Tag Archive for: Donald Trump

Securing Australia’s interests in a Trumpian trade world

Australia must adopt a sophisticated and multi-layered strategy to engage the second Trump administration on trade and security. Australia must frame its trade relationship with the US in terms of its direct contribution to US national security and job creation.

Donald Trump’s second presidency, not yet 100 days old, is already sending shockwaves across the global trade. Australia’s economic and national security and the future of Indo-Pacific security architecture depend on navigating an unpredictable trade landscape. Understanding the new administration’s trade policies and their link to broader security considerations is essential for Australia’s economic prosperity and broader national interests.

The previous Trump administration made clear its perception that many countries were taking advantage of the United States. This concern became a guiding strategic principle, extending beyond trade imbalances to encompass security burden-sharing. Australia has long been a good trade and security partner to the US, and it navigated the first Trump administration with aplomb. While our trade surplus played a role, it was not the decisive factor.

Two elements underpinned Australia’s success. First was Australia’s commitment to defence spending, as evidenced by the 2016 Defence White Paper and its pledge to meet a target of 2 percent of GDP. Second was Australia’s increasingly assertive stance towards China, even at the risk of short-term economic pain. Willingness to prioritise security over immediate economic gain earned Australia considerable respect within the administration.

Australia’s current strategic settings may fall short of the Trump administration’s expectations. While the AUKUS partnership bolsters Australia’s defence credentials, a closer examination of defence spending beyond this high-profile initiative reveals vulnerabilities. Moreover, there is a perception that Australia’s China policy has softened, potentially undermining its standing with the new administration.

Assuring the administration of Australia’s support for the US’s national security and economy requires highlighting sectors where US-Australia economic cooperation directly enhances US defence capabilities. In addition to Australia’s $3 billion investment in expansion of US shipyards, Australian industry and manufacturing has been deeply embedded in the US defence supply chain for many decades.

For instance, as part of a memorandum of understanding with the US, Australia has long supplied parts for F-35 fighters assembled in Texas and bought by Australia. Australian defence firms collaborate with US contractors, providing important components and technology for submarines, warships and cybersecurity solutions. Australia and the US are also deepening critical-minerals cooperation for US military and aerospace applications, including cobalt and lithium for defence-related battery technologies.

This framing must extend beyond specific sectors to encompass the broader alignment between the two countries. Australia’s unwavering commitment to a free and open Indo-Pacific, its willingness to confront Chinese assertiveness and its active participation in regional security initiatives, such as the Quad, contribute to a secure and stable environment conducive to US interests.

While the US may favour bilateral trade arrangements and a tiered system prioritising democratic economies, Australia must continue championing the existing rules-based international trading system. Australia is the 2025 chair of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Commission, whose member states accounts for about 14 percent of global GDP. Canberra thereby has a unique opportunity to coordinate action on US tariffs in the group and reaffirm member states’ commitment to free and open trade. Australia is likely to find strong support for this initiative, particularly as members Canada and Mexico face complicated trade disputes with the US.

Australia should use its membership in the Regional Comprehensive Economic Partnership, noting sensitivities with Chinese membership, and engage with European partners through the World Trade Organization to maintain a diversified trade portfolio.

Maintaining close ties with the US administration and avoiding escalatory trade disputes is paramount. With US$77 billion in two-way trade and bilateral investment stock valued at US$1.6 trillion, Australia must emphasise the mutual benefits of the economic relationship and the potential damage that protectionist measures could inflict on both countries.

This engagement will require an understanding of the administration’s priorities and concerns. Australia must communicate its value as a strategic and economic partner, underpinned by a mutually beneficial bilateral free trade agreement and shared history. In Trumpian terms, Australia must be clear that it is no economic or security freeloader; its global influence is due to real expenditure of time, effort and resources at a level well above that expected of a middle power.

While maintaining strong ties with the US is essential, Australia must also enhance its domestic economic resilience and diversify its trade partnerships. This approach should include investing in innovation, developing new industries and strengthening ties with regional partners. Such measures will reduce Australia’s vulnerability to external shocks and enhance its strategic autonomy.

By addressing the new administration’s concerns and demonstrating its value as a reliable ally and economic partner, Australia can secure its interests and navigate the challenges of a Trumpian trade world.

Japan navigates a course through Trump-era shoals

Japan’s relationship with the new Trump administration is off to not a bad start: so far, the two countries are agreeing on more than they are disagreeing.

The big development in the relationship since Donald Trump’s inauguration has been Prime Minister Shigeru Ishiba’s meeting with him on 7 February.

Before the visit, there were several apprehensions. Those included Ishiba’s shaky political position at home, China’s status as Japan’s largest trading partner, former president Joe Biden’s blocking of Nippon Steel’s acquisition of US Steel, the persistent threat from North Korea and Trump’s unpredictable approach to Kim Jong-un.

Against this backdrop, Ishiba faced the difficult task of aligning Japan’s strategic priorities with the Trump administration’s policy positions, such as the imposition of tariffs, withdrawal from the World Health Organization, sanctions against the International Criminal Court, and controversial claims over Gaza, Greenland and the Panama Canal. A challenge for Ishiba was to address those issues in a manner that best served Japan’s national interests, while simultaneously building a personal rapport with Trump—similar to the relationship former prime minister Shinzo Abe cultivated—by adopting a conciliatory approach without compromising Japan’s interests.

