Red book | Blue book 2024: A guide to the next US administration

Foreword

This compilation of essays by US Studies Centre researchers aims to provide a guide on what to expect from a second Biden term versus a second Trump term, as well as what to expect regardless of who takes office.

There is no shortage of punditry and political prognostications on the US election but in keeping with the US Studies Centre motto, “Analysis of America, Insights for Australia, Solutions for the Alliance,” the authors also detail what Australia should consider doing in either electoral outcome across a wide range of issues, ranging from AUKUS and US defence spending to a Europe policy and climate agenda. While much can and will change by the next inauguration in January 2025, the broad contours of policy direction for each candidate remain visible. It has arguably never been more important for US allies and partners to understand these policy directions and their resulting implications for Australia and the world.

The people and priorities of the next administration will undoubtedly impact diverse US policy differently. Yet, particularly for US allies like Australia, some strategies should be pursued regardless of who occupies the White House. Most notably, this includes maintaining robust engagement across all halls of power in Washington, increasing burden sharing in their own region and deepening engagement with other US allies and partners.

Australian efforts in these regards thus far have not only proven it to be a highly capable US ally but also allowed it to become one of the most influential allies in Washington. While Australia and other US allies and partners ultimately have no say in the 2024 election, they certainly have choices in how they respond to it. This compilation seeks to present some opportunities for how to do so.

Dr Michael J. Green
Chief Executive Officer, United States Studies Centre
May 2024

What the 2024 election means for America’s Asian alliances

Dr Michael J. Green

One does not have to look hard to find statements by Donald Trump that would cause deep anxiety for US allies. Then again, one would have to look hard to find a US alliance in the Indo-Pacific where the Biden administration is not building on initiatives started during Trump’s time in office. US presidential elections always cause some level of anxiety for allies and this one will deservedly cause more than most. But as the humourist Mark Twain observed about the music of Richard Wagner, it was “better than it sounds.”

First, the bad news. Donald Trump was the most deliberately divisive president in US history and has only doubled down as a candidate in 2024. Since he began attacking Japan in the 1980s, he has argued that US allies are cheaters, particularly countries that run trade surpluses with the United States. This is nonsensical, but scores of officials and members of Congress have failed to convince him that he cannot view alliances like he is head of the accounts payable department. Trump has been embroiled in more than 4,000 legal suits over the course of his career — mostly with erstwhile business partners and subcontractors. He saw his real mates as the heads of the rival casinos. Not surprisingly, as president he sought the adoration of Vladimir Putin, Kim Jong Un and — for a time — Xi Jinping. Trump thought nothing of unilaterally floating the withdrawal of US troops from Korea to Kim Jong Un or, since leaving office, proposing a peace plan to Putin predicated on ending military support for President Zelensky in Ukraine.

US President Joe Biden attends the Quad Leaders’ Summit in Tokyo, May 2022.Source: Getty

But here is the good news: none of that has happened. And for good reason. The American public’s support for alliances in public opinion polls has been at an all-time high since 2016.¹ In Congress, bipartisan support for US alliances and specific initiatives such as AUKUS remains almost universal. When Trump mused in Singapore in 2018 about withdrawing US troops from Korea, Republicans in Congress passed amendments to the next National Defense Authorization Act (NDAA) prohibiting him from using funds for that purpose without congressional approval. Many of these same Republicans were praising Trump publicly at the same time. Nobody around Trump put pressure on members to reverse their decision the way they would have had the issue been abortion or immigration.

Moreover, while Biden has abandoned the destructive rhetoric of Trump, his administration is building on rather than reversing most of the policies that the Trump administration initiated with Indo-Pacific allies and partners. Under Trump, the US-Australia-Japan-India Quad was elevated to a regular foreign ministerial and Biden has since taken the next step to establish a regular Quad leaders’ summit. Both the Trump and Biden administrations embraced former Japanese Prime Minister Abe Shinzo’s “Free and Open Indo-Pacific” strategy and enhanced US-Japan-Australia coordination on infrastructure financing to counter Beijing’s Belt and Road Initiative. Biden’s team have gone well beyond Trump, of course, with new security cooperation frameworks for the United States, Japan and Korea; the United States, Japan and the Philippines; and, of course, Australia, the United Kingdom and the United States through AUKUS. Additionally, there is not much evidence that Trump was all that interested in the progress his administration made with Asian allies and partners. But there is no a priori reason why officials in a second Trump administration would reverse any of these initiatives which only build on what they last pursued in office.

US presidential elections always cause some level of anxiety for allies and this one will deservedly cause more than most.

Some observers warn that the stalwarts who stabilised Trump’s Asia policy in the first term, such as former Defense Secretary James Mattis or National Security Advisor HR McMaster, will not be coming back because they have become outspoken Trump critics or found serving under Trump too chaotic. Meanwhile, the hard-core “Make America Great Again” (MAGA) movement is already angling to ensure that “RINOs” (Republicans in Name Only) are rooted out and replaced by loyalists if Trump wins in November. Groups like the America First Institute and Heritage Foundation are drafting lists of foot soldiers to prevent the so-called “deep state” from blocking Trump from being Trump in a second term.

