Trump’s second term, China’s opportunity, and what it means for Australian business

The United States is back in familiar but volatile territory: Donald Trump returned to the White House, bringing with him a foreign and economic policy that prioritises disruption over predictability. But this time, the global stakes are arguably higher, and for Australia, the consequences more complex.

I recently returned from the United States, where I engaged with fire protection industry leaders, national marshals, and international standards bodies from California to Washington, D.C. The technical nature of those discussions belied a more strategic undercurrent: America’s trade and economic posture under Trump is already shifting, and for allies like Australia, the landscape is fraught with risk, uncertainty, and—paradoxically—opportunity.

The Trade War Reignited

Trump’s second term has brought with it an immediate escalation of tariffs on international, but largely Chinese, goods, including consumer electronics, critical minerals, and advanced manufacturing components. The administration’s rhetoric is familiar—America First, decoupling from China, re-shoring supply chains—but the tools are sharper, the targets broader.

This extends beyond direct tariffs. In discussions with U.S. industry leaders, a recurring theme was the increasing scrutiny of so-called “trans-shipped” goods—products assembled or rebranded in a third country like Vietnam or Mexico to avoid tariffs on Chinese inputs. Even trusted allies are not immune to collateral damage from these policies.

It was notable to see Australian businesses responding in real time. One manufacturer I met during the trip was racing to secure toll manufacturing partnerships inside the United States. Their goal: to shield their operations from tariff exposure, reduce uncertainty, and present themselves as a lower-risk prospect to their U.S. customers. This is no isolated case. Across sectors, companies are repositioning supply chains to hedge against policy volatility.

A Weak Dollar and the Decline of U.S. Predictability

Ironically, Trump’s aggressive trade posture is coupled with expansive fiscal promises. A healthcare safety net, deficit-funded tax cuts, and protectionist tariffs are contributing to a weaker U.S. dollar which, rather than reducing trade imbalances, risks widening them. In financial circles, the long-assumed stability of the dollar as the dominant trade settlement currency is no longer unquestioned.

In conversations with U.S. officials and international partners, there was quiet acknowledgement of this shift. Bilateral trade deals denominated in renminbi, euros, and rupees are becoming more prevalent. China, in particular, is leveraging this moment to expand its economic influence across the Indo-Pacific, offering an alternative to the increasingly transactional U.S. approach.

For Australia, deeply embedded in U.S.-led financial systems and reliant on global supply chain stability, this trend demands attention.

Australia’s Strategic Bind

Australia’s position has never been more delicate. Economically, we are tightly linked to China, our largest trading partner by a significant margin. Militarily and strategically, we remain reliant on the United States as the cornerstone of our security framework. The longstanding assumption that both relationships could be managed within a predictable, rules-based global trade system is eroding.

Trump’s second term accelerates that erosion. The fragmentation of trade blocs, politicisation of supply chains, and weaponisation of tariffs leave Australia exposed to higher costs, regulatory complexity, and strategic ambiguity.

At the same time, U.S. officials I met were clear in their expectations: Australia remains a key Indo-Pacific partner, but also a player expected to demonstrate alignment on trade, technology standards, and critical minerals policy.

China’s Window of Opportunity

Amid the disruption, Beijing is quietly consolidating its position. While the U.S. fractures supply chains, China is deepening trade relationships across Southeast Asia, expanding Belt and Road infrastructure, and increasing its share of regional trade settlement in renminbi.

The more unpredictable U.S. trade policy becomes, the more attractive China’s alternative can appear—particularly to emerging economies seeking stability over ideology.

For Australian businesses, this dynamic presents both risk and leverage. The realignment of supply chains creates short-term exposure but also long-term opportunities to secure new partnerships, diversify export markets, and position Australia as a critical player in sectors like advanced manufacturing and resource processing.

What Australian Business Should Do Now

Navigating this fragmented environment requires a clear, pragmatic strategy:

• Actively diversify supply and customer base
  Review your current reliance on the U.S., China, or any single market—whether for inputs, components, or customers. Identify realistic pathways to shift portions of your supply chain or sales pipeline towards ASEAN, India, or other emerging markets. Even partial diversification reduces exposure to trade disruptions or political shocks.
• Invest in in-house capability where it counts
  Audit your dependency on offshore supply for critical inputs, especially in sectors like batteries, components, defence, or high-end manufacturing. Where commercially viable, bring key production, R&D, or assembly onshore or within ‘trusted’ markets to reduce global exposure.
• Harden financial risk management
  Volatility is the new normal. Revisit your currency hedging, offshore debt exposure, and pricing structures. Consider whether contracts, FX arrangements, or even relocation of financial functions need adjustment to deal with a weaker U.S. dollar, trade shocks, or regional currency shifts.
• Build direct channels into U.S. and other key markets
  Don’t wait for government-to-government negotiations. If your industry faces exposure to U.S. tariffs, regulations, or procurement rules, invest in direct advocacy, local representation, or partnerships that keep you close to U.S. policymakers. Early access means early influence—or at least early warning.

The manufacturer I met in the U.S., proactively restructuring to mitigate tariff risk, exemplifies the mindset Australian businesses will need. The rules are changing; so must the response.

The Final Uncertainty

There remains the possibility, whispered even among critics, that Trump’s apparent chaos masks a deliberate, longer-term strategy: destabilise trade norms to force global realignments in America’s favour, pressure allies into deeper economic integration, and corner China into meaningful concessions.

If that scenario unfolds—and history suggests dismissing it outright would be unwise—Australia must be ready to act decisively, aligning where interests converge and safeguarding autonomy where they do not.

From Washington to Melbourne, the message is clear: whether Trump’s trade war leads to chaos or calculated recalibration, complacency is not an option for Australian business.