Canberra has been little more than a nervous bystander as the US president, Donald Trump, unleashes his first scattered-gunned salvoes in his trade wars, keeping its collective head down, lest it attract fire itself.
That seems like a smart enough strategy in the short-term, but one way or another, Trump’s tariffs are going to impact Australia and the country’s economy – and, for the most part, not in a good way.
Even if Australian goods don’t face direct tariffs from the US, the economy will suffer from their effect, much as second-hand smoking can hurt nearly as much as lighting up a cigarette oneself.
It matters little that Trump has been more sizzle than sausage on tariffs thus far, threatening and then delaying this week imposts on Mexico and Canada, while adding 10% to existing duties on Chinese imports.
His approach of targeting friends, neighbours and adversaries all at once is a reminder that the US president can turn on anyone at any time, for whatever reason, or none at all.
Anthony Albanese’s government, like the Coalition that preceded it, has emphasised a few points to Trump, notably that Australia is a strong ally which has consistently run a trade deficit with the US.
For Albanese, that’s a good starting point, but it may not be enough if Trump at some stage introduces across-the-board tariffs for imports into America.
Last time, Australia got an exemption from US tariffs, on steel, for example. But that might be harder under Trump 2.0.
As a centre-left leader, Albanese – and indeed his ambassador in Washington, Kevin Rudd – lack natural and easy access to the informal networks surrounding Trump.
Australia has always adopted a friends-to-all-enemies-to-none approach in Washington, working both sides of the aisle.
But with Trump, even more so the second time around, the Albanese government is having to push its case up some very steep hills.
In his first term, Trump hired many conventional staffers who acted as a brake on his most anarchic impulses.
This time, Trump has surrounded himself with Maga uber-loyalists. Trump’s worst instincts are now implemented with speed and conviction.
To be sure, it is early in the administration, and Trump will almost always negotiate. But if Trump wants tariffs, his Maga team will ensure he gets tariffs.
The secondary effects of protectionism are harder to measure but nonetheless real, from slower overall global growth.
Any damage to China’s economy, which takes about one-third of Australia’s exports, will almost certainly flow through to Australia, though not in a straight line.
Australia’s exports to China are dominated by iron ore which goes into making steel, the production of which is already declining in China, with or without Trump.
On the flip side, Australia could benefit from Trump’s targeting of China, which is sure to remain in the crosshairs throughout his second term.
Any retaliation against US tariffs by China against American agricultural goods, for example, could allow Australian farmers to make up the shortfall.
But the real blowback for middle-powers like Australia may not be in the ups and downs of a quixotic and damaging trade war.
Rather, it will be the unravelling of the global trading system which has underpinned our postwar wealth, and, potentially, the severe undermining of trust in our main ally, the US.
The ties that bind Australia to the US run deep – through the economy, military and intelligence interdependence and scientific and technological exchanges.
China can’t substitute for that, and the trust that has been built up alongside of it.
Trump, however, can damage it, by unravelling the institutions of the US state which underpins such exchanges.
The damage will not be nearly as visible as the headlines about tariffs, but they will be far longer lasting.
• Richard McGregor is an analyst at the Lowy Institute
