EDITORIAL: US-China trade war presents risk & opportunity

After a brief ceasefire, China and the US appear to be back at the brink of a major trade war.

Beijing was first to break the peace, last week tightening controls on products manufactured using Chinese rare earths.

An irate Donald Trump responded with threats to place an additional 100 per cent tariff on Chinese imports from November.

Now the US is rallying its friends and allies to come to its aid — including Australia.

“If China wants to be an unreliable partner to the world, then the world will have to decouple,” US Treasury Secretary Scott Bessent said.

“The world does not want to decouple. We want to de-risk. But signals like this are signs of decoupling, which we don’t believe China wants.

“We’re going to be speaking with our European allies, with Australia, with Canada, with India and the Asian democracies, and we’re going to have a fulsome group response to this because bureaucrats in China cannot manage the supply chain or the manufacturing process for the rest of the world.”

It’s high rhetoric and will further complicate Anthony Albanese’s mission to cosy up to Donald Trump at the pair’s long-awaited White House meeting next week.

That meeting was already high stakes. The Prime Minister will be desperate to extract a statement of support from the President for the AUKUS project, as well as at least a whiff of an indication that tariff relief is possible.

The situation with China does lend Australia some leverage in those discussions.

While China is by far the biggest player in the rare earths game, controlling 70 per cent of global mining and more than 90 per cent of processing, Australia also has sizeable deposits of rare earths and critical minerals.

And we have something else China doesn’t have: a reputation as a reliable and stable international trade partner.

Stocks in Australian rare earth miners have soared in recent weeks off the back of hopes that Australia will step up to help plug the gap.

However there is also significant risk for Australia, should Beijing and Washington escalate this latest skirmish to all out war.

What, precisely, would the “de-coupling” urged by Mr Bessent look like if it came to that?

China is Australia’s No. 1 trading partner by a significant margin. The health of our economy is enormously dependent on the continuing sale to China of our iron ore.

“De-coupling” from that export market would be disastrous.

Would the US seriously expect Australia to do so, knowing what the consequences would be?

Mr Trump has made no secret of the fact that his is an inward-looking world view. Economic coercion is just another tool in his arsenal, even when longstanding allies are caught in the crossfire.

Having to navigate the tension between our top trading partner in China and closest ally in the US is all part of the job description for Australian prime ministers. Let’s hope this isn’t a stoush in which we are forced to pick a side.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.