Australians have grown in confidence about the country’s ability to withstand economic coercion from China since the imposition of punitive trade measures in 2020. Beijing suspended high-level political exchanges and imposed a range of informal sanctions and trade blockages against Australia in the wake of a series of escalating disputes, culminating in Canberra’s call for an independent inquiry into the origins of COVID-19 in April that year.

Two years on, it is prudent to plan on the basis that it is still early days in China’s use of trade measure against Australia. Canberra and Beijing resumed ministerial-level dialogue after the election of the Albanese Labor government in May 2022. But given the long-term structural divide between the United States and China, and Australia’s position as a strong US ally, Australian governments of all persuasions should assume that China’s trade policies against Australia will remain largely in place. Beijing may tactically retreat now and again to fill shortfalls or if it wants for political reasons to present itself as a conciliatory partner. But a solution to the fundamental bilateral political tensions driving trade disruptions is not on the horizon.

Key findings:

• China’s trade coercion against Australia since early 2020 has so far failed to meet its key objectives: to impose substantial costs across the economy and change Australia’s national security policy.
• Even as bilateral relations stabilise, Australia should expect punitive measures to remain in place, either in whole or in part, and the cost of them to rise over time as China grows and its market becomes less accessible to Australian producers.
• Australia should work to entrench its position as an indispensable supplier of key commodities to China. This benefits the Australian economy and gives Canberra leverage at a time when Beijing is trying to use trade as a political weapon.