Where does the US-China trade war leave Australia?

Illustration: Liu Rui/Global Times.

The rivalry between the United States and China puts Australia in a diplomatic predicament. For over 70 years the United States has stood as Australia’s closest ally on military and security matters, a status culminating in the ANZUS treaty – a collective security agreement between Australia, New Zealand and the United States. As the sun set on the British Empire and the Cold War era began, the three nations agreed in 1951 to cooperation on military matters, mainly in the Asia-Pacific region.  

On the other hand, China is Australia’s biggest trading partner, with Australian exports to China continuing to climb. According to the Australian Strategic Policy Institute, a record 40 per cent of Australian exports in June this year went to China. China is the main buyer of Australian iron and one of the main buyers of Australian coal, both important exports for the Australian economy. More than two-thirds of our exports to China consist of iron ore, coal and LNG. 

But the US-China trade war – sparked by President Donald Trump’s accusations of China “ripping America off” with its trade policies – has made Australia’s efforts to remain friendly with both nations more difficult than ever. Tit-for-tat tariff increases between the world’s two largest economies have impacted the economies of not just the two powers, but the whole world. 

American criticism over China’s suppression of Hong Kong democracy activists and persecution of China’s Uyghur ethnic minority has caused a stir too. Pro-Hong Kong protests here in Australia in August and September show that many Australians are angry at China too. But our economic reliance on China means that the Australian government figuratively shrugs its shoulders. More is on the line for us than the United States in speaking out against China. The Chinese government has shown that it is not beyond applying economic punishments on foreign nations for even smaller political slights. In March, with Chinese firms poised to invest heavily in Turkey’s energy and infrastructure projects, Chinese Ambassador to Turkey, Deng Li, warned that if Turkey continued to criticise China’s treatment of its Uyghur people, economic ties could be harmed. 

“If you choose a non-constructive path, it will negatively affect mutual trust and understanding and will be reflected in commercial and economic relations,” Deng said.

In 2010, China also blocked Norwegian salmon imports after Chinese dissident Liu Xiaobo was awarded the Nobel Peace Prize. At the time he was awarded, Liu was serving his fourth prison term for “inciting subversion of state power”.

Liu Xiaobo, who campaigned for an end to one-party rule in China. He died of liver cancer on July 13, 2017.

With 40 per cent of our exports going to China, who knows how severely our economy could be affected if our government too denounced its actions? 

The relationship between the United States and China is arguably as tense as it has been since the 1950s, when the United States supported the Republic of China (Taiwan) as the legitimate government of China, supporting its independence from the mainland, which remains under the rule of the People’s Republic of China. But if Australia wishes to remain friends with both the US and the PRC – and reap the economic and security rewards the status quo offers – we have a long tightrope to walk. US-China relations don’t look like they’ll improve any time soon. It remains to be seen how the the Australian Government will perform in the balancing act. 


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