However, the influence of these groups on a future Trump administration’s national security policy towards the Indo-Pacific is often overstated by the media. Firstly, Trump himself is more of an impulsive performer than a deeply strategic plotter. The reach of the true MAGA believers across the US Government will likely primarily be limited to areas that animate their base, such as immigration policy or trying to exact vengeance against officials behind the multiple justified indictments of Trump and his lieutenants for insurrection, mishandling of classified materials, and contempt of Congress. These moves will be corrosive to US democracy and distracting for policymakers, but they are not direct attacks on US engagement with the Indo-Pacific.

In addition, there remains a long list of Republicans who would be seen as loyal and would bring strong national security credentials to positions such as Secretary of State, Defense, or Commerce. That list includes Tennessee Senator and former Ambassador to Japan Bill Haggerty, Senators Joni Ernst of Iowa, Tom Cotton of Arkansas and Dan Sullivan of Alaska — all strong AUKUS supporters on the Senate Armed Services Committee — as well as former National Security Advisor Robert O’Brien. There are also scores of anonymous Republican congressional staffers and military officers who would be willing to serve in a Trump administration even as many others might decline. One would be hard-pressed to find a critic of US alliances in Asia among them.

Even the Republican National Committee has distanced itself from the Heritage Foundation’s plans against the deep state. Political groups always mobilise around presidential elections to gain an advantage and attract press attention. Those groups are more extreme this time than in the past, but their share of media attention is not an accurate reflection of their future share of policy influence — particularly given the views of alliances in the public and Congress.

US President Donald Trump speaks during a joint press conference with Canada’s Prime Minister Justin Trudeau at the White House, February 2017.Source: Getty

That is not to say that a Trump administration would be either reassuring or relaxing for US allies. The chaotic competition for influence internally will mean that embassies in Washington will need to be actively participating in the early scrum of a prospective Trump administration as governing priorities are separated from ‘angertainment.’ Leaders like Abe were masterful at managing Trump but had the advantage of connecting with his administration from Japan’s centre-right of politics. Left-of-centre governments like Australia’s will require a particularly disciplined focus on policy priorities. One can also expect Trump the showman to rush for a “historic” summit with Kim Jong Un to formally end the Korean War. Given Pyongyang’s dangerous nuclear weapons and missile build-up and defiance of the international community, this move would be laden with risk for Japan and Korea. Australia will need to form a united front with these allies and the US Congress to keep Trump’s worst excesses in check. The fact that Korean President Yoon Suk Yeol is a stalwart friend of the United States and Australia and working to repair relations with Japan will help.

Nor is the relatively higher risk to transatlantic alliances any relief for Australia. Trump’s America First branding evokes the isolationist movement in the United States before Pearl Harbor. That movement was isolationist towards Europe rather than Asia and many “America Firsters” were also “Asia Firsters” — arguing for neutrality towards Hitler but a tough stance towards Imperial Japan (or after the war towards communist China). Trump acolyte and Ohio Senator JD Vance shocked NATO allies at the February 2024 Munich Security Conference by calling for US retrenchment from Europe but pointedly said it was necessary so that the United States could pivot to Asia to deal with China.² US alliances do not exist in separate compartments, of course. The leaders of Japan, South Korea and Taiwan have all warned that Russian success in Ukraine will only embolden China and make their own security situation more dire. Australian foreign policy has neglected Europe in recent years, but under a Trump administration, Australia would do well to join Japan and Korea in shoring up the trans-Pacific and transatlantic alliances as part of one front against revisionist and totalitarian powers — and one might cynically say from the worst of Trump’s own instincts too.

These are all reasons for clear-eyed assessments of national interest rather than catastrophising or de-aligning from the United States. Some experts in Australia or Japan talk of “hedging” against a second Trump administration by strengthening security cooperation with other US allies. That may be “hedging,” but it also happens to be a good approximation of what the Biden administration would want allies to do anyway should the president be re-elected.

That raises a final point about alliances and the US election. A preoccupation with managing Trump’s return to power should not blind US allies to the opportunities with a second Biden term. Democratic presidents from Bill Clinton to Barack Obama have become more active on foreign policy and trade in their second term after being freed from the electoral pressures of key constituencies in swing states. For example, Clinton became more active on foreign policy and Obama on trade policy after being re-elected. A re-elected Clinton administration saw deeper engagement with China, NATO enlargement and Kosovo intervention, and the Camp David peace accords. A second Obama term saw the prioritisation of the Trans-Pacific Partnership, or TPP, and the Transatlantic Trade and Investment Partnership with the EU, or TTIP. While a US return to the TPP (now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) will remain challenging, more modest agreements around digital trade may be possible.

US alliances have survived shocks and betrayals because, as Winston Churchill was reported to have said, “you can always count on the Americans to eventually do the right thing after they have done all the wrong things.”

The United States has mistreated allies before. Richard Nixon shocked Asian allies when he suddenly announced they had to take the lead in their own defence in 1969. Clinton gave birth to the phrase “Japan passing” when he skipped Japan in favour of an extended visit to China in 1998. George W Bush clashed with Germany and France over Iraq and Obama raised questions in Japan and Korea about US commitment when he failed to enforce his “red line” against the use of chemical weapons by Syria in 2012. But US alliances have survived all these shocks and betrayals because, as Winston Churchill was reported to have said, “you can always count on the Americans to eventually do the right thing after they have done all the wrong things.”