It appears Ishiba played his cards well. From the outset, he met Trump’s expectations by pledging to increase Japanese investment in the United States to US$1 trillion. This commitment, particularly in the automotive sector, will not only support Trump’s ‘Made in America’ agenda but also create thousands of job opportunities.

Additionally, Ishiba offered to rebalance trade relations by increasing imports of US liquefied natural gas, conforming with a Trump-endorsed slogan, ‘Drill, baby, drill.’ He also skilfully negotiated the previously blocked Nippon Steel investment, agreeing to a compromise whereby the US will retain a majority stake.

Geopolitically, the two leaders agreed on their continuous commitments to a free and open Indo-Pacific, assuring the continuity of Abe’s foreign policy. Japan’s 2022 announcement to double its military spending by 2027, in response to the perceived threat from China and North Korea, aligned with Trump’s tough stance on Beijing—although the level of spending may not satisfy the Trump administration, which demands that NATO members contribute a minimum of 5 percent of GDP. The continued stationing of 54,000 US military personnel in Japan also sent a positive signal of the solid bilateral alliance.

During the meeting, Ishiba cautiously skirted around some of Trump’s other controversial policies—such as the US withdrawal from the World Health Organization, sanctions against the International Criminal Court, and territorial ambitions in Greenland and the Panama Canal. Those issues hold long-term significance for Japan, but do not require immediate action.

Notwithstanding those identified convergences, Japan has to face challenges and difficult decisions in the coming months. A major strategic dilemma for Japan will be balancing rules-based and merit-based approaches.

For instance, the US claims of ‘ownership’ of Gaza may contradict Japan’s support for a two-state solution. In the case of the US-China trade war and the imposition of tariffs, Japan must tread carefully, not only because China remains its largest trading partner and one of its primary investment destinations but also because China has lodged complaints about US tariff measures with the World Trade Organization.

Trump’s proposals to make Canada the 51st US state, gain control over Greenland (an autonomous Danish territory) and reclaim the Panama Canal, combined with China’s ambitions to unify Taiwan with the mainland, present complex challenges. Trump’s possible peace plan for Ukraine should cause concern among those who believe that Ukraine today may be East Asia tomorrow.

While the US-Japan joint statement opposes any attempts to unilaterally change the status quo by force or coercion, Japan will need to decide whether to draw a parallel between the US and China or adopt a double-standard. Alignment with US territorial claims needs careful legal and political scrutiny within the Japanese government. Diplomatically, such alignment could undermine Japan’s support for a rules-based order, complicating its response to similar attempts by China, Russia or North Korea.

Considering the evolving strategic dynamics, it appears that where Japan’s core interests are concerned it is now time for Japan to display its strategic autonomy. This will prove instrumental in enhancing its credibility in the region and expand the area of cooperation with other partners, such as Australia, India, South Korea and ASEAN members.

At the same time, while strategic autonomy may increase Japan’s policy manoeuvrability, it will be meaningless if it has neither its own principles nor policy alternatives. Regardless of the US policy, Japan’s facilitation of a free and open Indo-Pacific, including through the provision of development assistance and capacity-building based on the interests of recipient states, should not only stabilise regions where the US is expected to reduce its commitment; it should also make Japan a reliable and responsible guardian of the rules-based order.

We can predict Trump’s military policy. Here’s how Europe must react

We now know the main strategist in US President Donald Trump’s administration will be Elbridge Colby, nominated as undersecretary of defense for policy.

Colby is one of the most outspoken and transparent policy leaders in the Trump team, so European capitals can easily assess his worldview and likely moves. They must appreciate his perspective, which prioritises China as the United States’ main threat, and so they must do more in terms of defence.

From my own interactions with him, here is how I understand his big-picture assessment:

First, China is the ultimate threat to the US. China is an urgent threat, as it is outpacing the US in many key indicators and is clearly preparing for a global war. China could win such a war against the US, whereas other countries couldn’t.

Second, Colby believes the US is overstretched strategically and militarily. The US has overpromised security in many places and does not have the capacity to deliver on all its commitments. So it must prioritise. Almost everything the US will do strategically and militarily must be aimed at countering China and deterring it from launching a kinetic war.

Third, many US allies, from Europe to East Asia, are asking for US protection but not sufficiently funding their own defence, in Colby’s view. Defence spending of two percent of GDP in Europe or Japan is clearly not enough given current strategic threats.

The US defence industry base is weak, underfunded and poorly managed, Colby believes. It must be boosted and put on track, with a focus on building up the military power of the US and of core allies, power that is needed to confront China.

This world view of the incoming undersecretary will shape Trump’s expectations of European nations, and it suggests what they should do.

First and foremost, European defence spending must at least double. Trump has indicated a target of 5 percent of GDP, but only Poland is on track to reach it soon. Most NATO allies are only just finally meeting the 2 percent, deep-peace era minimum of 1990s.

Northern, central and eastern European countries—which have real fears of a possible Russian military attack—are urgently boosting their defence spending. For them, 4 percent sounds realistic.

Yet many western and southern European NATO members—facing economic problems and lacking the such fear of Russia—will surely reject such high spending targets. This may create a rift inside NATO between the eastern flank states and the rest of Europe. We may see Trump’s threats last year come to reality—that the US will protect only allies who spend enough.

Second, European states must expect that the war in Ukraine will be almost entirely their problem, not a transatlantic issue. If rich European states want Ukraine to survive, they must put their money where their proclamations about the epoch-deciding Russian war in Europe are. European capitals should offer to buy US weapons and ammunition for Ukraine. This is a deal the Trump administration may accept in exchange for its continued support of Kyiv.

