The trade dispute between the United States and China reignited in mid-May, with the Trump administration announcing that 25 per cent import duties would be imposed on about US$200 billion of imported products from China.
This was an increase from the existing 10pc duty, with the threat of other products being included on the list in the next few months.
China retaliated by announcing higher tariffs on imports from the US, mostly agricultural and IT products, including soybeans.
The Chinese government also orchestrated a sharp devaluation of the Chinese currency, the renminbi, against the US dollar, almost immediately.
This will make China's exports cheaper in US dollars, reducing some of the impact of the 25pc duty.
On investigation, the list of products on which the 25pc will be imposed by the US, includes wool products such as greasy and semi-processed wool, wool yarn and fabric, as well as wool carpets.
However, the list does not include wool clothing.
Almost all the wool products that the US imports from China are wool clothing and wool carpets.
For Australian wool, the key products are wool clothing items, which are not included at this stage.
But what happens if wool clothing products are included in the products with a 25pc import duty?
How important for wool clothing is the US to China's exports?
And, how important is China to the US imports of wool clothing?
Put simply - very, on both counts, particularly for US imports of wool clothing.
In 2018, the US accounted for 14pc of China's exports of wool clothing (by volume), although this share has fallen in recent years - in 2015 the US share was almost 17pc.
The US is the third largest destination for China's exports of wool clothing, behind the EU and Japan.
About 40pc of China's imports of raw apparel wool is exported as finished wool product (clothing).
China is the largest supplier to the US of wool clothing, accounting for 52pc of US imports of wool clothing (by volume) and 43pc of US imports by value.
The next largest value source is Italy with 18pc and the next largest by volume is Vietnam with 7pc.
Almost all of the retail sales of wool clothing in the US is supplied by imported products from various countries.
China's importance for the US' imports of clothing isn't restricted to wool. China accounts for a similar share of the US imports of synthetic fibre clothing, with a 51pc share by volume and a 38pc share by value.
China has a large but smaller share of US imports of cotton clothing, at 29pc in volume and 26pc in value.
If the US imposes a 25pc duty on imports of wool clothing from China, that will flow back to Australian wool growers, given Australia supplies about half of China's raw wool requirements.
Of course, as China has a 75pc share of Australia's exports, any reduction in China's demand will hurt the Australian wool market.