It will not be hard for Australia or others to remind the incoming administration of what the right thing is, because polls show the American public already knows. But there will be less margin for error than ever, so Australians should be ready.

Congressional Asia policy

Tom Corben and Alice Nason

Regardless of the next president’s political stripe, Congress has proven a key determinant of the scope and scale of US commitments in Asia and the pace and manner of their implementation. Fortunately for Australia, congressional consensus on the importance of the region to US interests has rarely been stronger. In that respect, the House and Senate elections that coincide with the presidential race are unlikely to result in major shifts in the overall trajectory of US policy in Asia.

Bipartisan agreement about the importance of competing with China in the Indo-Pacific and bolstering regional partnerships to meet that challenge will likely endure. However, come January 2025, a future President Biden or President Trump will face a new Congress still wrestling with ever-intensifying polarisation and procedural dysfunction, with ramifications for the speed and scope at which policy initiatives relevant to Asia strategy — and, hence, to Australia — can be funded, implemented or reformed.

Regardless of the outcome of the upcoming presidential and congressional elections, Australia must maintain its track record of robust congressional outreach to socialise a new cohort of congresspeople and their staffers around Australian equities and brace for another drawn out, unpredictable process on Capitol Hill negotiating the FY25 budget.

Often overlooked in favour of the Trump-Biden redux are the battles for control of the US House and Senate that will also be fought on 5 November 2024. Thirty-four Senate seats and all 435 House seats are on the ballot. Congress has an outsized role in designing and influencing US Asia policy, with final responsibility for the budget and appointments of key personnel.

The November 2024 election augurs significant shifts in the makeup of Congress. Republicans hold the House by a single seat and 26 Republican incumbents have announced at the time of writing that they will not run for re-election in November 2024.³ Due to the alternating cycle of Senate elections, Democratic seats disproportionately hang in the balance this year; of the 34 Senate seats up for re-election, 20 are held by Democrats and three are held by independents critical to the Democratic caucus.⁴ Though the outcome remains a toss-up, a GOP-controlled Senate and Democratic-controlled House seems probable.⁵

Thankfully for US allies and partners in the region, the debate about continued US commitments in the Indo-Pacific seems settled. Where other foreign policy priorities are fraught, support for Ukraine foremost among them, bipartisan agreement about the importance of strategic competition with China has defined the 118th Congress. Congressional defence hawks and the Biden administration have spoken in unison about the military challenge posed by China⁶ and the need for diplomatic engagement and coherent economic statecraft.⁷

Due to the level of alignment on China, leadership changes in either chamber would not result in striking changes in approach to US Indo-Pacific allies. Bipartisan concern for Beijing’s behaviour is likely to continue driving initiatives like enabling legislation for AUKUS and support for Taiwan. The risk, in the lead-up to the election and in its aftermath, is that one-upmanship on China could have unproductive flow-on effects for the administration’s management of relations with Beijing. China’s response to then-House Speaker Nancy Pelosi’s visit to Taiwan in August 2022 clearly demonstrated how Congressional actions can influence US-China relations.⁸

AUKUS after the election

After the election, a new cohort of lawmakers must be socialised into the AUKUS partnership. Preeminent voices in Congress on Asia policy are retiring or facing fierce contest in November, including Rep. Mike Gallagher (R-WI), former chair of the Select Committee on Strategic Competition, and Senate Armed Services Committee members Senators Joe Manchin (D-WV), Jacky Rosen (D-NV) and Angus King (I-ME).⁹ These figures would take with them not only their depth of foreign policy expertise, but also their cohort of staffers experienced in fine-tuning the mechanics of AUKUS legislation. While Australians should feel confident of continued commitment to AUKUS in the next Congress, sustained US attention amidst a suite of competing priorities will require immense outreach to new members and their staff.

Among the most important changes to watch will be the chairmanship of the Senate Foreign Relations Committee, following the stepping down of the committee’s long-time senior Democrat Senator Robert Menendez (D-NJ). With a Republican majority, ranking member Senator Jim Risch (R-ID) may re-assume the chairmanship. Though Menendez supported AUKUS, his reticence about reform to US arms controls reportedly slowed the progress of AUKUS legislation.¹⁰ Risch has demonstrated comparatively greater urgency around AUKUS implementation, encouraging rapidly easing US defence trade controls to facilitate cooperation with Australia and the United Kingdom and calling for “laser-focus” on Pillar II.¹¹

The road ahead for a second Biden or Trump administration

For a second term Biden administration, a Republican-controlled Senate would be a significant handbrake on initial budget negotiations and key appointments. Congressional Democrats could continue deferring to the Biden administration on directing Asia policy. If Democrats take the House, it would enable the smoother passage of supplemental bills with other provisions like Ukraine aid that have splintered the Republican caucus and implicated Australian equities as collateral damage.¹²