European states need to send significant equipment and ammunition reinforcement to Ukraine for its immediate defence and to hold any potential future frozen contact line in its territory. If European NATO countries don’t, we will just keep watching Russia destroy brave yet exhausted Ukraine piece by piece.

Third, central and eastern European states should see a chance to transform themselves from beggars for US protection to active supporters of the US in its primary theatre as it confronts China.

To be valued in global US military strategy, they need to lift defence spending to between 4 and 5 percent of GDP and scale up their arms industries to reinforce their own forces and Ukraine’s. Moreover, they should become involved in East Asian security, giving Washington another reason to care about them as they face the Russian threat. They could, for example, help train Japanese, South Korean, Philippine or Taiwanese soldiers in such areas as cyber, coast guard, air defence, military logistics and civil-military preparations.

NATO’s eastern flank is preparing for a large defensive war against Russia, while East Asian states must change their defensive postures considering the threats from China, Russia and North Korea.

We can expect the Trump administration to focus on deterring China from taking hostile action against Taiwan. So that is where smaller central and eastern European allies should look to help. They can provide direct political support. They could put particular effort into training Taiwanese troops on US soil, and they could build many thousands of drones for a US strategy of turning the Taiwan Strait into a hellscape for a Chinese invasion force.

Trump, and Colby, would be pleased.

Economic coercion tests international organisations

The rising use of economic coercion is a symptom of an increasingly unstable world that is struggling to contain rise of China and is no longer bound by the institutions established in the wake of World War II.

US President Donald Trump’s scattergun threats of punitive tariffs are a continuation of this trend. The Biden administration redoubled use of export controls to slow the spread of US technology to China. The West coordinated sanctions on Russia over its invasion of Ukraine, including the appropriation of its foreign exchange reserves. And China has repeatedly used boycotts and regulatory punishments targeting businesses of nations that have displeased it.

US legal firm Gibson Dunn, which tracks the use of economic coercion, says the Biden administration pursued ‘the most aggressive and far-reaching use of international trade tools of any US administration in history’. The number of individual designations under the US economic sanctions regime more than doubled to 16,400 in the past four years, with 3300 names added just last year.

The United States intensified its financial squeeze on Russia last year, imposing secondary sanctions on financial institutions of third countries that facilitated transactions with Russia’s military or industry, even if they had no knowledge of the prohibited activity.

The Biden administration also expanded the use of export controls on technology sales to China to cover artificial intelligence, quantum computing and chip-making equipment. A new development was a restriction on outbound investment in Chinese advanced technology businesses.

It is early days, but the Trump administration shows signs of further intensifying economic coercion. In its first three weeks, it issued direct threats of punitive tariffs on Canada and Mexico, demanding tighter border control on migration and fentanyl, and on Colombia, demanding it abandon its rejection of military deportation flights. Canada, Mexico and Colombia all took steps to appease the US.

Trump has also threatened punitive tariffs on Denmark and Panama, if they fail to hand over Greenland and the Panama Canal respectively. He has directed similar threats towards Egypt and Jordan if they fail to accept relocation of the Palestinian population.

The new administration is yet to spell out its policy towards Russia, however Trump threatened ‘high-level taxes, tariffs, and sanctions’ if it refused to negotiate over Ukraine.

The administration has also reinstated strict sanctions on Iran, including secondary sanctions on foreign organisations facilitating Iranian trade. It is unclear whether this will extend to Chinese banks, which the Biden administration was reluctant to attack. Furthermore, Trump has rescinded a deal negotiated by the Vatican under which the US would relax sanctions on Cuba and remove its designation as a sponsor of terrorism in return for the release of political prisoners.

China is ramping up export controls on critical minerals. Last December it banned the export of germanium and gallium, used for microchips, and antimony, used for ammunition, to the US. This month it added a requirement for government approval on the export of five further metals, including tungsten.

China is also restricting the export of critical minerals processing technology, which could affect planned rare earths and lithium processing plants in Australia.

Economic coercion has been accelerating alongside globalisation since the mid-1980s. As trade rose from 15 percent to 25 percent of global GDP, it became an attractive target. According to the historian Nicholas Mulder, sanctions were used twice as much in the 1990s and the 2000s as in the period from 1950 to 1985. Their use had doubled again by 2010. It has likely more than doubled once more since Russia’s attacks on Ukraine.

International trade agreements matter little when powerful nations use economic coercion. China ignored its 2015 trade agreement with Australia when it imposed bans on Australian exports. The US’s latest tariffs on aluminium and steel which have been justified on national security grounds, ignore both its trade agreement with Mexico and Canada and World Trade Organisation (WTO) standards.

China has foreshadowed a complaint to the WTO over the US’s 10 percent tariff on Chinese exports. However, the US has effectively shut down the organisation’s appeal panel as presidents, starting with Barack Obama, have refused to approve new members. The US contends that the WTO has facilitated the rise of China at the expense of US manufacturing.

During the first Trump administration, legislation was drafted to withdraw from the WTO. Now, an executive order that establishes a review of US participation in all multilateral organisations will likely confirm US withdrawal. The governor of the Bank of England, Andrew Bailey, has expressed concern that the review may also lead US to pull out of the International Monetary Fund and the World Bank.

Those organisations and the General Agreement on Tariffs and Trade, the predecessor of the WTO, were established in 1944 to avert the sort of breakdown in international economic relations that created the conditions for WWII. Seventy years on, they are proving to be inadequate brakes on the rise of economic hostility.

