Since President Donald Trump returned to office in January 2025, Australia has been grappling with unpredictable shifts in its relationship to one of its closest allies. Australia has long been committed to a balance of power in its Indo-Pacific backyard, one that has been guaranteed, to a significant extent, by US economic and military primacy. But with the Trump administration determined to move away from America’s role as guarantor of international security and to pursue protectionist economic measures at the expense of allies like Australia, Canberra is being forced to recalibrate this longstanding relationship.
The last-minute cancellation of talks between Albanese and Trump on the sidelines of the G7 summit in June put paid to what should have been the first face-to-face meeting of the two leaders. Since then, with no meeting forthcoming, Albanese has come under fire from his political opposition for what the center-right Liberal Party deems as neglect of Australia’s most enduring alliance. Domestically, managing relations with the US is no easy matter for the Albanese government, not least because Donald Trump is deeply unpopular in Australia. A 2025 Lowy Institute poll showed that Australian trust in the United States is at its lowest level on record, with only 36 percent of respondents saying they trust the US to act responsibly—a 20-point drop from 2024. Even in the court of public opinion, however, this antipathy is balanced out by geostrategic concerns: 80 percent still believe that the US-Australia alliance is important to Australian security.
Indeed, regardless of any concerns Canberra may have about the Trump administration’s outlook, Australia still badly needs the US to maintain its presence in Asia as a counterweight to growing Chinese regional dominance. Canberra is far from a repudiation of its US alliance and its broader commitments to allies in the Indo-Pacific. But, as Albanese’s recent visit to China shows, in rapidly changing geopolitical and economic circumstances Australia cannot afford to put its own regional interests on hold to placate the United States. China likely sees the cooling-off of US-Australia relations as an opportune moment to woo Australia, and Beijing pulled out all the stops to court Albanese during his trip.
The Albanese government is carefully and strategically straddling the line between maintaining its strategic partnership with an increasingly unpredictable United States and maximizing its economic relationship with China, Australia’s largest trading partner as well as its greatest security threat. Like China, the US is seeking to expand its trade relationship with Australia, particularly in critical minerals, to further separate and isolate China from the Western economy. But the US-Australia trade relationship will struggle to overcome Trump’s imposition of 10 percent tariffs on most Australian goods—an unfavorable contrast to the China-Australia Free Trade Agreement (ChAFTA), which ensures that most trade between the two nations remains duty-free.
The Albanese government’s recognition of Palestinian statehood seems likely to drive a further wedge between Canberra and Washington, with Mike Huckabee, US ambassador to Australia, describing Trump’s ‘disappointment’ and ‘disgust’ at the decision.
Military Cooperation
Diplomatic complexities notwithstanding, Australia and the United States share a fundamental commitment to deterring Chinese military expansionism in the Indo-Pacific region. This shared interest was on display during Talisman Sabre 2025, a recent three-week multilateral military exercise planned by Australia and the US and hosted by Australia.
But this military closeness is also under strain. Washington is putting increasing pressure on Australia to be more assertive about its defense posture in the Indo-Pacific region. The US has urged Australia to dramatically increase defense spending. Although Australian yearly defense spending is on track to rise considerably, from around 2 percent of GDP (55 billion AUD) today to around 2.3 percent of GDP (100 billion AUD) in 2034, including an additional 10 billion AUD over the next four years, this does not go nearly far enough for the US. Pete Hesgeth publicly called for Australia to raise defense spending to 3.5 percent of GDP (150 billion AUD) ‘as soon as possible.’ Thus far, Albanese has rebuffed these demands, emphasizing that Australia will determine its own defense policy according to its own needs and criticizing externally imposed spending targets as arbitrary.
AUKUS
The AUKUS agreement—a trilateral security partnership between Australia, the UK, and the US—has also increasingly come under scrutiny, with the Trump administration casting doubt on whether the 176-billion-pound deal is compatible with the president’s “America First” agenda. A review into the pact, led by US Department of Defense official and AUKUS critic Elbridge Colby, is currently underway. The Trump administration has also hinted that the outcome of its AUKUS review may be tied to Australian defense spending commitments, further increasing pressure on Canberra.
Even if the US maintains its commitment to AUKUS, practical problems may still prove insurmountable. Under the terms of AUKUS, the US is prohibited from selling Australia any submarines if doing so would compromise its own naval capacities. This eventuality seems increasingly likely, with US Chief of Naval Operations Admiral Daryl Caudle testifying during his Senate confirmation hearing that without doubling the current production rate of Virginia-class submarines, there simply will not be any boats to sell to Australia. According to recent Senate testimony by senior US naval personnel, the US is currently producing Virginia-class submarines at a rate of 1.13 submarines per year; to fulfill its commitments under Pillar 1 Optimal Pathway of AUKUS, production must ramp up to 2.0 (by 2028) and subsequently to 2.33 per year.
The Taiwan Question
US Under Secretary of Defense for Policy Elbridge Colby has been pushing for Australia to pre-commit to war over Taiwan in the event of Chinese aggression—something that the US itself, with its posture of strategic ambiguity, has been careful not to do. He is likely doing so because he knows that no country, Australia included, will publicly commit to a war that has not even occurred yet, and if Trump decides to abandon AUKUS, this alleged failure to commit to Taiwan will provide a pretext.
Albanese pushed back against this pressure, emphasizing when asked by reporters that Australia supports the ‘status quo’ and that he did not want any ‘unilateral action’ on Taiwan. It is not reasonable for the US to demand promises from Australia about the deployment of troops in a war with Taiwan, as officials well know. However, it is also true that the question of Taiwan is not going away, not for Australia nor for the world; Xi Jinping has told the People’s Liberation Army to be ready to take the island by 2027. Albanese and his successors must therefore maintain a balanced outward approach while preparing in private for the very real possibility of a war over Taiwan and asking themselves what Australia’s role in such a conflict would be.
The Quad
The evolving international outlook of the US promises both challenges and opportunities for Canberra in the context of the Quadrilateral Security Dialogue (Quad), an Indo-Pacific-focused security partnership between Australia, India, Japan, and the United States.
Tensions between the US and the two other Quad allies, India and Japan, have also been rising. Trump’s threat to increase tariffs on India as part of his economic pressure campaign against Russia has prompted a stiff response, and Japan and the US are only now emerging from a month of bruising negotiations over an unexpectedly punitive trade deal between the two countries.
Indian Prime Minister Narendra Modi is set to host the 2025 Quad Leaders’ Summit, an event Albanese flagged as the possible site for his first face-to-face meeting with Trump. If relations continue to deteriorate, the summit may end up as an attempt to paper over diplomatic crises rather than solidify amicable relationships between leaders—another missed opportunity for an Albanese-Trump meeting. On the other hand, despite the difficulties they pose, emerging fault lines between the US and its partners in the Quad also present an opportunity for Australia to adopt a more prominent role in the alliance. For one thing, its status as a trusted ally of India, Japan, and the US puts Australia in a favorable position to mediate between the partners.
Conclusions
Ultimately, Anthony Albanese faces a fiendishly difficult juggling act. He must maintain the all-important alliance between Canberra and Washington, shoring up cooperation with the Trump administration by finding common ground, especially when it comes to the regional threat China poses, and thereby maintaining critical military and intelligence ties. But he must also act pragmatically to safeguard Australia’s national interests even when they do not align with the Trump administration’s volatile and elusive foreign policy outlook.