Under a second Biden presidency, congressional Republicans would remain responsible for defining their party’s foreign policy platform. Standing up to China has been central to the framing of Republican foreign policy in the 118th Congress, obvious in the advent of the Select Committee on the CCP and the salience of Taiwan’s defence, including in justifying some Republican opposition to continued support for Ukraine.¹³ If their control of the House continues, and especially if Democrats retain the White House, staunch competitive rhetoric with respect to the Biden administration’s diplomatic efforts, referred to by leading GOP figures as “zombie engagement,” will persist.¹⁴

How exactly a second Trump presidency might influence these dynamics is unclear. In a second Trump administration, less controversial nominations could sail through a Republican-controlled Senate, but Democrats may resist budgetary measures proposed by the White House or Senate Republicans. In opposition, Republicans and Trump himself have issued more barbed criticisms of China than their Democratic counterparts. It seems unlikely that their rhetoric or approach to competition would be moderated in leadership. Some experts observe that Trump has “brought the party along with him” on concerns for free riding in US alliances.¹⁵ If Trump is re-elected, this trend could deepen, particularly with the retirement of several seasoned moderate Republicans, though Australia seems far removed from such criticisms for the time being.

In opposition, Republicans and Trump himself have issued more barbed criticisms of China than their Democratic counterparts. It seems unlikely that their rhetoric or approach to competition would be moderated in leadership.

Deep dive: The FY25 Budget appropriations environment

Whoever occupies the White House come January 2025 will have to contend with an uncertain appropriations environment in Congress. Indeed, the politics of an election year are already influencing the size and timing of this year’s budget appropriations.

Congress increasingly depends upon Continuing Resolutions (CRs) — interim measures that maintain existing government funding in lieu of a new budget agreement — to extend annual budget negotiations.¹⁶ Senior Republican lawmakers have already indicated that an FY25 CR is all but certain.¹⁷ Though such delays are common — only four budget appropriations have passed on time since 1977 — a new CR will constrain the next administration’s capacity to boost resources for US Asia strategy until well into 2025.¹⁸

Furthermore, downward budgetary pressures will limit lawmakers’ room to right-size funding for US Asia strategy. The greatest of these are the budget caps associated with the June 2023 Fiscal Responsibility Act (FRA). This measure was negotiated by President Biden and congressional Republicans to avoid a government default in exchange for a two-year limit on non-discretionary spending and a sequestration ‘trip-wire’ if those budget caps are breached.¹⁹ Before the caps were introduced, Congress routinely exceeded the Pentagon’s requests to implement the ambitions of the 2022 National Defense Strategy (NDS).²⁰ As Figure 1 shows, the FRA budget caps effectively eliminated congressional headroom to increase resourcing for US regional strategy in the 2024 National Defense Authorization Act (NDAA).²¹

Figure 1. Trump and Biden administration requests vs Congress defence budgets, FY18-FY24

Source: Office of the Undersecretary of Defense (Comptroller)

The same will be true in FY25. Indeed, the Biden administration’s FY25 budget adhered to the FRA spending ceiling to the dollar,²² leaving little room to negotiate higher spending on priority programs without cuts elsewhere or breaching Congress’ own limits. This problem is compounded by the absence of a reliable workaround. For example, the Overseas Contingency Operations account used to bypass budget restrictions by an average of US$119 billion under Obama and Trump, was eliminated in FY22, leaving few alternative avenues for funding beyond base funding.²³ The long delay of the 2023 National Security Supplemental Appropriations Act, worth US$95.34 billion in foreign aid and security assistance, illustrates the difficulty of relying on such mechanisms to right-size US regional strategy.²⁴

The appetite among prominent lawmakers to breach the FRA caps is mixed. Senior defence-focused Democrats endorse President Biden’s FY25 request and have not explicitly called for spending above limits.²⁵ However, Senate Armed Service Committee Chairman Jack Reed (D-RI) suggested in March 2024 some openness to exploring “unchartered territory” to resource security priorities.²⁶ Where GOP defence committee members have resoundingly criticised the restrained FY25 presidential request, Republican appropriators believe that it is “premature” to consider circumventing the budget caps even if they agree with their colleagues that this would underfund the National Defense Strategy.²⁷ Lawmakers agree that FY25 budget negotiations will be exceedingly contentious.

Beyond the budget caps, political incentives and structural economic challenges may inspire new budget restrictions in Congress. Though FY25 is the last year in which budget caps will apply, some officials fear they will be extended following renewed debt ceiling negotiations in 2024.²⁸ Fiscal hawks in both parties may seek to maintain or deepen cuts to both Pentagon and State Department budgets in the face of mounting government debt.²⁹ Indeed, 2024 marks the first year in which the government will spend more servicing its debt repayments than it will on national defence spending, four years earlier than projected just last year.³⁰

Experts are divided over whether a second Trump administration would see Republicans cut, match, or meaningfully exceed Biden-era defence spending.³¹ In its first term, the Trump administration consistently pushed for a larger defence budget. However, much of those increases covered growing personnel and operating costs rather than new procurements.³² His administration failed to meet its own targets for annual increases in defence spending.³³ Though it is likely that Republicans and hawkish Democrats could push Congress towards ignoring its own spending caps were Trump to return to office, a future President Trump may not necessarily support increases beyond that. A bipartisan Congress would be capable of pushing back against some Trump-style spending cuts, as was evidenced by the reduction of proposed cuts to foreign aid in his first term.³⁴

