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It’s no secret that Australia is facing an existential conundrum when it comes to its traditional alliance with the United States of America and its ongoing trade reliance on the People’s Republic of China.
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On the one hand, Australia has spent decades cementing its place as the ever-loyal sidekick to red, white and blue interests since the United States came to power at the conclusion of World War II in 1945 and completed a bonus Cold War victory lap against the crumbled Soviet Union in the late 1980s, early 1990s.
As a non-NATO ally, Australia has fought with the US in both the World War I and World War II, the Vietnam War, the Gulf War, and the War on Terror. There is ideological and, some would say, fundamentally agreed similarities in which both countries apply a shared world view on international relations.
In addition, both countries maintain a close and cooperative trade relationship underpinned by the US-Australia Free Trade Agreement.
US goods and services trade with Australia totalled an estimated $77.1 billion in 2022 (while the US trade surplus with Australia was $27.1 billion in the same year) and US foreign direct investment in Australia was $173.7 billion in 2022.
On the other hand, Australia also maintains significant trade relations and a China-Australia Free Trade Agreement with the Indo-Pacific’s largest player and potential US rival, the People’s Republic of China (PRC).
China is Australia’s largest trading partner with the country buying more than $219 billion of Australian exports – worth 32.5 per cent of Australia’s total exports to the world in 2023. Australia sends agriculture, resources and services to China and this returns almost $88 billion in Chinese investment in 2023.
The inevitable and rapidly approaching wedge comes between the three countries as the US tries to disentangle its own trade links from the PRC.
This transition is already in progress as America attempts to reform its own manufacturing industry, improve self-sustainability and retain its globe grasp on the US dollar-driven world economy.
In example, the first waves of changes can be seen in newly introduced export controls on technologies like quantum computing, semiconductor manufacturing goods and vehicle manufacturing.
But what happens when the same PRC–US decoupling measures are requested of the US’ closest allies?
The likely answer to a country completely stripping its own well-established export and import supply chain reliant on the PRC can only result in severe economic pain. Such a process could normally be partially weathered by domestic manufacturing, an industry long since dissolved in Australia.
Decades spent enjoying the deluded fruits of a “100-year democratic victory” have now put Australia in a position where it is approaching a scenario in which it can no longer sit on the fence – but it is also faced with a severe economic outlook in either direction.
Australian Deputy Prime Minister and Minister for Defence Richard Marles, speaking to Newstalk ZB on 5 December, has previously confirmed the tightrope Australia is currently walking in regard to trade between the two countries.
“China is Australia’s largest trading partner ... it’s a complex relationship, it’s a difficult relationship with China,” he said.
“We want the most productive relationship we can have with China and a key part of what we’ve sought to do since coming to power back in 2022 is to try and stabilise our relationship with China, and we’ve seen the fruits of that with much greater dialogue at a ministerial level, we’ve seen the reinstitution of the better part of $20 billion of trade between China and Australia.
“But at the same time, there are significant security anxieties with China, and so we’ve just got to manage all of that. And so in that sense, we talk about working with China where we can, disagreeing with China where we must, and that’s the challenge that we face.
“Nothing here is obvious, the way through is complicated, but one thing is clear: this is a time to be doubling down with friends.”
The hard choice is swiftly arriving in regard to maintaining the Western alliance with its best international ally, led by returning US president Donald Trump, or continuing to enjoy the benefits of its ideologically opposed yet biggest trade partner, led by Chinese head of state Xi Jinping.
