Chinese spinning mills have been told to stop buying Australian cotton and the industry could soon face tariffs of up to 40 per cent.

Cotton millers in China are given an import quota each year and have been told they might not receive the allowance if they buy from Australia.

Australia sells about $800 million worth of cotton to China each year and industry groups are disappointed by the deterioration in export conditions.

Cotton Australia and the Cotton Shippers Association are working with the Federal Government to investigate what is going on.

“The Australian cotton industry will continue having meaningful conversations with stakeholders to fully understand this situation,” they said in a joint statement on Friday.

“We will continue working with the Australian Government to respectfully and meaningfully engage with China to find a resolution.”

Trade Minister Simon Birmingham is seeking clarity from Chinese officials.

“Our cotton exporters have worked hard to win contracts and establish themselves as reliable suppliers of high quality cotton in the Chinese market, which is an important input for many Chinese businesses,” he told AAP.

“China should rule out any use of discriminatory actions against Australian cotton producers.

“Impeding the ability of producers to compete on a level playing field could constitute a potential breach of China’s international undertakings, which would be taken very seriously by Australia.”

China has targeted Australian beef, barley and wine in recent months and has reportedly enforced a go-slow on importing coking and thermal coal.

Home Affairs Minister Peter Dutton said the Government was working closely with the cotton industry to ensure exports could make it to market.

-AAP