What Donald Trump can learn from allies on foreign aid

There are smarter and more effective ways to streamline and re-strategise US foreign aid.

The Trump administration is not the first Western government to envision a stronger, safer, and more prosperous country by integrating foreign aid with strategic objectives. The experiences of the United States’ Five Eyes partners, particularly Australia and Britain, offer encouraging evidence for reform, having achieved tightly targeted development programs supporting diplomatic and strategic priorities. They also offer sobering lessons about implementation pitfalls, including the abrupt disruption of established programs, especially those already aligned with strategic policy, loss of critical skills among government personnel and heightened unease among international partners.

The logic driving aid integration is compelling. In an era of great power competition, maintaining separate tracks for diplomacy and development is an unaffordable luxury. China has harnessed development, along with trade and financial investment, as an instrument of strategic influence through both soft and hard means. Both Australia and Britain recognised this reality, merging their aid agencies into their foreign ministries to create more strategically coherent development policies. Having made clear its intent to fundamentally reshape USAID, the Trump administration has the opportunity to learn from its allies in the pursuit of the American national interest.

A unified strategy: Australia 

The Australian government integrated the Australian Aid Agency (AusAID) with the Department of Foreign Affairs and Trade (DFAT) in 2013 with the stated goal of better aligning Australia’s development, foreign policy, trade priorities, strategies and objectives while bringing an enhanced focus on the Indo-Pacific. The integration accompanied a reduction of Australia’s development funding. After reaching a peak of more than $5 billion in 2013–14, or 0.33 percent of gross national income, Australia’s development budget has progressively declined. In 2023-24, the budget was $4.8 billion, or 0.19 percent of gross national income. This change is also stark in terms of the slice of the Australian budget spent on foreign aid compared to defence expenditures.

An independent review of the integration in 2019 found that 90 percent of the Australian government’s strategic targets for the integration had been met, driving development allocations towards infrastructure and the Pacific. The review also found ‘examples of development goals being more strongly advanced through joined-up, whole-of-department efforts.’

These initial efforts—such as the Pacific Seasonal Worker Scheme and the Australian Infrastructure Financing Facility for the Pacific—have since grown to enable more ambitious and innovative integrated development and strategic initiatives. Key among these are the Falepili Union with Tuvalu (which provides Australia with strategic denial rights and Tuvalu with climate resilience monies and opportunities for migration), the agreement between Australia and Papua New Guinea (which encompasses development and security elements) and Telstra’s acquisition of Digicel Pacific, the largest mobile provider in the Pacific, with the Australian government’s support amid rumors of interest from China Mobile. While the review stepped carefully around the issue, it found integration had increased Australia’s ability to counter efforts to overshadow Australia’s influence, like China’s Belt and Road and Digital Silk Road initiatives.

However, the review also found several areas of concern. Early morale problems among staff arising from the abrupt way the integration was implemented had largely dissipated by 2019, but a ‘pronounced deterioration in skills and systems’ remained. The review found that ‘almost 1000 years of experience left [government service] shortly after integration.’ Additionally, ‘estimates suggest another 1000 years of experience’ left the department in the five years before 2019 due to the department underestimating the capability needed to design and deliver development programming.

This loss of know-how continues to hamper effectiveness over a decade later. While development is now firmly accepted as a tool of statecraft, best wielded as part of a whole-of-government strategy, an article by the review’s author 15 months ago suggested DFAT still had room to improve in terms of fully harnessing its development delivery.

Strategic prioritisation: Britain

The merger between Britain’s Department for International Development and its Foreign and Commonwealth Office occurred in 2021. The principal intention behind the merger was to better align Britain’s development activities with its wider diplomatic, trade and geopolitical interests, both in strategic terms and in terms of in-country representation. The merger coincided with a decision to reduce the Britain’s development funding commitment from the 0.7 percent of GDP enshrined in law to 0.5 percent of GDP. Notably, the integration occurred while Britain was experiencing the economic slowdown of the Covid-19 pandemic, which resulted in a double blow to funding in absolute terms, constituting a 30 percent reduction overall.

Alongside the budget reductions, a strategic prioritisation of development initiatives was pursued, in which Britain focused on bilateral funding to a smaller group of countries where measurement of effect is often easier to determine, but at the expense of some wider bilateral and multilateral commitments which were deemed to deliver less tangible value to Britain.

In addition, Britain identified a select set of issues for its development focus, namely climate investments, girls’ education, and global health, where it had demonstrated expertise and where funding would have constructive spillover effects. For example, improving girls’ education is found to reap positive dividends for local security, prosperity and governance. These initiatives, concentrated in Africa, the Indo-Pacific and South Asia, are all areas in which Britain’s adversaries were harnessing development as an instrument of influence, dependence and coercion.

Britain’s National Audit Office (NAO) review of the progress of the merger in 2024 found positive evidence ‘of where a more integrated approach has improved the organisation’s ability to respond to international crises and events, which has led to a better result.’

Two such examples were Britain’s coherent humanitarian, diplomatic, and military response as the leading European power supporting Ukraine after Russia’s invasion, and the joint humanitarian and political response to the Ebola crisis in Uganda. The findings supported the rationale for the merger and the modernisation of the department as fit-for-purpose in sharpening the Britain’s geopolitical interests. However, the NAO also noted that ‘the indirect costs’ of the merger ‘in terms of disruption, diverted effort and the impact on staff morale should not be underestimated.’

