Caught between two giants

‘Not … a friendly act’. ‘A very bad day for our relationship with the United States’. ‘Not how allies should treat one another’. Such were the descriptors that Australian Prime Minister Anthony Albanese and his ministers used to announce that the United States had hit local steel and aluminium producers with 25 per cent tariffs on 12 March 2025.

On the explanation that Washington had provided — that Australian steel and aluminium was a threat to US national security — the replies were just as blunt.

When Australian Trade Minister Don Farrell was asked whether ‘China is now a more reliable trade partner than the United States’, his answer must have made US diplomats in Canberra wince. Farrell pointed out that ‘the Chinese economy for us is much, much bigger and much, much stronger than the United States economy’. The robust language surprised many, but Canberra also immediately ruled out imposing retaliatory measures.

Australia has widely come to be seen as a prototypical balancer, lending its modest strategic weight in support of its long-time ally, the United States, to offset the challenge China’s rise poses to the regional order.

This contrasts with Australia’s inclination for hedging as recently as the mid-2010s, which caused senior US officials to ask: ‘Who lost Australia’?

Australia’s past approach to China’s rise might have been infused by the paradigm of liberalism, which puts store in the ability of economic interdependence, international institutions and rules to constrain power. But the AUKUS pact, hatched in 2020 under then prime minister Scott Morrison and signed with Washington and London in 2021, was interpreted as proof positive that realism had become the defining frame.

For Washington at least, AUKUS is all about China. Michael McCaul, then chairman of the US House of Representatives Foreign Affairs Committee, said in 2024 that US deployments of assets and personnel concentrated in Australia’s Northern Territory constituted ‘the central base of operations in the Indo-Pacific to counter the [China] threat’. In January 2025, McCaul described Australia as ‘the beachhead to counter China … and that’s why AUKUS is so important’.

After losing the 2022 federal election, Morrison urged the Albanese government to secure Washington’s ongoing support for AUKUS by being unapologetic that its ‘primary reason for being’ is to deter the United States’s ‘biggest strategic rival’.

Yet the evolution in Australia’s approach to Chinese power has always been more sophisticated than a straightforward abandonment of hedging for balancing, and liberalism for realism. Once this is understood, the responses to US President Donald Trump’s tariffs do not appear so stark. Canberra and Washington have been, and remain, far from perfectly aligned in their strategic assessments.

While there are early signs that Washington might finally be contemplating the arrival of a multipolar regional order, Australian Foreign Minister Penny Wong was unequivocal in 2023 that the era of US primacy was already over.

An assessment of multipolarity places bounds on the choices that Canberra regards as feasible and reasonable. Even the Morrison government never showed much interest in joining Washington’s attempts to slow Chinese growth, and was reluctant in signing up to the strict characterisation of China as a ‘strategic competitor’.

Washington sees cutting exposure to the Chinese economy as essential to mitigating security risks. Canberra has its own China trade anxieties, particularly about vulnerable supply chains. But more broadly, Wong insists that Australia’s national interest ‘lies in being at every table where Indo-Pacific economic integration is being discussed’. For Canberra, deeper integration is ‘an investment in our own security. Stability and prosperity are mutually reinforcing’.

In March 2023, Farrell delivered a particularly ebullient version of the same sentiment, claiming ‘nothing’s going to do more to achieve peace in our region than strong trading relationships between Australia and China’.

Somewhat ironically, Chinese economic coercion during 2020–24 has only left Canberra more convinced of the merits of liberalism and limits of realism. Australia’s closest geopolitical friends did not deter or punish China’s behaviour, nor did they pick up their own purchases of goods disrupted by Beijing. Despite Washington’s fulsome rhetorical support, the biggest share of lost Australian sales to China was snapped up by US companies. Despite promises of ‘friend-shored’ supply chains to support greater resilience, US industrial policy initiatives have favoured ‘onshoring’.

What protected local industries from Beijing’s trade disruptions was China’s reliance on Australia as a vital supplier, along with access to open and competitive global markets overseen by the World Trade Organization (WTO). When Chinese importers stopped buying Australian coal, copper, cotton and more, those markets redirected Australian exports elsewhere, almost immediately and at low cost. Wong also acknowledged the WTO’s crucial role in helping secure the withdrawal of Beijing’s tariffs on Australian barley through the dispute process.

Now the opposition, led by Peter Dutton, has also reverted more to Australia’s traditional, nuanced approach. In June 2024, Dutton said he would ‘love to see the trading relationship [with China] increase two-fold’.

The second Trump administration’s behaviour will likely only serve to strengthen Australia’s hedging impulse and ongoing attachment to liberalism. Both serve Australia’s interests, which, rather than ideology or woolly notions of ‘values’, have loomed large in Australia’s foreign policy choices.

This article was published by the East Asia Forum.