China has imposed a massive 80 per cent tariff on Australian barley imports from today, saying the product has been imported against trade rules.
The import tax will remain in place for five years, and is expected to wipe out Australian sales into the lucrative market.
Typically, at least half of Australia's barley exports would be bound for China, trade that was estimated to be worth $1.5 billion in 2018 but due to drought fell to $600 million in 2019.
In a statement announcing the decision, China's Ministry of Commerce said its "domestic industry had suffered substantial damage".
"The Ministry of Commerce conducted an investigation in strict accordance with China's relevant laws and regulations."
It said the anti-dumping tariff would be 73.6 per cent, while the anti-subsidy tariff would be 6.9 per cent.
Barley is considered one of Australia's top three agricultural exports to China but since 2018 has been at the centre of dumping allegations.
Beijing's decision comes amid diplomatic tension between the countries and follows the Morrison Government leading the global push for a COVID-19 investigation.
On Monday night, Trade Minister Simon Birmingham left open the option of Australia appealing to the World Trade Organization (WTO), saying he was "deeply, deeply disappointed" by China's decision.
"Australia does not believe that the decision China's made is justified or defensible in accordance with anti-dumping practices," he said.
"Regardless of whether or not we pursue a WTO process, we will continue to lobby Beijing."
Senator Birmingham said he had still not heard from his Chinese counterpart, Zhong Shan, to discuss barley and the suspension of imports from four Australian abattoirs.
He said China had the power to change its mind on the tariff at any time, saying the decision would also affect China.
"Whist this is a blow for Australian farmers, it's also Chinese breweries and Chinese consumers, who will pay a price through paying more for barley through other [producers], or will end up getting substandard barley from other markets around the world," he said.
Grain Growers chairman Brett Hosking said it was likely Australia would pursue the issue at the World Trade Organization.
"It's not guaranteed, but we do want to engage with the Chinese around this," Mr Hosking said.
"It's a diplomatic situation, it feels more like a misunderstanding on their behalf, than it does genuine trade action.
"We know our industry hasn't done anything wrong, we're confident of that. We know our farmers are the least subsidised in the world.
"If we can engage with the Chinese, we'll be able to clear up any of their concerns and negotiate or navigate a way forward."
Tariffs to affect 4.5 million tonnes a year
Mr Hosking, a Victorian grower, said the tariffs would affect shipments already at sea.
"There's been sales made, vessels loaded and some others are even on the water," he said.
"What the fate of those vessels will be I am not certain. If they do land in China, the assumption is they will be hit with an 80 per cent tariff, [so] I'd imagine they may find another destination for that grain."
Mr Hosking said an average of 4.5 million tonnes of barley is sold to China from Australia each year, much of it for the purpose of making beer.
"We're looking at a big harvest," he said.
"It could have been 5 million this year, but under this regime, it's very unlikely any will go to China: it will find other destinations."
China's Foreign Ministry last week claimed the trade measures were not related to Australia's call for an investigation into the pandemic, despite an incident last month in which the nation's Ambassador to Australia, Cheng Jingye, all-but threatened exporters in response to the Federal Government's push for a coronavirus inquiry.