Economic security and geostrategic competition: tariffs don’t equal coercion

The Trump administration’s decision to impose tariffs on Australian aluminium and steel has surprised the country. This has caused some to question the logic of the Australia-United States alliance and risks legitimising China’s economic coercion.

Australia must be level-headed and see the alliance as greater than the sum of its parts. It must be clear-eyed about the reasoning behind US decision-making and  remain sophisticated in its responses. Australia must also focus on the real threat of economic coercion from China.

Aluminium and steel make up just 0.2 percent of Australian exports to the US, and their value of $1 billion is a tiny fraction of Australia’s total global exports of $660 billion in the past financial year. Aluminium and steel producers will just redirect exports to other markets or shift production to their US-based manufacturers. The tariffs are more political than economic: they are less about Australia and more about the US resetting its ledger with the world and delivering on its national interests.

As Australian Ambassador to the US Kevin Rudd said, the US will be ‘hardline and transactional in its approach, even to long-standing friends, partners and allies’.

So, Australia must respond to the causes, not the symptoms. As with any competition, being beaten by a better rival is not unfair. But, having held up the international free trade system since its inception, the US is increasingly concerned about being cheated or taken for a ride. This includes the correct assessment China is not playing by the rules the rest of us have been following.

Australia must avoid drawing a false equivalence between the Trump administration’s tariffs and China’s economic warfare. The US is seeking to rebuild domestic production and level bilateral trade—albeit by wringing concessions, even from friends, partners and allies. But China’s objective is to recast the international system in its favour.

Since World War II, the global order has, for the most part, benefited from economic liberalism and free market incentivisation. But while the West granted the free market free rein, the Chinese Communist Party used controlled industrial policy to achieve rapid economic growth. It did two things at once: exploiting the open global market and combining it with a form of domestic industrial policy. The CCP has prioritised sectors defined as most relevant to manifesting national strength using subsidies, investment, and theft of intellectual property to drive Chinese innovation and companies. This has occurred most sharply under Xi Jinping.

Through its investments in manufacturing under its Made in China 2025 plan, Beijing showed a willingness to lose money to make the world dependent on Chinese support. It has used predatory pricing as a deliberate strategic ploy, selling low and bankrupting competitors to create a monopoly. We’ve seen that across multiple fields, including commercial drones and batteries in electric vehicles.

While many governments use economic incentives to support local industry, most generally maintain a market-driven approach to technology sectors. While such governments may provide research funding, tax incentives or targeted subsidies, their efforts are typically more transparent, limited in scope and not directly tied to state intelligence objectives such as creating levers of coercion or military modernisation programs.

That distinction highlights the unique risks posed by China’s approach. China combines aggressive state-backed industrial policies with a lack of separation between private enterprise and government control.

As a result, this supports Beijing’s regional and global agenda to supplant the US and its allies across critical technology sectors relevant to future economic prosperity and national security. In these fields, Beijing has simultaneously increased foreign dependence on China and reduced China’s dependence on the rest of the world.

This doesn’t just boost China’s own prosperity; it also deters democracies from standing up for their own security by making countering Beijing’s malign actions not just challenging, but impossible.

ASPI’s Critical Technology Tracker shows China’s significant lead in areas such as advanced sensors, AI and advanced materials. This diagnostic tool shows governments where to direct their efforts to maximise innovation and competitiveness.

China has acted in this way—wanting the global market open but its domestic one closed—because it sees industrial policy as a means to achieve its strategic ambitions and dominate globally. In comparison, Western governments narrowly view industrial policy as a domestic policy.

There should be two options: hold Beijing to account for rule breaches or play the new game. While the Trump administration tries to do both, the rest of us appear to choose a third option. We are allowing China to play by its own rules while we remain committed to the old game and expect the US to do the same.