This article was originally published on RNZ and re-published with permission.

Falling wool prices in Australia and New Zealand are being attributed to trade tensions between the US and China.

China is a major importer of fine wool, which it uses to manufacture garments that are sold to many countries including the important US market.

Earlier this month Washington announced that fresh tariffs on Chinese imports would include clothes and shoes, sapping wool demand from factories in China that churn out everything from street fashions to sports gear.

AgriHQ senior analyst Mel Croad said China was now showing a reluctance to buy wool to make products it could have a hard time selling.

Last week Australia’s wool market, which controls about 90 percent of global fine-wool exports, fell by more than 10 percent.

Meanwhile prices for New Zealand fine wool at PGG Wrightson’s South Island auction last week were back to about 5-7 percent.

“Just with that declining retail demand and … those trade tensions, it has just reduced the buying demand and yes we did see it in New Zealand last week particularly for the mid-micron and the finer wools and it was just on the back of that drop in the Australian market,” Mel Croad said.

PGG Wrightson’s South Island sales manager for wool, Dave Burridge, said it was not good timing for prices to start dropping, given the majority of this country’s fine wool was going to be shorn in the next two and a half months.

“China is the global textile hub of the world now and it’s certainly where most of the wool goes to to be processed and made into further product,” Burridge said.

“The Chinese order book has all but been closed, not a lot of new business has been written until they can see clear of further trade barriers.”

Some wool growers who were operating on the open market might consider holding onto product until prices improved, he said.

Another wool brokering and handling business, Carrfields Primary Wool, also noted in its 15 August South Island auction report that uncertainty in the world economy had a dramatic affect on the wool sale, with “Chinese business very subdued.”

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