Australia’s economy suffered deeply during the pandemic, as did the rest of the world’s. However, declining trade relations between China and Australia caused potentially irreparable damage to the economy.

China is Australia’s biggest trade partner, making up almost 40% of all goods exports and almost 18% of all services exports from 2019 to 2020. However, with tensions rising between the two countries, Beijing has progressively added tariffs on popular Australian imports to China such as wine and barley. They have also suspended all beef imports.

This could mean that even after Australia has recovered from the pandemic, the Australian economy may not return to pre-pandemic status. Additionally, if China chooses to continue reducing its imports from Australia then the cost to the economy could rise to 2.8%.

Australia may be able to recover some economic loss by diverting exports to other countries but at this point in time, complete recovery seems unlikely.