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.