Pragmatic compromise must restore trade stability

US and Chinese accounts of the telephone call between Donald Trump and Xi Jinping on Friday AEST differ. If Mr Trump’s version is to be believed, almost 10 weeks since the global uproar that followed his April 2 “Liberation Day” tariffs announcement, the call, which he initiated, cleared the air. “We had a very good talk and we’ve straightened out any complexity,” he said. “I think we’re in very good shape with China and the trade deal.” Beijing, The Wall Street Journal reported, was less effusive, saying Mr Xi had urged Mr Trump to remove negative measures that had disrupted bilateral trade. Whichever version is more accurate, what matters is that Mr Trump and Mr Xi, not just officials, finally are talking directly about tariffs and trade. That is vital as countries, including Australia, seek to deal with Mr Trump’s unilaterally imposed tariffs.

The dialogue between the world’s two biggest trading nations – with top officials from Beijing and Washington meeting in London this week to build on the green shoots of compromise that appeared after an inaugural meeting in Switzerland in May – could be a positive sign. Mr Trump’s keenness to talk is in sharp contrast with his bombastic “Liberation Day” announcement.

It augurs well, hopefully, ahead of next week’s G7 summit at Kananaskis in the Canadian Rockies, where Anthony Albanese will represent Australia as a non-member “outreach partner”. The profound disruption to global trade and stability doubtless will be the crucial issue at the summit, at which the Prime Minister is hoping to have his first face-to-face meeting with Mr Trump. It is imperative that Mr Albanese does everything possible to persuade Mr Trump that Australia deserves far better from the US President’s tariff regime. The architect of our free-trade agreements with China, South Korea and Japan, former Coalition trade minister Andrew Robb, has urged Mr Albanese to focus on the nation’s shared history with the US. Opposition finance spokesman James Paterson said on Sunday that British Prime Minister Keir Starmer’s success in achieving a partial exemption from steel and aluminium tariffs after direct talks with Mr Trump sets a precedent for what Mr Albanese should be able to achieve. Barriers on Australian imports to the US currently include a 50 per cent levy on steel and a blanket 10 per cent on other goods. To obtain the exemption, Britain agreed to take more US beef tariff-free. Australia, as Senator Paterson said, “should not compromise in any way, shape or form on biosecurity and the issues of traceability”. But he said Australia was at least as good an ally of the US as Britain, “so there’s no reason why the Prime Minister should not be able to secure that exemption’’.

Mr Albanese rightly has ruled out any compromises to Australia’s biosecurity. He also ruled out changes to the Pharmaceutical Benefits Scheme, the News Media Bargaining Code and a ban on social media for under-16s. But he has highlighted Australia’s critical minerals industry as a potential bargaining chip, which would be good for US defence industries, with the US likely to be offered access as part of tariff negotiations. That should resonate with Mr Trump. As Will Glasgow has reported, Mr Trump is “fuming about Beijing’s slow walking” over the lifting of restrictions on rare earths exports, which he says China agreed to at the meeting in Switzerland in May. China’s restrictions on rare earths have caused chaos for US manufacturers. Chinese industry also is suffering, last month recording its worst slump since 2022 as US tariffs have stung smaller exporters.

Trade Minister Don Farrell, who has just returned from the latest stage of negotiations for an Australia-EU trade deal, was optimistic on Sunday, speaking about a “mood around the world to push the case for less protectionism and more free and fair trade”. If he is correct, the call between Mr Trump and Mr Xi reflects an emerging mood of compromise, needed to stabilise world trade and economic activity.