Aussie Industries at Risk in US-China Trade War

The fallout from a full-blown trade war between the US and China isn’t just a headache for those two—it’s going to send shockwaves around the world, and yep, Australia is definitely in the blast zone.

This week, President Donald Trump cranked up tariffs on Chinese imports to a staggering 145%, while giving most other countries a temporary pass for 90 days. In response, China made it crystal clear it’s ready to “fight to the end,” and experts don’t see either side backing down anytime soon.

Isaac Goss from Monash Business School put it bluntly: "The most worrying fact is both sides are willing to play tit-for-tat." He warns that if this keeps escalating, it could basically shut down trade between the two economic giants—and that would shake the global economy.

So, how does this hit Australia?

China is Australia’s biggest trading partner, especially for resources like iron ore and coal, which are major moneymakers. If China’s economy takes a hit, it’ll need less of those exports—and that’s bad news for Aussie miners, jobs, and growth.

Goss warns this could lead to rising unemployment and even falling prices in some sectors. Why? Because cheaper goods from places like China, Vietnam, and Cambodia—squeezed by tariffs—might flood into countries like Australia as they look for new markets.

To cushion the blow, the Reserve Bank of Australia is likely to cut interest rates—possibly at its next meeting in May—and more cuts could follow if things keep sliding.

One bit of good news: Goss says superannuation funds should mostly ride it out. Young investors have time to recover from market dips, and older folks are (hopefully) already shifted into safer investments.

How can China hit back?

The US buys a LOT from China—around $731 billion AUD worth of goods last year—while it exports much less in return, creating a trade deficit of about $450 billion AUD. That gives China room to hit back in other ways.

Experts say China could:

• Cut cooperation on things like fentanyl (a hot-button issue in the US),

• Limit agricultural imports (a blow to US farmers),

• Target American services in China, like finance and law firms.

And politically, standing up to Trump actually works in Chinese President Xi Jinping’s favor—he can take the economic hit if it boosts his popularity at home.

But it’s not just about the money

These tariffs are also shaking up old alliances. Biden’s previous attempts to build partnerships across Southeast Asia are now under strain, especially since some of those countries were hit hard by earlier tariffs.

Even Australia got dragged into the mix. China’s ambassador, Xiao Qian, publicly invited Australia to “join hands” with Beijing to protect global trade. But the offer was politely iced by the Albanese government.

PM Anthony Albanese made it clear: “Australia will speak for ourselves.” The message? We value trade with China, but we’re not getting in the middle of a superpower standoff—especially since we’re still patching things up after years of trade tensions and sanctions.

So, for now, Australia’s playing it cautious: eyes on economic resilience, more diversified trade ties, and a whole lot of watching from the sidelines as the US and China lock horns.