economically we would say that this product is very demand inelastic," he says, referring to the fact that Beijingers are not likely to seek alternatives to their favorite local beers or the atmosphere the venues provide. "In this case, we would expect much of the cost to be passed onto the consumer."

Beef could see a delayed impact too

The ban on imports from several major Australian beef processing plants comes at a critical time for China's beef market, which like the aforementioned barley stocks, is made up of around 60 percent imported Australian beef. According to Justin Alters, director of sales for beef importing company Usource, the past year has been a downright rollercoaster for meat.

"China’s cold storages were full at the beginning of the year due to a resetting of tariff rates at the start of the year. 2019 saw meat prices hit a record high due to swine flu, fires, and droughts. Importers made large purchases for delivery after Jan 1 when quotas automatically reset. Then COVID-19 happened, decimating demand."

Now that demand is finally recovering, Alters says that the obstacles are now on the supply side, and the import ban is just part of the equation. "Many abattoirs are closed or operating at reduced capacity," he says. "We are therefore seeing cold storages in China not being refilled with Australian beef at the rate that meat is being sold, which will eventually affect pricing... if these four big plants remain closed to China for a longer period of time."

Nevertheless, Alters adds that these large plants have incurred similar import bans in years past for periods lasting several months, and the market has taken it in stride.

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Image: Melissa Walker Horn (via Unsplash)