Responses of Australian Importers to the 2018‐2019 US‐China Trade War: Decoupling From China?

ABSTRACT Using comprehensive trade transaction and firm‐level data from 2015 to 2023, we examine how Australian firms adjusted import patterns following the US‐China trade war. Our method compares firms with high versus low exposure to products subject to Trump tariffs in 2018–2019, measured by their pre‐war import patterns. We find that highly exposed Australian firms increased their import dependency on Chinese goods in subsequent years. This suggests the US‐China trade war paradoxically reinforced rather than reduced Australiaʼs reliance on Chinese imports, contrary to the expectations of supply chain diversification amid deteriorating geopolitics. A trade war unleashed by the Trump administration, intended, in part, to diminish Chinaʼs global trade position and encourage US allies to diversify their economic relationships away from China, may have had the paradoxical and unintentional effect of deepening Australiaʼs reliance on Chinese imports.