ACCI says US is the preferred market for Australian traders, knocking China off the top spot

Mounting geopolitical tensions and tariffs have shifted businesses’ perception about China and they now prefer the US as a trading partner.

Australian businesses are turning to one of the nation’s strongest allies in the US at the expense of China amid mounting anxiety over geopolitical uncertainty and trade wars.

The latest National Trade Survey by the Australian Chamber of Commerce and Industry (ACCI) – the sixth time the survey has been conducted – was the first that recorded the US as the leading market for Australian traders, ahead of China.

Businesses are shying away from China after an extended period of tensions between the world’s second largest economy and Australia, during which the former put hefty tariffs or restrictions on barley, wine, coal, lobster and beef imports.

It also comes amid signs that the Chinese economy is losing steam. Economic data shows a deterioration since Covid-19 restrictions were removed earlier this year and there are concerns that China will invade Taiwan by 2027.

The ACCI, in partnership with the Australian Centre for International Trade and Investment, surveyed 154 small, medium and large businesses from all Australian states and territories, and across goods and services businesses. Geopolitical tensions and the need for market diversification were front of mind for Australian respondents to the survey.

It showed that 50 per cent named the US as Australia’s main market, followed by China and Singapore which were almost level pegging. New Zealand was in fourth place and the United Arab Emirates shot up into fifth position.

ACCI chief executive officer Andrew McKellar said the trade disruptions of recent years have been a wake-up call for businesses about the importance of their diversification.

“China has been at the top of the list in all previous ACCI National Trade Surveys. It remains to be seen whether this finding will be repeated as those trade barriers are increasingly being reduced or removed,” he said.

“This recent experience has sent a clear message to Australian businesses of the risks of having all our eggs in one basket; diversification of markets is crucial.”

The pivot to the US by businesses comes weeks out from Prime Minister Anthony Albanese’s first official visit there, where President Joe Biden will host a state dinner. Discussions will include business opportunities, regional security, AUKUS and strengthening co-operation in science and technology.

ACCI chief executive Andrew McKellar said trade disruption has been a wake-up call for businesses. Picture: Gary Ramage

While the US was named as the top trading partner by those surveyed, the world’s largest economy was only Australia’s fifth largest export market, with China buying $16.5bn of goods in August, according to the Australian Bureau of Statistics. Japan was second with $6.9bn and the US trailed with $1.93bn.

A $9.64bn trade surplus was recorded for August with $53.55bn in exports and $46.23bn in imports.

Seven in 10 respondents ranked the need to diversify markets as either a major or moderate concern.

“International market risks are taking a range of forms, from geopolitical risks and supply chain risks to the costs of vital inputs,” Mr McKellar said.

“The survey shows that Australian exporters have taken the initiative in seeking new customers and markets to help manage international market risk, although doing so is not always easy.”

While businesses were concerned about their supply chain risks, their options were often more constrained as the majority paid more to secure supply chain services and almost 30 per cent said that no alternative was available to manage international shipping and logistics-related supply chain risks.

The peak body has made five recommendations for businesses on how to manage an increasingly complex trade environment, including investing in domestic productivity, modernising trade systems, reducing red tape, fostering partnerships between government, addressing the critical barriers to trade and taking full advantage of opportunities.