Futures Slide After China Punishes Australia Over Coronavirus Origin Probe, Bans 35% Of Beef Imports

At the end of April, China sparked a diplomatic row after it threatened Australia with an economic hit if it doesn't stop investigating the origins, and Beijing handling, of the coronavirus pandemic. As a reminder, Chinese Ambassador Cheng Jingye told Sky News that while China's response may not have been "perfect," Australia's inquiry was "dangerous," and could lead to Chinese consumers avoiding Chinese exports and travel.

"So what is being done by the Australia side?" asked Cheng. "The proposition is a kind of teaming up with those forces in Washington and to launch a kind of political campaign against China. The Chinese public is frustrated, dismayed and disappointed with what Australia is doing now," Cheng warned Asutralia, adding that "in the long term… if the mood is going from bad to worse, people would think ‘Why should we go to such a country that is not so friendly to China?’ The tourists may have second thoughts."

"The parents of the students would also think whether this place which they found is not so friendly, even hostile, whether this is the best place to send their kids here," Cheng continued (via the Daily Wire). "It is up to the people to decide. Maybe the ordinary people will say ‘Why should we drink Australian wine? Eat Australian beef?'"

Australia's Foreign Minister Marise Payne hit back saying "Australia has made a principled call for an independent review of the COVID-19 outbreak, an unprecedented global crisis with severe health, economic and social impacts."

"We reject any suggestion that economic coercion is an appropriate response to a call for such an assessment, when what we need is global co-operation."

And in confirmation, on the very same day, Australia's Daily Telegraph reported that Western intelligence agencies are "looking closely at the work of a senior scientist at the Wuhan Institute of Virology, Peng Zhou," as part of a joint international investigation into the origins of COVID-19. The Australian newspaper Australian newspaper reported that "the Five Eyes intelligence agencies of Australia, Canada, NZ, UK and US, are understood to be looking closely at the work of a senior scientist at the Wuhan Institute of Virology, Peng Zhou, as they examine whether COVID-19 originated from a wet market or whether the naturally-­occurring virus may have been released from the level four laboratory in Wuhan that was studying deadly coronavirus pathogens from bats."

None of this went unnoticed by Beijing which, not used to having its threats ignored, has just escalated the trade war when it imposed an import ban on four Australian slaughterhouses, the Australian Broadcasting Corporation reports, adding that, as noted above, China's trade barriers are "in retaliation to Prime Minister Scott Morrison's demand for an independent investigation into the COVID 19 outbreak."

The blacklisting of the beef plants - three in Queensland and one in NSW - came just days after China flagged plans to introduce an 80% tariff on Australian barley, bringing the trade to its knees.

Three Queensland meatworks — Kilcoy Pastoral Company, the JBS owned Beef City, near Toowoomba, Dinmore, near Brisbane, and the New South Wales' Northern Cooperative Meat Company at Casino — have been suspended by China; together the four "meatworks represent 35% of beef exports to China, a trade that had been on track to reach $3.5 billion this year", the ABC reported.

The news, which came around the time BOJ governor Kuroda said that the global economy was rapidly worsening, sent S&P futures down 0.5% to session lows...

... and slammed the Aussie which dropped 50 pips on the news.

In fact, risk is off broadly with the New Zealand dollar down more than 0.5% while the Mexican peso, the euro, the British pound and the Canadian dollar are all suffering. S&P 500 futures are down about 0.5%, while WTI crude pared its earlier advance. Risk havens such as Treasury futures are up 5 ticks, the yen is climbing and gold trimmed losses.

And now that China has acted on its threat to retaliate against countries seeking a probe into origin of the coronavirus, we wonder how long before officials realize that where there is smoke, there is likely a fire burning all the evidence. Speaking of which, the Wuhan Institute of Virology still hasn't been burned down, but considering China's adamant refusal to open up the facility to global inquiry and its openly punitive act against those who accuse Beijing of being behind the pandemic, it is clearly time for a full-blown inquiry just in case some WIV scientist has another accident, this time involving a flamethrower and a few hundred pounds of explosives.