The NAO also reviewed the effect of the overseas development aid reduction and found that while the prioritisation compelled in the government’s activities had some positive dividends, ‘the speed and scale of the budget reduction, and the lack of long-term planning certainty, increased some risks to value for money.’

What can the US learn?

These cautionary tales suggest some considerations for the Trump administration:

First, pace matters more than may be immediately apparent. While decisive action has its advantages, too rapid a transformation risks institutional damage that could take years to repair. Recipient partners need to be assured about the value of the relationship, as reputation matters when development partners have the luxury of choice. A phased integration that maintains critical expertise while gradually aligning strategic direction would likely prove more effective in the long term.

Second, capability preservation requires active management. Both Australia and Britain learned the hard way that development expertise isn’t quickly or easily replaced. The technical knowledge required for effective commissioning, procuring, financing and managing of development programs, while not unique to the aid world, is distinct from traditional diplomatic and geostrategic policy skills. Any US reforms must include concrete plans for retaining and developing each of these specialised capabilities and empowering them to work together to deliver coherent whole-of-government priorities.

Third, funding stability enables strategic coherence and builds influence with partners. Britain’s experience shows that simultaneous organisational and budgetary upheaval can undermine even well-conceived reforms. While efficiency gains are desirable, treating integration primarily as a cost-cutting exercise risks strategic self-harm. With strategic competitors snapping at our heels, such interruptions cannot always be remedied.

Fourth, clear metrics for success must encompass traditional development indicators and strategic effects. Australia’s focus on its immediate neighbourhood and Indo-Pacific infrastructure and Britain’s emphasis on areas of demonstrated expertise and reputational value offer useful models for linking foreign aid and development assistance to broader national interests.

The stakes for getting this change right are immense. China has outflanked the West in harnessing foreign aid as a strategic tool of statecraft, having learned from the experiences of Western development agencies. The US cannot afford to unilaterally disarm in this arena and sacrifice its many areas of retained advantage through poorly executed reforms.

Secretary of State Marco Rubio’s framework of strength, safety and prosperity provides useful guideposts. Development programs should demonstrably enhance US security partnerships, expand trade relationships that benefit US workers, or strengthen allies facing authoritarian pressure. Programs that cannot do this should be reconsidered.

Achieving these goals requires maintaining the US’s development capabilities even as they are more tightly aligned with strategic objectives. The experiences of Australia and Britain suggest this balance is achievable but demands careful attention to ensure areas of national strength and influence are strengthened, not squandered.

Trump’s trade war is about more than trade

The opening salvos of US President Donald Trump’s trade war have sent shockwaves around the world. Over the past three weeks, his administration has broken with decades of free-trade orthodoxy, threatening to impose tariffs not only on strategic adversaries such as China but also on longstanding allies such as Canada and Mexico. Even Denmark—a NATO member and steadfast US ally during and after the Cold War—has found itself in Trump’s crosshairs.

Trump’s actions have made many in the United States and around the world wonder: what exactly are tariffs, and how do they affect global trade? Simply put, tariffs are taxes on imported goods. If a Chinese manufacturer wants to sell shoes in the US, the American government can impose a tariff. If a US retailer pays $100 for a pair, then a 10 percent tariff, like the one that Trump recently imposed on goods from China, means that the retailer must pay the US government $10.

Those $100 shoes now cost $110. Who pays the extra $10? When Trump raised tariffs on Chinese imports during his first term, US importers bore most of the cost, particularly when they could not find alternative suppliers. Consequently, retail prices remained relatively stable, at least in the first year.

But the picture becomes more complicated when tariffs remain in place for an extended period. US importers cannot absorb the added costs indefinitely and may go out of business unless they find new suppliers or pass those costs to consumers, who may then need to cut back on spending.

When one country uses tariffs or other sanctions to damage another country’s economy, the result is often retaliation and trade war. China, for example, responded to Trump’s tariffs by imposing its own tariffs on US imports. Yet, although Chinese and US tariffs are based on similar reasoning, their impact will not necessarily be the same.

During the first US-China trade war, most of the burden of China’s retaliatory tariffs was borne by American exporters rather than Chinese importers. This was because China quickly found alternative suppliers for the goods it had previously sourced from the US. Oil and food—two of the top US exports to China—were readily supplied by Russia and other countries. Meanwhile, the US struggled to replace Chinese imports, forcing US businesses and consumers to bear the brunt of Trump’s tariffs.

These consequences have not gone unnoticed. Under both Trump and former President Joe Biden, the US has taken steps to incentivise domestic production and encourage firms to reduce their dependence on Chinese supply chains. But the extent to which such efforts will enable the US to shift more of the tariff burden onto China remains unclear.

To be sure, the vast size of the US market gives it a significant advantage. While Chinese importers can find alternative suppliers, Chinese exporters will have a hard time finding a market that can fully replace the US. The combined GDP of Russia, India, Africa and South America amounts to $13 trillion—just over one-third of US GDP, which is projected to rise to $30 trillion in 2025. And if the US convinces its Organisation for Economic Co-operation and Development allies to join the trade war, China could face tariffs from countries representing 46 percent of the global economy.

The Trump administration is betting that because the US is the world’s largest economy, China and other foreign exporters will struggle to find viable alternatives. This, in turn, would give the US decisive leverage in the trade war between the two countries. Early signs suggest that Trump’s strategy may deliver at least symbolic victories, with Mexico and Canada seemingly acquiescing to his demands by promising to do what they were already doing.