Regardless of who wins, Congress will be preoccupied with routinely drawn-out negotiations and flirt with shutdown. Senior Pentagon officials insist that the FY25 request satisfies NDS requirements, but warn that future defence budgets will need to grow in real terms to keep pace with Chinese military modernisation.³⁵ This will be especially important for underwriting flagship initiatives, including AUKUS and the Pacific Deterrence Initiative.³⁶

Deep dive: The Pacific Deterrence Initiative

A key metric for US investment in US Indo-Pacific Strategy to track under the next administration will be the Pacific Deterrence Initiative (PDI). Though it is the Pentagon that requests funding for the PDI and oversees its implementation in concert with the US Indo-Pacific Command (INDOPACOM), Congress has the final say over how the initiative is resourced. The PDI is considered a key bellwether for US regional defence strategy writ large, resourcing certain shortfalls in US regional defence strategy.³⁷

However, the PDI’s record over the last four years suggests that there is little consensus between the Biden administration, Congress and the command over how the initiative should function. Considering that the PDI has yet to be implemented by a Republican-controlled executive branch, and given both candidates’ emphasis on regional military uplift, PDI stands as a key budget account to watch in 2025.

The PDI was designed to meet two key objectives: to funnel money into Indo-Pacific initiatives in areas like capacity-building, military construction, logistics enablers, and integrated air and missile defences for key bases; and to “enhance budgetary transparency and [congressional] oversight” for US initiatives in the Indo-Pacific.³⁸ Encouragingly, funding for the PDI has increased dramatically since 2021. The combined US$34.7 billion appropriated for the PDI over four budget cycles comes close to equalling the US$38.4 billion in funding the European Deterrence Initiative (EDI) has received over the past decade (see Figure 2). That trend is likely to continue under the next Congress, budgetary pressures notwithstanding.

Figure 2. European Deterrence Initiative vs Pacific Deterrence Initiative appropriations, FY15-FY24

Source: Office of the Undersecretary of Defense (Comptroller)

Below the surface, however, the PDI remains hotly contested. These differences are stark in INDOPACOM, congressional and Pentagon PDI budget proposals (see Table 1). Beyond dollar measures, experts and former legislators have remarked that the PDI is yet to verifiably deliver on its aim of resourcing INDOPACOM priorities. They lament that the Pentagon has utilised PDI as an incomplete budget display “rather than as a strategic plan to fund and increase military capability and capacity” in Asia as intended.³⁹ Conversely, former Pentagon leaders have argued that the PDI’s utility is structurally limited given that it only captures a subset of investments — nominally, those of greatest importance to INDOPACOM — rather than the complete aperture of US resourcing for regional defence strategy.⁴⁰

Table 1. Pacific Deterrence Initiative budget requests and appropriations, FY22-25

Source: Office of the Undersecretary of Defense (Comptroller)

Protracted wrestling over the scope and purpose of PDI has meant that, even after four years of significant funding, the initiative has not met its core objectives. Congress has consistently funded PDI above administration requests, but not always to the full amount, nor against the priority workstreams requested by INDOPACOM in its annual legally mandated independent assessments.⁴¹ It is uncertain as to whether the Pentagon or INDOPACOM requests are most appropriate to right-size PDI, and public debate is limited. This contrasts with the clear consensus between the Pentagon and Congress on how to right-size the EDI (see Table 2), though the dynamics shaping that consensus behind the scenes are unclear.

Table 2. European Deterrence Initiative budget requests and appropriations, FY16-25

Source: Office of the Undersecretary of Defense (Comptroller)

Without a change in approach under the next administration and Congress alike, the PDI is likely to remain an incomplete accounting mechanism to spotlight budget allocations with contestable relevance to the Indo-Pacific. Granted, PDI is not the sole measure of US regional strategy: clear wins in advancing alliance modernisation and building out a defence industrial integration agenda with close allies like Australia and Japan show that important progress is being made. Yet, there is clearly work for the next Congress to do — in concert with the next administration — to get the PDI functioning as originally intended.

Long-term trends

The AUKUS partnership between Australia, the United Kingdom and the United States has been among the landmark foreign policy initiatives of the Biden administration.⁴² The partnership, embodying the Biden administration’s strategic concept of integrated deterrence, is made up of two pillars: the delivery of conventionally-armed, nuclear-powered submarines to Australia and the development of joint advanced capabilities and enhanced interoperability in six technology areas and across two technological working groups.⁴³

US commitment to AUKUS cooperation will certainly be sustained under a second Biden presidency and is highly likely to be sustained in a new Trump presidency. Though their approaches to strategic competition appear different, both President Biden and Trump are seized by the need to compete with China in the Indo-Pacific. AUKUS is the most significant US defence cooperation initiative contributing to that objective. More importantly, neither Biden nor Trump are likely to have any principled objection to a trusted ally endeavouring to take on a greater share of the burden in providing for its defence.

