How directors can navigate trade war opportunities and risks

The tariff war between China and the US could open up trade opportunities for Australian companies.

US President Donald Trump has slapped tariffs on imports into the US from all around the world, but none higher than on China. A series of tit-for-tat increases was paused in June, following a meeting between officials in Switzerland. The deal brought US tariffs on Chinese products down to 30 per cent, while Beijing slashed levies on US imports to 10 per cent and promised to lift barriers on critical mineral exports. A trade truce was put in place until 12 August, but each side has since claimed breaches on non-tariff pledges. As of mid-July, the shaky truce was holding.

US Trade Ambassador Jamieson Greer said China had failed to roll back restrictions on exports of rare earth magnets. Beijing said US violations of the agreement included stopping sales of computer chip design software to Chinese companies, warning against using chips made by Chinese tech giant Huawei and cancelling visas for Chinese students. Following reports that China would resume rare earths exports to the US for six months, Trump said that total tariffs on Chinese goods will settle on 55 per cent, boasting China was only hitting US goods with a 10 per cent tariff.

“It’s a welcome pause and truce, but I don’t think anybody’s assuming this is over by any stretch,” says Doug Ferguson GAICD, NSW chair and head of Asian markets at KPMG, who adds Australian directors should not be lulled into a false sense of security. “It’s very uncertain and the risks remain real. The strategic rivalry between our largest trading partner in China and our military alliance partner in the US is only intensifying. There is very significant mistrust.”

Lessons learned

Ferguson notes that many Australian exporters and importers have learned from our own diplomatic and trade spat with China. When the Chinese imposed crippling high and punitive tariffs on many Australian products in 2020, Australian exporters looked to new markets and now have more diversified customer bases as a result. China began lifting its restrictions at the start of 2023. While the higher tariffs affected individual industries such as wine, meat, seafood and barley, overall trade to China stayed strong and the country remains Australia’s largest trading partner. Australia exported around $149b worth of goods to China in 2019 and by 2023, this had risen to $204b.

Australia’s global trade competitors are actively visiting China and building personal relationships, says Ferguson, and Australians need to do the same. “My advice would be to re-engage, to travel, to meet and to exchange and welcome exchanges from China to achieve your export and import objectives. There is no safe decoupling for Australia from China exports. It might be more transactional than 10 years ago, but it’s still so important to Australia’s prosperity.”

In 2024, the US exported US$140.7b worth of goods and US$46.3b in services to China. Among the top export categories were sectors where Australia competes — oil and gas, meat products, crops, pharmaceuticals, medicines and medical equipment. Australia is also competitive in services categories such as education, financial services and business management and consulting. This would appear to create opportunities for Australian exporters in those sectors.

“Obviously, the fact China is going to put a new tariff on a US import and not put a tariff on the Australian import means we’ll get a cost advantage we didn’t have before,” says Dr Jenny Gordon, a non-resident fellow at the Lowy Institute and an honorary professor at the ANU Centre for Social Research and Methods. “High bilateral tariffs between the US and China create opportunities for Australian firms to sell into those markets.”

Proceed with caution

However, several challenges make taking advantage of the spat difficult. The first is whether like-for-like exports are required. Commodities such as coal can be easily substituted, but high-tech and specialised goods can’t. “You really have to look at this product by product,” says Gordon.

She describes trying to quickly step in and fill the gap left by US exports to China as a risky proposition, because it’s unclear how long the US-China tariff war will go on. Getting established in a country like China takes considerable resources. Directors must work with a local Chinese partner and consider the advantage they make from scaling their products. “If you get really great gains from scaling, then you should be working hard to work out how you’re going to expand your market,” she says. “It’s a big investment to scale into a market, so you want to be looking at what the growth opportunities in that market are over time.”

Gordon warns that Australian exports to the US and to China could potentially get trapped by each country’s rules of origin for imports, where exporters to the country are required to demonstrate the origin of the components. Even if companies are abiding by the rules, it is a costly compliance burden.

David Olsson AM GAICD, national president and chair of the Australia China Business Council and a Hong Kong-based director at Australian-Chinese law firm King & Wood Mallesons, also cautions against trying to jump in to fill gaps in Chinese imports.

“Everybody’s treading very warily at the moment. We don’t know where this is going to play out,” he says. “No-one wants to be caught again in this scenario where we jump in quickly, try to build a market, which can be quite expensive, to replace another nation, and then find in a month or two that the Americans are back or we’re caught indirectly by other tariffs ourselves, because of what we’ve done.”

Rather than taking a short-term transactional approach to China, directors should be more strategic in their thinking, because China is more than just a buyer or a competitor. Olsson says we should consider it as an evolving system of economic activity that will shape energy, technology, health and sustainability around the world. “Companies need to engage China strategically to see where as an individual company you’re fitting into that whole ecosystem.”

Short-term gains

Andrew Robb, the former Minister for Trade and Investment who now has an eponymous trade and investment consultancy, expects there to be short-term benefits to Australian exporters to China, particularly meat suppliers. “We could supply so much more if we had it or had the infrastructure to do it,” he says. “There’ll be a range of other commodities, and I have no doubt about services.”

In fact, with an unemployment rate hovering around four per cent, industries in Australia could struggle to increase their supply — and Robb says this is only the short-term picture, anyway. Longer-term, he’s concerned about Australia being caught in the middle of a tussle between the US and China, and expects both superpowers will exert coercion on Australia. Each is developing its own technologies — such as ecommerce and payment systems — and standards for goods. The US could say to Australia that it will supply a particular technology as long as Australia doesn’t trade a particular good or service with China.

“If the US continues to have the containment of China as their primary global objective before everything else, it will only get worse,” says Robb. “If the US does it, China will do it in return — and it will balkanise the world. The longer that goes on, the more you will be required to choose a side, and that’s highly destructive.”

Knock-on effects

Kathleen Conlon FAICD is considering the second-order effects of the China-US trade war on the companies where she is a non-executive director — BlueScope Steel, gaming machine manufacturer Aristocrat Leisure and lithium miner Pilbara Minerals. The fact that the drivers of the current trade dislocation and uncertainty are political rather than economic makes it more difficult for directors to navigate. “We’re used to cycles, we know how to hunker down and save money,” she says. “We don’t have the certainty about whether we’re in a blip or resetting the world order.”

Conlon notes those companies like BlueScope, Aristocrat and Pilbara Minerals — which learned the pandemic lessons of supply chain resilience and diversifying their customer base — will be best placed to withstand the current trade ructions. Boards need to ensure their companies are positioned to have relationships to increase trade where opportunities exist — and not just China.

“You’ve got to create views of options and scenarios, then try to manage through that and do the things that are no regrets — then hedge your bets on the other things,” she says. “The question for my companies is, what are the second and third-order effects?”

If the tariff war continues and its economy slows, the Chinese government could try to stimulate its economy by encouraging take-up of EVs. This would increase demand and prices for lithium, to the benefit of Pilbara Minerals, where Conlon is chair.

Aristocrat is in a position where it can move production as required, a legacy of a previous effort to ensure supply chain resilience. “If you look at Aristocrat, we make near or in-country for country, and the rest of our product is actually intellectual property, which isn’t subject to tariffs,” says Conlon. However, should consumer confidence fall in the US, that could weaken demand for its products.

For BlueScope — which manufactures steel in the US among other places — the issue is whether there is disruption to the US automotive supply chain, potentially through supply constraints on rare earths. This in turn would flow through to less demand for steel.

This article first appeared under the headline 'Power play' in the August 2025 issue of Company Director magazine.