Push for Donald Trump to ease up on trade war with China

The Albanese government is seeking to persuade the US to take a more considered approach with China when the two superpowers’ treasury and trade officials meet in Switzerland this week.

US President Donald Trump and his Chinese counterpart Xi Jinping. Pictures: AFP

You can now listen to The Australian's articles. Give us your feedback.

You can now listen to The Australian's articles.

The Albanese government is seeking to persuade the US to take a more considered approach with China when the two superpowers’ treasury and trade officials meet in Switzerland this week, flagging that the hit to Australia’s biggest trading partner will weigh more heavily on our local economy than direct trade imposts from Washington.

Canberra and the Australian embassy will also await the outcome of trade talks between the US and UK this week for a guide as to how it will renew its efforts with Washington for a separate exemption on direct tariffs on Australian exports.

Optimism is building around a de-escalation of the trade war between the US and China after officials from both sides agreed to meet for their first formal economic talks since US President ­Donald Trump announced sweeping tariffs on China and triggered a trade war.

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with their Chinese counterparts to discuss “economic” and “trade” matters. “I look forward to productive talks as we work towards rebalancing the international economic system towards better serving the interests of the United States,” Mr Bessent said in a statement on Wednesday.

Mr Trump has defended the 145 per cent tariff he slapped on Chinese imports, saying the country “deserves it”.

Following his Saturday election victory, Anthony Albanese raised trade in a brief phone call with Mr Trump but it’s understood there was little by way of reply on trade specifically.

The Prime Minister will again raise concerns around trade and the impact from tariffs on China at the G7 leaders meeting in Alberta next month, where opportunities for a face-to-face meeting with the US President and other world leaders is strong.

Australia’s ambassador to the US, Kevin Rudd, met with Trump allies following Saturday’s election result and has been encouraging the US and China to rebuild lines of communication across trade and military ties, highlighting the consequences for Australia without them.

Both Treasury and the Reserve Bank have modelled the impact of US tariffs worldwide, including Australia, noting that the bigger hit comes indirectly through our trade with China rather than directly on our exports to the US such as steel, aluminium, beef and pharmaceuticals.

Economists estimate the trade war would slice up to 0.2 percentage points off Australian gross domestic product.

On Wednesday, Chinese authorities announced a raft of stimulus measures – including interest rate cuts and a major liquidity injection – as Beijing seeks to counter the economic hit caused by the trade war.

ANZ economists noted on Wednesday that Australia’s largest trading partner for goods exports was now valued at 6.6 per cent of our GDP and warned that the stimulus package “suggests the government is concerned about the 5 per cent growth ­target”.

“Slower growth in China would place downward pressure on demand for Australian exports, especially commodities,” the economists said.

Australian trade officials including Foreign Affairs and Trade Department secretary Jan Adams, who has negotiated deals with China, Korea, Japan and the Trans-Pacific Partnership, are waiting to see the key outcomes from the China talks and any deal with the UK this week.

A government official said the focus of the China-US talks would be analysing whether it is possible to get a deal; what concessions will be made, including what is “off limits”; and what is “fair game”.

Mr Greer said in a statement on Wednesday that he was “negotiating with countries” at Mr Trump’s direction “to rebalance our trade relations to achieve reciprocity, open new markets, and protect America’s economic and national security”.

The focus on the US-UK talks would be the details of any deal with the UK, including how many tariff rates go to zero; what sectors the tariff is applied to; whether an official free-trade agreement would be struck; or whether the outcome is for four or five areas of dispute being resolved that would have a meaningful advantage for the economy.

The British government said trade negotiations with Washington were ongoing and it was taking a “calm and steady approach” to talks in a bid to “ease pressure on UK businesses”.

Mr Trump announced a 90-day pause on his 10 per cent universal tariff which also applied to Australia. The reprieve will expire on July 9.

However, the Albanese government failed to get an exemption from 25 per cent tariffs that began hitting $1bn in annual Australian exports last month. Australia’s critical minerals reserve is being used as leverage by the Albanese government to try to persuade the Trump administration to reverse its decision to hit steel and aluminium exports with tariffs, and not proceed with a feared second wave against agricultural products and pharmaceuticals.

Messaging around the minerals reserve would also be amplified in any discussions with the US on how to deal with China.

The critical minerals reserve would have a mechanism for smoothing prices of key mineral inputs to military equipment. Prices for such minerals have been manipulated by China through its dominance in production.