That said, tariffs are often a double-edged sword. On one hand, winning the trade war with China would allow the US to negotiate better trade terms. But US households could pay a heavy price. Fewer goods would be produced and sold to US consumers. While reduced imports could boost the competitiveness of domestic manufacturers, higher production costs and the absence of foreign alternatives would likely drive up consumer prices.

The potential geopolitical benefits of Trump’s trade war are less ambiguous, as his administration has decided to use economic pressure to achieve broader strategic objectives. It seeks to pressure Mexico and Central American countries to stem the flow of migrants to the US southern border and accept deported immigrants, and to counter China’s growing influence in the Asia-Pacific region and rein in Chinese expansionism, especially in the South China Sea. Moreover, Trump has vowed to take back the Panama Canal, and he seems serious about buying Greenland for its strategic location and natural resources—a US ambition going back to 1868.

Consumers and manufacturers in the US, China and beyond must brace for price increases and escalating geopolitical tensions. If Democrats regain control of Congress in the 2026 midterm elections, in which one-third of the US Senate and the entire House of Representatives will be on the ballot, they could curb Trump’s ability to impose tariffs. This gives Trump two years to win his trade war with China and the rest of the world—or at least convince Americans it was worth the cost.

Neither Atlanticist nor isolationist: recognise Trump as an imperial nationalist

Like people in other regions, Europeans face the challenge of discerning what motives underlie US President Donald Trump’s verbal provocations. After all, what Trump really wants is often unclear, which makes it difficult to devise a strategically effective response.

Traditionally, Europeans have interpreted US foreign policy through a binary lens: either a US administration is Atlanticist, in which case all is well (for the most part); or it is isolationist, which spells trouble. But Trump fits neither category.

He is certainly no Atlanticist, because he is convinced that NATO offers insufficient benefits for what it costs the United States, and that Europeans are all free riders. But he is hardly the first US leader to make this criticism. US complaints about European free-riding date to at least to the early 1950s, when NATO was just taking shape. The difference between Trump and his predecessors is that he puts a much higher price tag on protection by the United States and views it as something that Europeans do not really deserve.

But nor is Trump an isolationist, though many commentators describe him in these terms. Trump does not think only in crude transactional terms. He believes that the US is owed all the perks of hegemony, but with none of the costs. Rather than an isolationist, he is an imperial nationalist, like many 19th-century US leaders. Even his preferred policy instruments for ushering in a golden age—tariffs and territorial expansion—recall that era.

For Europeans, both seem absurd today. But from a US point of view, they have a historical resonance. The US’s war for independence began with a conflict over tariffs, which have since been seen as an instrument of sovereignty. The US is one of the few countries in the world whose constitution explicitly mentions trade. Even if tariffs tend to harm domestic consumers, they serve a political function.

This is reflected in Trump’s proposal to create a new External Revenue Service which would centralise tariff administration and serve as a depository for tariff revenues. With such an agency, Trump would have the means to redistribute revenues among states and political clients as he wished. He pursued a similar strategy during his first term when he established a fund within the Department of Agriculture to compensate those harmed by China’s retaliatory measures against US soybean exporters.

But the most important objective, of course, is to use tariffs to exert pressure on partners that are particularly dependent on the US market: Mexico, Canada and Europe. In the case of Canada and Greenland (an autonomous Danish territory), Trump has also expressed territorial ambitions, wishing to ‘get Greenland’ and make Canada the ‘51st state.’ Commercial pressure is thus a means of achieving territorial expansion, just as it was for the US in the 19th century.

In pining for a US geostrategic fortress stretching from Greenland to Mexico, Trump is unwittingly echoing a US State Department document from the middle of the 19th century which stated that the acquisition of Greenland would ‘flank British North America for thousands of miles on the north and west, and greatly increase her inducements, peacefully and cheerfully, to become a part of the American Union.’

Europe has understandably been left in a state of shock by Trump’s decidedly non-Atlanticist, non-isolationist geopolitical project. What can be done? Should we simply pray that it will not happen? That, more or less, has been the response from the European Union’s new high representative for foreign affairs and security policy, Kaja Kallas. In one of her first public statements, she said little about the threat from the US, because she is primarily concerned with just one issue: maintaining transatlantic solidarity to confront Russia in Ukraine. But laudable though this objective may be, it takes two to tango.

Meanwhile, no European official has bothered to mention the EU’s Anti-Coercion Instrument, which permits retaliatory tariffs to be imposed against any state that would use trade restrictions for geopolitical purposes. If Trump decides to intensify his pressure on Denmark through high tariffs, the EU will have no choice but to trigger this mechanism. To do otherwise would be to confirm—and exacerbate—its own geopolitical weakness.

For the same reason, the Danish government is wrong to play the appeasement card. Obviously, the balance of power is not in its favour. But by making no secret of its fear, it is inviting Trump to be even more aggressive.

While it does not make sense for Europe to deploy troops to Greenland—which would either look ridiculous or create the possibility of a war with the US—nor does it make sense to grovel. Whatever happens, Russia is the biggest winner for now. While Europeans hem and haw, no one should be surprised if the White House and the Kremlin negotiate the future of Ukraine behind closed doors.

With US funding freeze, China nonprofits are facing extinction. They need emergency assistance

An entire ecosystem of vital China-related work is now in crisis. When the Trump administration froze foreign funding and USAID programs last week, dozens of scrappy nonprofits in Hong Kong, Taiwan, and the United States were immediately affected. Staff are losing their jobs; some organisations face imminent closure due to lack of funding; others are paring back their programming.