Since the first announcement, AUKUS has become increasingly embedded in US defence planning, making it challenging to undo. The passage of the 2024 National Defense Authorization Act (NDAA), which contained important authorisations for AUKUS implementation, makes AUKUS proceedings ‘business as usual’ for the next president. This is compounded by the diffusion of responsibilities for AUKUS implementation within the Pentagon and US Navy; a future president could not prevent AUKUS progress by dissolving any single position. The State Department’s announcement that AUKUS export control exemptions for Australia and Britain are expected to be finalised in the next 120 days, further cements AUKUS progress going into the next administration.⁴⁴ As a result, Australian officials have continued to voice their “complete confidence” in the future of AUKUS regardless of the election outcome.⁴⁵

Ensuring broad-based political support continues across the US system is the best way for Australia to weather changes in the Oval Office.

The internalisation of AUKUS in Congress, in the Defense bureaucracy and in the US Navy will likely assure continuity, regardless of the occupant of the Oval Office. It is Congress that holds the Pentagon’s purse strings and it is the Pentagon and armed services who will deliver on AUKUS cooperation over successive presidential administrations. There has long been consensus in both the Republican and Democratic caucuses that strengthened cooperation with Australia and the United Kingdom is in the US national interest.⁴⁶ This level of unanimity from both parties will enable the next Congress, to an extent, to set and advance a policy agenda around AUKUS, even under a reluctant president.⁴⁷

Ensuring broad-based political support continues across the US system is the best way for Australia to weather changes in the Oval Office. For that to endure, Australian diplomats will need to continue their policy advocacy in Congress. To date, more than 50 members of Congress have announced they will not be seeking re-election, far surpassing the average of 35 retirements per House election cycle.⁴⁸ The immediate task for Australia, come November, will be socialising a new cohort of lawmakers into the partnership, especially around the less-developed Pillar II.⁴⁹ Now that responsibility for AUKUS implementation is increasingly diffuse within the US bureaucracy, though still stewarded by a senior advisor within the Department of Defense, Australian officials must identify and engage with a larger group of champions to encourage continued US focus. Australia should also remain alert to the risk of budget shortfalls and blowouts in US manufacturing schedules that will shape AUKUS implementation under any president.

Blue Book

What happens under Biden

Recent efforts to promote the less-glamorous sibling of AUKUS nuclear-powered submarines — Pillar II advanced technologies — indicate a second Biden term may seek opportunities for growth and expansion in Pillar II, as the optimal pathway of Pillar I glides towards the 2027 Submarine Rotational Force West milestone.⁵⁰ Unlike the fixed pathway of Pillar I, Pillar II has scope for growth, from integrating new partners to building on limited innovation and co-development activities.⁵¹ This may include key outputs from trilateral Pillar II innovation challenges, designed by research institutions and industry in the AUKUS countries.⁵² The April 2024 announcement that AUKUS partners are “considering cooperation with Japan” on Pillar II, coupled with Canadian Prime Minister Justin Trudeau’s expression of interest in joining AUKUS, suggests a degree of momentum that the Biden administration may wish to capitalise on.⁵³

Australian Prime Minister Anthony Albanese, US President Joe Biden and British Prime Minister Rishi Sunak hold a press conference during the AUKUS summit in San Diego, March 2023.Source: Getty

With key steps to set up the enabling environment for AUKUS in place, including export control reform, and conversations progressing well around foreign disclosure, procurement policies, information-sharing and certification systems, a second Biden administration will likely place greater emphasis on increasing the volume of Pillar II outputs.⁵⁴ This could include forging trilateral pathways for the delivery of novel capabilities arising from the AUKUS innovation challenges. One essential task will be ensuring the broader defence ecosystem — including defence industry and investors — is brought into Pillar II table-top exercises in a more meaningful way, providing greater opportunities to connect with operators and government. In addition, though AUKUS legislation will not need to be passed each year, further Australian input into policy reform will undoubtedly be required as the United States seeks to reform a defence industrial and innovation base designed during the Cold War.

What Australia should do

Australia can be assured of continued commitment to AUKUS during a second Biden term. With Pillar I implementation in motion, the Biden team can be expected to turn their focus to increasing the ambition of Pillar II ‘outputs.’ Australia should closely monitor the health of its sovereign defence industry, as firms, investors and the research community look for opportunities to contribute and adapt to new export control legislation introduced in 2024 at the behest of the Biden administration.⁵⁵ This should include company-specific consultations and sector-wide assessments to ensure Australia’s smaller AUKUS-relevant companies are not being overburdened by increased compliance costs.

Red Book

What changes under Trump

Donald Trump’s former National Security Advisor John Bolton suggested commentators should save their breath, rather than try to predict the former president’s foreign policy in a second term. Why? Because, at this stage in the campaign, Trump himself does not know.¹⁴⁷ This ambiguity is especially the case for AUKUS, an initiative on which former president Trump has been conspicuously silent to date. With his sights set firmly on domestic political opponents and the war in Ukraine, submarines seem comparatively removed from Trump’s radar. AUKUS has only appeared publicly in Trump’s orbit through an infamous leaked conversation with an Australian member of his Mar-a-Lago Club.¹⁴⁸

