Key ASX shares in the wine and dairy sector could be in the firing line as trade tensions look to escalate between Australia and China. A recent article from Bloomberg reports that China is considering targeting more Australian exports, following calls into an independent inquiry into the coronavirus pandemic.

Here are the latest developments on trade tensions and the key stocks that could be impacted.

Escalating trade tensions

According to the article, China is considering enforcing further trade barriers and tariffs on Australian imports, including wine and dairy products. The article states that Chinese officials have listed potential goods from Australia that could be subject to stricter quality checks and tariffs. It is also possible that China could encourage a consumer boycott of Australian products, however a formal stance has not been acknowledged.  

The speculation of further economic retaliation follows China’s action to block meat imports from 4 Australian slaughterhouses and the enforcement of an 80% tariff on Australian barley on Monday. Calls by the Australian Government for an independent inquiry into the coronavirus pandemic are thought to have fuelled economic retaliation from the Chinese government.

Which ASX shares are in the firing line?

A2 Milk Company Ltd (ASX: A2M) is one of the few shares on the ASX that has managed to withstand the turmoil caused by the coronavirus pandemic. Despite the company’s resilience thus far, sanctions and trade restrictions on its products to China could cause major damage.

The infant formula company relies heavily on consumer demand from China to fuel revenue growth. Currently, a2 Milk reports it has a 6.4% share in the lucrative infant formula market in China and the company recently spent NZ$200 million of its marketing budget on ads in China.

Treasury Wine Estates Ltd (ASX:TWE) is another company with heavy exposure to China. Australia is the 5th largest exporter of wine in the world, with China accounting for the majority of the volume. The operations of Treasury Wine reflects the wine industry’s reliance on China, with the company generating more than 40% of its total profits from Asia. The company’s prestigious and luxury brands, such as Penfolds, are highly popular in the Chinese market and offer better profitability margins.

Foolish takeaway

China is Australia’s most important trading partner – Chinese consumers and businesses are a reliable source of demand for many Australian goods and services. As China emerges from the coronavirus pandemic, demand will play an important role in the recovery of Australia’s economy.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Interest rates are at ultra-low levels and look likely to remain that way for the foreseeable future.

As a result, I continue to believe investors would be better off putting any excess funds into the share market rather than leaving them to gather paltry interest in an account.

But where should you invest these funds? Here are three top shares I would invest $5,000 into right now:

Freedom Foods Group Ltd (ASX: FNP)

I think Freedom Foods could be worth considering for that $5,000 investment. It is a growing diversified food company with a focus on healthy eating trends. The company has been investing heavily in its future growth over the last few years and looks set to reap the rewards in the coming years. Especially given its significant lactoferrin and UHT production capacity and the insatiable demand for these products in Asia. Combined with the rest of its growing business, I believe Freedom Foods is well-positioned to grow its earnings at a strong rate over the next decade.

NEXTDC Ltd (ASX: NXT)

Another share that I would invest $5,000 into is NEXTDC. It is Asia’s most innovative Data Centre-as-a-Service provider and busy building the infrastructure platform for the digital economy. I believe this leaves NEXTDC in a very strong position to benefit from the accelerating adoption of cloud computing. This is because as cloud computing usage increases, demand for its data centre outsourcing solutions and connectivity services is likely to increase along with it. This year the company has seen a big lift in demand. So much so, it recently announced plans to build a new data centre in Sydney.

Pro Medicus Limited (ASX: PME)

Another option to consider investing $5,000 into is Pro Medicus. It is a leading provider of a full range of radiology IT software and services to hospitals, imaging centres, and healthcare groups globally. The key product in its portfolio is Visage 7. Pro Medicus’ Visage 7 technology delivers fast, multi-dimensional images streamed via an intelligent thin-client viewer. It offers users robust clinical capabilities and scales to the needs of massive organisations. Demand has been very strong over recent years, leading to strong sales and profit growth. For example, during the first half of FY 2020, Pro Medicus reported a 32.7% increase in net profit after tax to $12.1 million. Although the pandemic is likely to stifle its growth in the second half, I remain confident that its long-term potential is enormous.

More reading

• These ASX tech shares could be destined for big things thanks to cloud computing
• These ASX 200 shares are up over 40% in 2020
• Why I would buy these exciting ASX growth shares right now
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• Should you invest in super or your ASX share portfolio?

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Freedom Foods Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Alternative ASX dividend shares could be a great way to boost your income during these times.

Popular ASX dividend shares like National Australia Bank Ltd (ASX: NAB), Sydney Airport Holdings Pty Ltd (ASX: SYD) and Transurban Group (ASX: TCL) have disappointed shareholders because of the coronavirus.

But alternative ASX dividend shares could be the answer. Here are three very interesting ideas:

Vitalharvest Freehold Trust (ASX: VTH)

This is an agricultural real estate investment trust (REIT) which owns berry and citrus farms in Australia. It earns fixed rental income and variable rental income from Costa Group Holdings Ltd (ASX: CGC), its tenant.

The variable rental income is a share of profit from the farms, which is an interesting time to be able to get some of the profit considering food prices are rising.

Each year Vitalharvest will pay out most (or all) of its net rental profit. The last 12 months amounts to a trailing distribution yield of 6.7%. A solid yield from the alternative ASX dividend share. The last year includes a lot of disruption, so the next 12 months could be materially better.

Duxton Water Ltd (ASX: D2O)

The water entitlement business is definitely one of those investments that could count as an alternative ASX dividend share. It’s the only share on the ASX that purely owns water entitlements.

It leases the water to farmers to ensure they get the water they need for their operations. Some of it is leased with multi-year leases, which locks in attractive water income for Duxton Water, providing good visibility.

It’s these leases that have given the Duxton Water Board the confidence to forecast that dividends can grow over the next two years with an increase every six months.

Based on the next 12 months of projected dividends, it currently has a forward grossed-up dividend yield of 6.1%.

Rural Funds Group (ASX: RFF)

Farmland is a very different asset class compared to most other investments on the ASX. Rural Funds is the biggest agricultural REIT on the ASX. It has a diverse property portfolio including cattle, almonds, vineyards, macadamias and cotton.

One of the most attractive things about Rural Funds as an alternative ASX dividend share is that it aims to increase its distribution by 4% each year. This is possible thanks to the contracted rental indexation, regular productivity investments and the occasional accretive acquisition.

Rural Funds has forecast another increase for FY21. It offers a forward distribution yield of 6%.

Which alternative ASX dividend share to buy?

Vitalharvest is an interesting idea, it may prove to be the strongest performer over the next 12 months. But for consistent dividend growth I think Rural Funds and Duxton Water would be better buys today.

More reading

• 3 safe and strong ASX dividend shares to buy right now
• 2 ASX shares I plan to hold til I’m 100
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• 3 industries that may never recover from COVID-19
• Beat falling rates with these strong ASX dividend shares

Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO, DUXTON FPO, and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended DUXTON FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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