In many cases, these organisations provide our last window into what is actually happening in China. They do the painstaking and often personally risky work of tracking Chinese media censorship, tallying local protests, uncovering human rights violations, documenting the Uyghur genocide, and supporting what remains of civil society in China. They provide platforms for Chinese people to speak freely; they help keep the dream of democracy in China alive. I’m not listing the names of any specific organisations at this time, because some prefer not to disclose that they receive foreign funding. Beijing believes funding that supports free speech and human rights is interference by ‘hostile foreign forces’.

As China’s President Xi Jinping has squeezed Chinese civil society and expelled journalists, information from inside China has gotten harder and harder to access. The 2017 Chinese foreign NGO law crushed US and other foreign nonprofits based in China. Some moved to Hong Kong or elsewhere. The spending freeze may deal them a death blow.

The research and other work done by these nonprofits is invaluable. It largely isn’t replicated by think tanks, universities, private firms, or journalists. If it disappears, nothing will replace it, and Beijing’s work to crush it will be complete.

As a journalist who covered China for more than 10 years, I took for granted the numerous organisations I could turn to when I needed certain kinds of information. But Donald Trump’s foreign spending freeze has revealed how dependent these organisations are on a single government for their survival—and, by extension, how fragile our sources of information about China really are.

The US must immediately grant emergency waivers to China-focussed nonprofits. If the US is not able to do this, governments around the world that value democracy, human rights and truth must step in and find a way to restore funding to these organisations now. It wouldn’t take much; a few million dollars spread across a handful of donor nations would be enough to preserve the research, expertise and networks these organisations represent.

Regardless of whether the US continues funding this work, this crisis should serve as a wake-up call for democracies everywhere. Funding from a single government should not be the only thing standing between us and an information blackout on Chinese civil society. That is not a model of international democratic resilience.

Providing funding for China nonprofits operating outside of China is directly aligned with the core interests of democratic nations. We base our security on the idea that democratic systems are the best way to guarantee the long-term stability, prosperity and wellbeing of citizens. Government budgets exist to preserve the democratic systems that make these goals possible; we don’t sacrifice these ideals to shave off a few numbers on a budget.

A key part of China’s agenda is to persuade its own citizens and the world, falsely and through deception and coercion, that democratic systems are not better. Beijing claims its system is the best way to guarantee economic prosperity and stability. It claims its one-party system is a meritocracy.

It is difficult and time-consuming—though not particularly expensive—to do the work that proves Beijing is lying, and that what it offers is smoke and mirrors. Tools that allow us to uncover the flaws of China’s own system and the actual struggles Chinese people face, directly support the goals, security and resilience of democratic governments.

Without the work that China nonprofits do, it will be much harder to show that China’s domestic model of economic and political governance is deeply flawed. If we can no longer prove that, it becomes much harder to understand why democracies are worth fighting for in the first place.

To deal with Russia, first understand what Putin wants

President Donald Trump has said he wants to end the fighting in Ukraine quickly. But it’s far from clear whether this is achievable, not least because the war in Ukraine has become a proxy for Putin’s wider confrontation with the West.

Trump’s campaign pledge that he would end the fighting within 24 hours has already been modified, with the new president and his advisers more recently discussing a period of three to six months. Trump has signalled plans for an early meeting with Vladimir Putin, while the United States’s special adviser to Ukraine is expected to visit Kyiv soon.

Putin will likely welcome a meeting with his US counterpart, not least because it will put him where he always wanted to be: talking directly to Washington, one great power to another, disposing of world affairs. This appeals to the Russian president’s concern for his, and Russia’s, appropriate standing in global affairs.

Moreover, Putin will likely fancy that he can play the incoming president, much as reports claim he did at their Helsinki summit in 2018. He will also consider himself to be in a strong position to drive a hard bargain on Ukraine.

He thinks he’s winning and that time is on his side. To some extent, he has a point.

Russia has the upper hand in what has become a brutal war of attrition. Russian forces have been making slow, costly yet inexorable progress, pushing the outmanned and outgunned Ukrainian defenders onto the backfoot. Meanwhile, relentless missile and drone attacks have taken a high toll on Ukrainian energy and civilian infrastructure.

Western countries are facing domestic political and economic pressures and distractions. Putin calculates that this, coupled with uncertainty over Trump’s approach to the US’s European allies, will lead the West to tire of supporting Kyiv and to welcome a deal.

To date, Putin has shown no real interest in a negotiated settlement—except on his own terms. These terms would effectively amount to capitulation by Kyiv and are by no means in the West’s interests.

Putin has not resiled from his core objective to bring Ukraine to heel, install a more pliable government in Kyiv, and draw Ukraine back firmly within Russia’s sphere of influence.

He won’t therefore be satisfied with just a ceasefire. Rather, he’ll want recognition of Russia’s annexed territories and a pledge of permanent Ukrainian neutrality and disarmament.

This relates to Putin’s wider objectives. As the war has continued, he has increasingly described Ukraine as a proxy for what he portrays as a wider existential conflict between Russia and the West. Resisting purported Western hostility towards Russia is now crucial in legitimising Putin’s continued rule.

Putin also wants to revise the post-Cold War security settlement in Europe and restore Russia’s global standing and influence. This was the essence of treaties that Moscow proposed in December 2021 on the eve of its invasion of Ukraine.

