In recent weeks, there’s been considerable discussion about the influence of Donald Trump and foreign policy on the Australian federal election campaign. It’s unfamiliar territory for Australia, and that inexperience is evident.
The conversation oscillates between simplistic talk about who can cozy up to an outspoken leader and a more subdued, somewhat unspoken acknowledgment that the global trade system and geopolitical landscape are undergoing profound disruption.
Australia’s relationships with the United States and China are often viewed in a narrow, bilateral framework. But far more is happening beyond our election cycle than just these two connections.
Whoever claims victory on May 3 won’t just inherit a complicated geopolitical landscape — they’ll be confronting a multi-layered, global economic and strategic chess match, one that could define the era for the nation.
Global Powers Competing for Influence
This week, Italian Prime Minister Giorgia Meloni met with President Trump at the White House. Trump, an admirer of the right-wing leader, used the meeting to express confidence about securing a trade deal with the European Union, despite his recent criticisms of the bloc. Meloni, for her part, voiced her aim to “make the West great again,” suggesting a shared vision.
Though the meeting lacked the spectacle of Trump’s previous encounter with Ukrainian President Volodymyr Zelensky, it carried significant weight. The world’s largest economies are now vying for influence over the EU’s trade allegiance.
Amidst Trump’s tariffs, China has been recalibrating its global trade ties and deepening negotiations with Europe. The EU itself has shifted its tone from concerns over dependence on China to focusing on beneficial partnerships.
This all unfolds as the idea of two distinct global trading blocs — one led by the US, the other by China — gains traction.
New Alliances Emerging
Experts note the Trump administration’s strategy centers on economically isolating China. At the same time, there’s a clear connection between imposing tariffs and expecting allied nations, especially in Europe, to share the financial burden of US-led defense arrangements.
The EU, as one of the world’s largest trading entities, represents a significant prize for either side in this emerging global contest. While a full alignment with the US might seem unlikely, a zero-tariff agreement could tempt the EU and trigger a domino effect, forcing nations to pick a side.
As Financial Times columnist Rana Foroohar recently noted, the US is wary of relying too heavily on allies deeply economically intertwined with China — a category that includes Australia.
Australia’s Dilemma
Diplomats in Canberra are now contemplating where Australia would stand in a world divided between two major trade blocs. While Australia’s economy is heavily linked with China, its strategic and defense alliance is firmly rooted with the US, posing a difficult choice.
Analyst Hugh White has long argued Australia would eventually have to choose between its main security ally and its top trading partner. Until now, that debate has largely centered on defense scenarios, like a potential conflict over Taiwan. But with Trump’s erratic trade policies and the restructuring of global alliances, the question is rapidly becoming an economic one with serious strategic implications.
The “Mar-a-Lago Accord” Vision
Another factor complicating the landscape is a proposal informally dubbed the “Mar-a-Lago Accord.” This plan involves revitalizing US manufacturing through a combination of tariffs and a devalued US dollar. The US dollar’s reserve status has kept it overvalued for decades, hampering American competitiveness.
Trump’s economic adviser, Stephen Miran, detailed this idea in a recent paper, proposing that other nations should let their currencies rise and convert US debt holdings into long-term bonds — an unlikely scenario without the leverage of tariffs or withdrawal of US security guarantees.
The plan’s assumptions — particularly the expectation that China would concede to US demands rather than retaliate by offloading its massive US debt holdings — have left most analysts unconvinced, especially given the Trump administration’s volatile policy record and the damage to international trust.
A Transformed World Stage
The incoming Australian government will inherit a vastly altered global environment. A pre-election Lowy Institute Poll revealed Australian trust in the US is at a 20-year low, with only 36% believing the US acts responsibly on the world stage. At the same time, 80% of Australians disapproved of Trump’s tariff-based tactics.
Yet, despite this growing distrust, 80% still regard the US alliance as vital or fairly important to national security — a figure unchanged from the previous year.
Navigating the complexities of the Trump era will require not just careful diplomacy but also guiding an Australian public now deeply divided in its views of the US relationship.