Still, most experts are cautiously optimistic about Trump’s likely attitude towards the agreement.¹⁴⁹ Despite his long-standing reticence around cooperation with allies, the former president’s fixation on strategic competition with China makes AUKUS, an Indo-Pacific deterrence partnership with an ally paying over two per cent of GDP for its defence, a much easier sell than other Biden-era multilateral efforts. Senior Albanese government officials see “no reason” to think President Trump would be “anything other than supportive.”¹⁵⁰ That said, the former president’s self-conception as a shrewd negotiator makes it likely his impulse will be to either reject or add conditions to a landmark deal struck by his predecessor.¹⁵¹ Though AUKUS seems appealing to Trump, Australia should expect a future President Trump to seek to add his own personal mark. Trump’s calculus may emerge, in part, from the personal relationship he develops with Prime Minister Albanese.¹⁵²

HMAS RankinSource: Getty

Public comments from Trump’s would-be administration officials and advisors provide the best indication of his future stance. Former Trump administration National Security Advisor Steve Bannon has stated he does not “know anyone on the National Security Committee, anyone in MAGA land, that thinks the Australians either haven’t pulled their weight or when the balloon goes up, they wouldn’t pull their weight.”¹⁵³ Many of those floated as would-be senior members of a new Trump White House are established AUKUS supporters, including former Indo-Pacific Command Commander Harry Harris, former Congressman Mike Gallagher and Senator Dan Sullivan. Gallagher, for his part, co-chaired the AUKUS Working Group and Friends of Australia Caucus and Sullivan remains on the Senate Armed Services Committee, where he has supported AUKUS-enabling legislation.¹⁵⁴

However, other prospective administration officials, including former Deputy Assistant Secretary of Defense Elbridge Colby and Heritage Foundation researcher Alex Velez-Green, have publicly questioned the wisdom of Pillar I.¹⁵⁵ Colby remarked that transferring scarce US Virginia-class submarines to Australia on the timelines specified would be “crazy” and a refusal by Canberra to pre-commit AUKUS submarines invalidates the logic of Pillar I. Though such critics are in the minority, the famously variable internal dynamics of the previous Trump White House make it difficult to determine who would have the ear of President Trump throughout his second term. In the lead-up to the election, Australian interlocutors should be engaging with prospective members of the Trump team to ensure continued commitment and prioritisation of AUKUS.

What Australia should do

Though support for AUKUS is widespread among key personnel, apprehensions persist that the transfer of Virginia-class submarines to Australia could “unacceptably weaken” the US submarine fleet.¹⁵⁶ Accordingly, the key message to a second-term President Trump must be that AUKUS is no benevolent effort. Australian interlocutors should make a rigorous case for how AUKUS serves the US national interest. As former National Security Advisor Mike Rogers argued, a key argument to prosecute is that “AUKUS talks about investment in US infrastructure and US shipbuilding technology.”¹⁵⁷ Further, with Australian defence spending rising and investments into the US industrial base forthcoming, it must be emphasised that Australia is paying its way on AUKUS. Swift progress on Australia’s transferring of funds, placement of workers and announceables under Pillar II would be timely demonstrations of the strategic value of AUKUS cooperation for the United States.

Long-term trends

Whoever wins the election, it will be difficult to tell a positive story about US trade policy post-November 2024. Australia will need to work hard in the context of the alliance to insulate itself as best as possible from US protectionism — not to mention increased global protectionism.

President Biden has been bold on “industrial policy” but timid on trade policy. There has been little direct challenge to Trump-era protectionism — most clearly evidenced by the Biden administration maintaining the Trump administration’s tariffs on Chinese imports. Like Trump, Biden relies on crude messages of economic nationalism to court support. Both want to be seen as “pro-worker” on trade rather than favour the interests of US multinationals.

National security is increasingly a shield for inward-looking trade and investment policies, as shown by the hurdles put in the way of Japan’s biggest steelmaker, Nippon Steel, from purchasing US Steel.⁵⁶ Although Japan is a key US ally and US Steel’s operations could be requisitioned in the event of war, the deal faced considerable US Government scrutiny on national security grounds. This reflects the creep of national security into domestic considerations around maintaining US jobs and higher employment figures.

No matter who wins the election, US-China trade battles will continue to rage. Both Biden and Trump judge China as behaving unfairly on trade, and both have little interest in US leadership through the World Trade Organization (WTO). As Chinese green tech manufactured products such as electric vehicles, batteries and solar panels flood global markets (what some are now calling the second “China shock”), it is likely US tariffs on China will ratchet up further to protect US manufacturers.⁵⁷ Decades of Chinese state subsidies have led to artificially low prices on green technology and goods, influencing the United States to apply tariffs.

Compared with the first China shock of the 2000s, when Chinese imports to the United States skyrocketed, this one will be against a backdrop of acute geopolitical rivalry and a Chinese share of world manufacturing value added that already approaches 30 per cent.⁵⁸ Neither the United States nor the Europeans are in a mood to countenance further rapid growth in imports of Chinese manufacturing.

Regardless of the electoral outcome, expect “trade enforcement”⁵⁹ to feature prominently in US policy. Much of the work of the Office of the US Trade Representative (USTR) now centres on protecting US interests from unfair trade practices. Market opening initiatives will continue to be in short supply.

Australia should look at new “economic security” initiatives that are positive and aligned with shared interests, such as new agreements with the United States on critical minerals and rare earths. This could include new US investment in Australia for critical minerals refining so Australia can move into downstream production. More broadly, Australia will necessarily intensify cooperation on trade initiatives with other like-minded trading partners.