How the Trump administration deals with Moscow will be crucial not only for Ukraine’s future, but also for wider European and global security.

A quick, partial deal now would eventually come back to bite the US and its European allies.

If Trump wants a quick deal, he will press Ukraine to accept a ceasefire along the current lines of fighting. Kyiv may indeed have to accept a loss of territory as part of a settlement. But unless this is accompanied by robust Western (above all, US) security guarantees, such an agreement is unlikely to last, giving Russia the opportunity to rebuild its forces. Once it senses that Western attention has shifted elsewhere, Moscow will be emboldened to resume its subjugation of Ukraine.

The smarter approach for Washington would instead be to try and even up the scales by intensifying pressure on Putin to nudge him into negotiations while strengthening Ukraine’s hand ahead of any talks.

For example, Putin is keen to secure a relaxation of Western economic and technology sanctions so the Russian economy can recover and Moscow can reduce its stark dependence on China. Western states should give no such relief. Sanctions should instead be stepped up to increase pressure on the already-weakened Russian economy.

Washington should also pledge to increase military and economic support for Kyiv, signalling to Putin that he’s unlikely to achieve his aims in eastern Ukraine.

These measures would push Moscow to agree to talks to end the fighting and would strengthen Kyiv’s hand (and that of its Western backers) ahead of any such negotiations.

Early signals from the new administration are encouraging. Trump has urged Putin to agree to end the fighting in Ukraine, threatening otherwise to increase pressure substantially on Moscow, including through expanded sanctions.

Even so, securing a long-term, durable settlement in Ukraine involves more than this. It will also require Washington and its European allies to face up squarely to Moscow’s more confrontational and expansive ambitions.

The question is whether the new US administration will do this.

Australia can’t easily lift defence spending to a Trump-satisfying level

US President Donald Trump has called on NATO members to lift their defence spending from the current target of 2 percent of GDP to 5 percent.

‘They could all afford it,’ he said, warning that the United States would withdraw its guarantees of protection to Europe unless they paid up.

Trump has not opined on Australia’s defence spending, but, when he gets to consider AUKUS, he is unlikely to be satisfied. And there’s no easy way for Australia to lift its spending to a level that would satisfy him.

Australian defence spending was $53.3 billion in 2023–24, which was 2 percent of GDP. The Treasury expects it will reach 2.4 percent of GDP in 2027–28.

Russia, Ukraine, Israel and some Middle Eastern states are the only nations currently spending at least 5 percent of GDP on defence. (China’s data is too opaque to know.) In Europe, Poland comes closest, spending 4.7 percent of GDP this year. US defence spending is 3.4 percent of its GDP.

Trump’s 5 percent figure may be an ambit claim—a Financial Times report suggested he would settle for 3.5 percent. NATO will debate raising its target at its June summit.

For Australia, 3.5 percent of GDP would be $97 billion, about 75 percent more than was actually provided for defence in the budget.

Any increase in defence spending can be funded in three ways: increased taxation, reallocating money from other uses, or debt.

To get an additional $40 billion a year from taxation looks politically painful. To meet that target would require either a 12 percent increase in personal tax collections, a lift in the GST rate from 10 percent to 14 percent, or raising the company tax rate from 30 percent to 40 percent.

The federal government has in fact received an income boost of these dimensions, with total tax collections averaging 23.2 percent of GDP over the past five years, up from 21.6 percent in the previous five. However, this mostly flowed from the extraordinary profitability of resource companies, which will not be repeated.

It is more likely that company tax payments will fall short of treasury forecasts over the next few years as China’s appetite for iron ore and coal fades.

Australia is a low-taxing country—the US, Switzerland and Ireland are the only advanced nations taxing less—so an increase in taxation would not be ruinous to the economy.

It has been suggested Europe impose a defence tax to pay for military preparedness. Denmark scrapped a public holiday to help finance a higher defence budget. Without the immediate threat of Russia at war with a near neighbour, it would be hard to build the political support for such moves in Australia.

Reallocating existing spending looks just as difficult. Cutting social programs carries a high political cost, as the Abbott government learned with its ill-fated 2014–15 budget.

Most of the budget is locked in. There are 412 administered programs with payments governed by indexation. Many programs are driven by legislated entitlements, such as unemployment benefits, Medicare and the National Disability Insurance Scheme (NDIS).

The NDIS is an interesting example: it elbowed its way into a constrained budget on the false assumption costs would be held to $13 billion a year. Instead, it is at $46 billion this year—1.7 percent of GDP—and is forecast to rise to $93 billion, or 2.1 percent of GDP, by 2033–34.

Strong company tax revenue helped fund the NDIS without resorting to debt until this year. Deficits will increase as resource prices soften and the cost of the NDIS continues to rise three times faster than inflation.

Australia is a low-debt country. Its net debt of 29 percent of GDP compares with an advanced country average of 91 percent, so it could afford to borrow more. Poland has funded its expanded military with debt: its deficit is expected to reach a perilous 12.5 percent of GDP this year. There is pressure to ease the European Union’s debt rules to help lift defence spending.

There is an argument for borrowing to purchase assets, including defence equipment, the benefits of which will be derived long into the future. In extreme circumstances, debt forms part of the national security equation through the issue of war bonds.

But with the IMF warning that global government debt is becoming a financial powder keg, surpassing US$100 trillion this year, this may be the wrong time to seek the indulgence of financial markets.

The sorry conclusion is that there is no easy way to achieve the sort of increase in the defence budget that President Trump has in mind for US allies, including Australia.

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