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https://www.internationalaffairs.org.au/australianoutlook/australia-needs-strategic-reconfiguration-in-the-asia-pacific/
14 May 2025
Australia Needs Strategic Reconfiguration in the Asia Pacific
By Dr Arpit Raswant and Dr Jiye Kim
"Facing mounting pressure from US tariffs and global trade volatility, Australia must urgently realign its economic strategy. Deepening ties with key Asian partners and investing in emerging sectors like space technology could safeguard national prosperity and regional influence."
Australia’s economic prosperity has long depended significantly on international trade, making the country particularly sensitive to shifts in global trade dynamics. The recent move by US President Donald Trump, announcing substantial tariffs aimed at protecting American businesses, has set off alarm bells across Australia. These tariffs, targeting critical Australian exports such as aluminium, beef, and minerals, could significantly disrupt Australia’s economic stability.
Trump’s new tariffs have rattled global markets, leading to fears of recession and unsettling the US bond market. According to a recent analysis, these tariffs directly threaten key Australian sectors and may significantly dampen economic growth. Australian exporters, despite temporarily stable conditions, remain exposed to tariff volatility. Rather than launching new initiatives, Australia must intensify existing trade and diplomatic efforts with key Asian partners. Policymakers must understand how proactive strategic reconfiguration, rather than reactive policymaking, can insulate Australia’s economy from external shocks. This approach doesn’t merely defend the country against immediate threats but positions Australia to emerge stronger, leveraging already-established relationships during what experts warn may only be a short-lived tariff pause.
Australian policymakers are attempting to mitigate the adverse effects of these tariffs while navigating the outcomes of the federal election. The current government intends to support Australian industries, diversify export markets, push for a tariff pause, pursue international diplomatic avenues, and prepare Australia’s economy for potential long-term volatility. As these efforts suggest, however, Australian policymakers must strike a balance between economic and security concerns in the rapidly evolving global business and security environment.
It is worth noting that the US remains one of Australia’s most significant trading partners, with an investment relationship valued at over AU$2 billion. In response to the current sensitive international business and security environment, Australia must quickly realign its trade strategies and leverage partnerships with key regional economies. India, Japan, South Korea, and Southeast Asian nations offer promising alternatives to diversify and stabilise Australia’s trade relationships. Indeed, the government has begun some movement in this area. Canberra has recently emphasised strengthening economic ties with India, unveiling a comprehensive roadmap to bolster trade and investment. India’s expanding economy and increasing openness to international trade present Australia with substantial opportunities to diversify its markets beyond traditional ones. While Australia–US two-way trade stands at approximately AU$120 billion, Australia–India two-way trade is nearing AU$50 billion, indicating significant growth. Meanwhile, the Australia–Japan, Australia–Korea, and Australia–Southeast Asia two-way trade stands at approximately AU$120 billion, AU$70 billion, and AU$180 billion, respectively.
India, Japan, and South Korea represent longstanding strategic partners whose economic collaboration with Australia has grown considerably. The Australian government highlights these relationships as central pillars of its regional trade strategy. Enhanced cooperation in advanced manufacturing and technology, particularly in the burgeoning space sector, could offer sustainable, high-value trade alternatives. It is essential to note that fostering innovative sectors, such as space technology, presents another strategic opportunity. Australia recently entered a new phase of space cooperation with India, which was marked by collaborative agreements aimed at joint missions and technology exchange. Similar initiatives with Japan and South Korea demonstrate Australia’s strategic pivot towards sectors that promise long-term economic security and growth. However, Australia must continue to strengthen ties with strategic partners in the Asia Pacific, especially in emerging economic and security domains, such as collaborating with India, Japan, and South Korea in the space economy. Recent engagements, such as the Australia–India defence policy talks and the Australia–Japan–South Korea trilateral dialogue, underscore the shared benefits of deeper partnerships with India, Japan, and South Korea, especially amid geopolitical uncertainties.
In addition, Southeast Asia is another vital region in Australia’s long-term economic strategy. The Australian government’s Southeast Asia Economic Strategy to 2040 outlines extensive trade and investment targets aimed at expanding Australia’s regional economic footprint. Southeast Asia’s rapidly developing economies, such as Indonesia and Vietnam, could become critical trading partners, offering diversified markets for Australian commodities and services.
Overall, these partnerships help mitigate the risks posed by US tariffs and position Australia at the forefront of a high-tech global economy. However, such a strategic shift is not without challenges. Pivoting rapidly towards reprioritising markets and sectors requires substantial investment and robust governmental support to succeed. Furthermore, deepening relationships with multiple partners simultaneously involves navigating complex geopolitical landscapes, which can potentially complicate Australia’s foreign policy and trade negotiations.
Ultimately, Australia’s strategic response to US tariffs underscores the importance of considering the international business and security perspective, which focuses on the intersection between international business and international security. Focusing on how these two domains interact and shape each other through economic, political, and strategic dimensions can inform policymakers on how to enhance agility and resilience in their trade policy.
Amid escalating market volatility and global uncertainty, including the impact of US tariffs and accelerating foreign capital outflows from China, Australia has an opportunity to engage in strategic reconfiguration and transform the crisis into an opportunity for long-term economic stability. By focusing on existing relationships with India, Japan, South Korea, and Southeast Asia, Australia can reduce economic risks, diversify export markets, and build long-term economic resilience. The recommended approach, which emphasises market diversification, regional cooperation, and investment in emerging sectors, can help Australia navigate immediate economic challenges while laying the foundation for sustainable growth.
In sum, Australia needs strategic reconfiguration in the Asia Pacific to turn global trade uncertainty into a catalyst for greater resilience, regional influence, and long-term economic strength.
Dr Arpit Raswant is an Assistant Professor of International Business at the University of Newcastle in Australia and a Visiting Researcher in Entrepreneurship and Strategy at Lancaster University in the United Kingdom. He is a former Korea Foundation Fellow at Korea University in South Korea. His research focuses on firm investment from social, economic, and security perspectives, and he is currently leading a research programme on space. Contact: arpit.raswant@newcastle.edu.au
Dr Jiye Kim is an Assistant Professor of International Security at the University of Queensland and a researcher affiliated with the University of Sydney in Australia. Her work explores international security issues using multilingual and multi-country approaches. She specialises in international relations, focusing on the Asia-Pacific region and linking international business with security challenges, including climate, health, and space. Contact: jiye.kim@uq.edu.au, jiye.kim@sydney.edu.au
This article is published under a Creative Commons License and may be republished with attribution.
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