By Dr Majid Khan (Melbourne):
The resurgence of protectionist trade policies under the Trump administration, particularly the imposition of tariffs on Chinese goods, has reignited a global debate about the effectiveness and economic impact of such measures. The prolonged trade war between the United States and China, the world’s two largest economies, has not only disrupted global supply chains but has also forced many countries to reassess their trade dependencies and economic strategies. Amid this turbulence, Australia emerges as a potential beneficiary, poised to capitalize on both the short- and long-term consequences of this geopolitical standoff.
Australia’s advantage stems from a unique blend of factors: a resource-rich economy, strategic location in the Asia-Pacific, well-established trade frameworks, and an ability to pivot diplomatically and economically in response to shifting global dynamics. With both the U.S. and China redirecting their trade policies inward and away from each other, there is significant space for third-party economies like Australia to step in, offer alternatives, and expand their global market share across several sectors.
One of the most significant areas where Australia stands to gain is agriculture. China, in its attempt to reduce dependence on American agricultural imports due to retaliatory tariffs, has increased its reliance on other trading partners. Australia’s agricultural sector is well-positioned to respond to this demand, particularly in high-value exports such as beef, dairy, seafood, and fresh produce. In 2022, Australian beef exports to China were valued at over $3.6 billion, a figure expected to grow as U.S. supplier’s face up to 116% in tariffs. Similar trends are seen in seafood (e.g., lobster, abalone) and fruit exports, where consumer demand in China remains strong but has shifted away from U.S. products.
The wine and barley sectors, previously hit by Chinese tariffs amid bilateral tensions, are also regaining momentum. Following diplomatic normalization, China has lifted punitive duties—previously as high as 206% on wine and 80.5% on barley—paving the way for Australian producers to recapture lost market share. These developments reflect a broader pattern of Australia’s ability to respond flexibly and diplomatically to trade challenges, using economic statecraft to restore and even enhance its export relationships.
Beyond agriculture, Australia’s minerals and resources sector presents another area of strategic advantage. The global demand for minerals, particularly from China’s manufacturing sector, continues to rise. China relies on Australia for over 60% of its iron ore imports, a dependency that remains difficult to replace, even amid political tension. BHP, one of Australia’s largest miners, recently reported a record nine-month iron ore output, underlining the strength and resilience of the sector.
In addition to iron ore, Australia is gaining prominence in the trade of critical minerals such as lithium, cobalt, and rare earth elements—essential inputs for clean energy technologies, electric vehicles, and advanced electronics. With the U.S. and China restricting access to these resources from each other, Australia can play a key role in supplying both sides. Companies like Lynas Corporation are already expanding operations to meet growing global demand, while the Australian government has created a strategic reserve to ensure long-term supply chain resilience.
The services sector, often overlooked in discussions of trade wars, also presents growth opportunities for Australia. Chinese students have historically formed the largest group of international enrollees in Australian higher education institutions. In 2023, over 150,000 Chinese students studied in Australia, contributing more than $12 billion to the economy. This trend is likely to continue or even grow, as students and their families seek alternatives to the U.S. and U.K., where visa restrictions and geopolitical frictions have made access more difficult. The tourism industry, another significant contributor to the Australian economy, could also benefit from a potential shift of Chinese tourists away from U.S. destinations.
As global companies look to diversify supply chains away from China, Australia has the potential to become a regional hub for manufacturing and high-tech investments. The country’s reliable infrastructure, political stability, and strong legal framework make it an attractive base for advanced industries. Opportunities are emerging in critical technologies such as battery manufacturing (powered by domestic lithium supply), semiconductor inputs, and defense technology. The AUKUS security alliance with the U.S. and U.K. further bolsters Australia’s standing in defense and aerospace, potentially attracting investment and creating high-value jobs.
Australia’s response to the shifting global landscape includes a proactive effort to diversify its trading partners. While China remains Australia’s largest trading partner, recent efforts to reduce over-reliance have led to the strengthening of ties with countries such as India, members of the ASEAN bloc, and the European Union. The Australia-India Economic Cooperation and Trade Agreement (ECTA), effective since 2022, has led to increased trade in sectors like coal, agriculture, and education. India’s expanding middle class provides a growing market for Australian exports, from wine to lentils to online education services.
ASEAN nations—including Vietnam, Thailand, and Indonesia—are also emerging as crucial economic partners. These countries are rapidly becoming alternative manufacturing hubs as supply chains shift from China. Australia benefits by supplying raw materials to these economies and leveraging regional agreements such as the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade pact. Two-way trade between Australia and ASEAN exceeded $178 billion in 2023, highlighting the economic potential of these partnerships.
Negotiations with the European Union for a free trade agreement are also in advanced stages. Such a deal would open up significant new markets for Australian beef, wine, and renewable energy technologies. Simultaneously, the Middle East—particularly the UAE and Saudi Arabia—is emerging as a key buyer of Australian agricultural goods and clean energy technologies like hydrogen, which aligns with the Gulf states’ investment in sustainability and food security.
However, Australia’s potential gains are not without risks. The country’s economic reliance on China makes it vulnerable to sudden policy shifts or geopolitical disputes. Recent history has shown how quickly trade restrictions can be imposed, with damaging consequences for key sectors. Furthermore, balancing diplomatic relations between the U.S. and China remains a delicate task. Australia must also address internal challenges such as labor shortages, logistical bottlenecks, and regulatory hurdles to fully capitalize on the opportunities arising from the U.S.-China trade war.
To support export-driven sectors, the Australian government has rolled out several initiatives, including a $1 billion zero-interest loan program aimed at helping exporters tap into new markets, and a $50 million market development fund. Strengthened anti-dumping measures have also been introduced to protect domestic industries from unfair foreign competition, particularly from redirected Chinese exports.
While the U.S.-China trade war poses challenges to the global economy, it also creates a unique window of opportunity for Australia. By leveraging its strengths in agriculture, mining, education, and clean energy, and by actively pursuing new trade agreements, Australia is positioned not only to weather the storm but to emerge more resilient and economically diversified. With thoughtful policy execution and strategic international partnerships, Australia could become one of the key long-term beneficiaries of the reconfiguration of global trade dynamics.
