Ojasvi Rana | USA Fellow
Image sourced from Matt Hecht via Flickr.
Donald Trump’s return to the American presidency is rooted in harsh economic realities, reflecting broader international trends in 2024’s global election megacycle. Widespread public discontent with cost-of-living pressures and immigration have ultimately proven decisive over culture wars and criticisms of Trump’s strongman character. As American political consultant James Carville’s iconic refrain from the 1992 United States (U.S.) presidential race goes, “it’s the economy, stupid.”
Beyond the entertaining barrage of tweets likely to dominate headlines over the next four years, expect considerable policy reforms and a recalibration of the U.S.’ strategic posture. While Trump’s first presidential term provides a reference point, it is not a perfect guide for what to expect this time around. Republicans now hold slim majorities in both the House and Senate, giving Trump greater legislative support on paper. However, the dynamics within his party remain complex. Trump’s attempt to appoint controversial figures to his cabinet, such as Matt Gaetz for Attorney General, has already fallen through, potentially highlighting that the Democrats’ alive and influential opposition within the Senate. Additionally, if Trump attempts to repeal the Inflation Reduction Act – which benefits many Republican-leaning states through subsidies, incentives, and preferential tax conditions – he may encounter pushback from his own party. For allies across Europe, Australia, and the broader Indo-Pacific, this evolving political landscape requires a cautious but adaptive approach as they navigate a somewhat familiar yet distinct second Trump presidency, particularly regarding security and trade.
NATO, Transatlantic Tensions, and Shifting Priorities
A key feature of Trump’s previous term was his scepticism of NATO’s effectiveness and accusations that European allies were failing to shoulder their fair share of defence spending. This rhetoric, paired with actions that undermine transatlantic cohesion, may return, potentially pushing NATO into existential uncertainty at a time when it is most strained. A focus on transactional relationships could reduce the U.S.’ commitment to collective defence, signalling to adversaries like Russia that NATO is not to be feared. Trump’s likely approach has been described as “insulationism” – as opposed to isolationism – which would not entail the total disengagement of US global involvement but would involve the U.S. urging their partnerships and alliances to help maintain a semblance of continuity in managing international challenges. It implies a strategic recalibration rather than a complete withdrawal, ensuring that allied nations "carry the slack" as America addresses its internal preoccupations, potentially resulting in a reshaping of NATO’s traditional model of solidarity.
For Australia, the implications are clear: a weakened NATO risks emboldening authoritarian actors globally and undermining democratic unity. Australia must proactively engage in dialogues to preserve NATO’s strategic importance while furthering its own regional security interests. This should include leveraging multilateral partnerships such as AUKUS and the Quad to reinforce Indo-Pacific security, where U.S. leadership remains critical.
Trade Wars and Australia’s Economic Strategy
Trump’s protectionist trade policies during his first term disrupted global markets, and prioritised tariffs and bilateral deals over multilateral free trade agreements. This was most clearly seen with the U.S.’ withdrawal from the Trans-Pacific Partnership. At the same time, the Biden Administration not only retained many of Trump’s tariffs but expanded on them, signalling a broader shift in global trade dynamics that the world has adjusted to. Trump 2.0 is poised to be even more aggressive, with proposals to introduce 60 per cent tariffs on China and 20 per cent tariffs on all other trading partners, aiming to protect U.S. industries while pressuring trade partners to yield to American terms.
Trump also practices a transactional model of foreign policy known as “transactionalism”. As long as Australia maintains its trade deficit with the U.S., continues fostering deep bilateral investment ties, and investing 2-3 per cent of its GDP in defence spending including in AUKUS, Australia could position itself as one of U.S.’s most successful partners and allies. Australia should leverage its role as a critical minerals supplier, a key technology cooperation partner, and a defence ally. Continued diplomatic engagement with the U.S. will be essential to maintaining favourable trade conditions and mitigating potential shocks.
The Indo-Pacific Balance and Australia’s Strategic Role
A second Trump presidency will also test the balance of power in the Indo-Pacific, where U.S.-China tensions remain high. Trump’s approach to China — characterised by decoupling, tariffs, and assertive military posturing — has already reshaped regional dynamics. For Australia, which is closely tied to the Indo-Pacific’s security and economic future, this poses both challenges and responsibilities.
As a top-tier U.S. ally, Australia’s commitments under AUKUS and its broader regional diplomacy are critical. The alliance, focused on technology sharing, nuclear-powered submarines, and regional security collaboration, positions Australia as a key player in countering Chinese influence. Beyond defence, Australia must also deepen its engagement with Japan, South Korea, and Southeast Asian partners to uphold a rules-based order that counters authoritarian encroachments. This extends to trade, where Australia and Japan, working closely with the U.S., can influence strategic initiatives that reinforce stability and deter economic coercion from Beijing.
Navigating Trump’s Insulationism: A Strategic Imperative
To effectively navigate Trump’s insulationist foreign policy agenda, Australian officials must employ a multi-pronged approach grounded in effective diplomacy and strategic foresight. Deepening bilateral defence investments, maintaining economic leverage in key sectors, and working closely with key Indo-Pacific partners to shape regional strategies are essential. As a nation with strong U.S. ties and a critical regional role, Australia must strive to keep the U.S. engaged and focused on collective security and economic stability, even as America’s inward focus grows stronger.
This nuanced approach — balancing loyalty with independence — will ensure that Australia can weather a volatile international landscape, preserving its security and prosperity amid a rapidly changing world order.
Ojasvi Rana is the USA Fellow for Young Australians in International Affairs. pursuing double degrees in Biomedical Engineering Honours and Arts in Economics at the University of Sydney. In 2023, she completed an academic exchange semester at the University of Pennsylvania. Her recent internship at the United States Studies Centre as an Emerging Technology and Economic Security Intern deepened her strategic geopolitical thinking, a highlight included presenting her AI policy brief to USSC. Ojasvi will further her studies at Cornell University, spending the 2024-2025 academic year in Ithaca, New York.
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