Xiao Qian urges Anthony Albanese to join forces with China to counter impact of Donald Trump’s trade tariffs

Australia and China should join forces to counter the impact of Donald Trump’s threatened trade tariffs while acting in their own economic interests, China’s envoy to Canberra urged on Tuesday.

Ambassador Xiao Qian cautioned Australia to maintain robust ties at a “critical time” as Mr Trump declared he would slap new tariffs on China, Mexico and Canada on day one of his presidency - immediately destabilising the Australian economy.

Announcing the move on his Truth Social network under the pretext of combating illegal immigration and drug smuggling into the US, the president-elect said he would sign an executive order immediately after his inauguration on 20 January to impose a 25% tariff on all goods coming from Mexico and Canada.

An additional 10% tariff would be levied on China until it blocked the smuggling of the synthetic opioid fentanyl at the root of a US public health crisis, he said, accusing Beijing of failing to follow through on its pledges to impose the death penalty for drugs traffickers.

“Drugs are pouring into our Country, mostly through Mexico, at levels never seen before,” he wrote.

“Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America,” the post read.

The Biden administration has been pushing Beijing to step up efforts to prevent the production of ingredients used in fentanyl, which Washington estimates killed almost 75,000 Americans last year.

Washington has demanded China reinforce law enforcement, including tackling illicit finance and clamping further controls on the chemicals, but a deal to tackle the problem — forged between the two leaders at a 2023 summit in San Francisco —has so far made only incremental progress.

News of the upcoming tariffs rocked financial markets on Tuesday, dragging shares down by a sell-off in energy stocks. It caused the US dollar to rise but the Australian dollar slid to a seven-month low as fears grew of a global trade war.

Mr Trump’s plan has added to anxiety that tariffs could negatively impact global trade and investment.

Since his electoral victory earlier this month, economists have warned that, if imposed, the curbs would slow growth in countries like Australia that have a sizeable economic relationship with China.

Treasurer Jim Chalmers sought to calm jitters, stressing the government’s economic plan would ensure Australians were “big beneficiaries of the shifts that are shaping the global economy” and that the country was “well placed and well prepared to work with the incoming administration in the US.”

He added: “The incoming US administration will bring a different suite of policies and we’re confident in our ability to navigate that change.”

The Chinese embassy in Washington reacted swiftly, warning that neither the United States nor China would win a trade war.

“About the issue of US tariffs on China, China believes that China-US economic and trade cooperation is mutually beneficial in nature,” Chinese Embassy Spokesperson Liu Pengyu said in a statement. “No one will win a trade war or a tariff war,” he added.

Mr Liu argued that China had taken measures to combat drug trafficking following the agreement between President Biden and the Chinese leader.

“The Chinese side has notified the US side of the progress made in US-related law enforcement operations against narcotics,” Mr Liu said.

“All these prove that the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.”

Speaking at a Canberra press conference shortly before Mr Trump’s sudden announcement, Chinese Ambassador Xiao Qian underscored the importance of Australia’s role as a vital partner in the impending new global economic order.

He indicated that as “two big trading nations” they could work together “to promote global trade instead of compromising our respective national interests and our common interests.”

Under the shadow of punishing tariffs and a new Trump cabinet stacked with China hawks, Mr Xiao indicated Canberra and Beijing could combine to uphold the “globalisation process” and “to safeguard the integrity of the global trading systems,” for the sake of the region and the world.

“There is no reason for us to compromise our respective national interests for the sake of a third party,” the ambassador said.

I look forward to a constructive, productive relationship between China and Australia, irrespective of what has happened in other parts of the world.

The ambassador spoke in glowing terms about a bilateral relationship that was now in “very good shape” after emerging from a rocky period two years ago with “efforts from both sides.”

The government has sought to rebalance its relationship with Beijing after it slapped a series of import bans on Australian commodities in 2020, holding billions of trade hostage, in response to the Morrison administration’s demands for an independent investigation into the origins of the Covid-19 pandemic.

Mr Xiao expressed “regret” that relations had plummeted in the way that they had.

Earlier this month, China’s strictly controlled state media praised Anthony Albanese as the leader other US allies should follow at a time of “unprecedented geopolitical complexity and uncertainty” after the election of Donald Trump.

The positive appraisal of Mr Albanese’s approach suggested that Beijing may see Canberra as a future ally in countering Mr Trump’s tariff threats under rising US-China competition.

Mr Albanese has previously criticised an earlier plan by Mr Trump to slap a 60% tax on Chinese imports, and vowed that Australia, as a middle power, “can play a role” in any potential trade war, acknowledging that “China is our major trading partner.”

During a meeting of the two leaders in the margins of the G20 in Rio de Janeiro this month, President Xi urged Mr Albanese to stand firm against protectionism and help foster “stability and certainty.”

The US was still in a “transition period” but Canberra should not allow the incoming administration to undermine the renewed momentum of its ties with Beijing, said Ambassador Xiao.

“China and Australia’s economies are strongly connected with each other. Our two economies are interwoven with each other. In a certain sense we are interdependent,” he said.

“No other country can singlehandedly take the place of China and no other country can take the place of Australia,” he added.

“We are friends not foes, partners not rivals.”