Blue Book

What happens under Biden

The Biden administration’s so-called “worker-centred trade policy” is focused on standing up for the rights of US workers, promoting sustainable environmental practices, bolstering supply chain resilience and expanding engagement with a variety of domestic stakeholders. What it is mostly not about is trade liberalisation.⁶⁰

Biden came to office critical of Trump’s bluster and his scattergun approach to tariff hikes and promising to work constructively with allies in multilateral forums. In practice, Biden has viewed trade almost entirely through the prism of domestic politics, preferring to put his energies into subsidy-heavy industrial policy and “Buy American” provisions.

Most Trump-era protectionist measures have been left in place, including tariffs on roughly US$300 billion of Chinese goods.⁶¹ There has been some modification of steel and aluminium imports, with the United States exempting imports of European steel and aluminium from Section 232 tariffs up to a certain volume after the European Union (EU) suspended its WTO dispute.⁶² At best, one could say the Biden administration supports “managed trade.”

US President Joe Biden delivers remarks alongside members of the Indo-Pacific Economic Framework at the Asia-Pacific Economic Cooperation Leaders’ Week in San Francisco, November 2023.Source: Getty

Biden scores points over Trump on two fronts. First, he is more solicitous of US allies and partners and will look to take their interests into account and dampen down trade and technology frictions where domestic politics permit.⁶³ Second, he is at least somewhat predictable compared with his Republican counterpart.

With that said, under Katherine Tai, USTR has become synonymous with union interests and the progressive wing of the Democratic Party.⁶⁴ It has been left to Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo to put a veneer of Clinton-Obama orthodoxy around the Biden international economic agenda.

If Biden is re-elected, issues to watch include digital trade, the Indo-Pacific Economic Framework and World Trade Organization reform. At the moment, all three are hamstrung in different ways.

Where the United States used to be steadfast in opposing digital trade barriers, in October 2023 USTR abruptly withdrew US support for free data flows and new WTO disciplines. It then paused digital trade negotiations in IPEF. This showed the power wielded by progressive forces within the Democratic Party opposed to the influence of ‘Big Tech,’ like Amazon, Google, and Meta, on US trade policy. It left the United States at odds with the EU, Japan, Korea, Canada, Mexico, Singapore, and Australia.⁶⁵ Some players in the Biden administration and Congress will likely seek to re-explore digital trade possibilities if Biden wins in November.

A second Biden administration would persevere with IPEF. The framework was launched with much fanfare in 2022 and includes the United States, Australia, Japan, South Korea, India and nine other Indo-Pacific countries. IPEF has four “pillars” — trade (including digital trade); supply chains; clean energy, decarbonisation and infrastructure; and tax and anti-corruption. Although IPEF’s trade pillar remains stalled, this component of the agreement could be revisited in future given that negotiations on the other three “pillars” have been concluded.

Under a second Biden term, expect further complaints about the World Trade Organization not being fit-for-purpose, especially in furthering workers’ rights, on climate action, and in countering Chi­nese trade practices.

In November 2023, the United States indefinitely postponed negotiations on digital trade in IPEF’s modest trade pillar under pressure from Democrats, led by Ohio Senator Sherrod Brown, who were worried about negative perceptions of trade in their electorates.⁶⁶ While leaving US IPEF partners bemused, it served to highlight how easily domestic politics can derail US international strategy. Whether IPEF can achieve something via its other pillars, such as new supply chains in Southeast Asia, is uncertain. It is worth noting that the Obama administration, along with then-Vice President Biden, pursued a significantly more ambitious trade agenda in their second term of office.

At the start of his term, President Biden promised to “write the rules of the road” on trade within the WTO system.⁶⁷ By 2024, virtually no rules for trade have been written. The saga over the WTO Dispute Settlement arrangements — where the United States has blocked appointments to the Appellate Body — has dragged on. US discontent with the WTO started as far back as 2011, when President Obama blocked the US appointee from serving a second term.⁶⁸ But the system has been paralysed since December 2019, when the WTO Appellate Body lost its voting quorum due to President Trump declining to vote on its replacements.⁶⁹

What Australia should do

If Biden wins, Australia should highlight additional areas for investment in Australian industry for the clean energy transition and maintain momentum to conclude IPEF. Under a second Biden term, expect further complaints about the WTO not being fit-for-purpose, especially in furthering workers’ rights, on climate action, and in countering Chinese trade practices. The question will be whether a re-elected Biden administration can provide any sort of tangible alternative. In a positive sense, there may be the opportunity to move forward on digital trade in some capacity. Australia should also prioritise keeping the United States engaged in the WTO.

Red Book

What changes under Trump

In 2018, President Trump declared proudly: “I am a Tariff Man.”¹⁶² In Trump’s first term, this played out principally via higher tariffs on nearly all steel and aluminium imports and through a tit-for-tat trade war with China.

Some countries were more successful than others at cutting deals and securing carve-outs. Others simply hunkered down and waited him out. Australia largely evaded steel and aluminium restrictions by the Trump administration, thanks to strong support for Australia from US officials within the Pentagon and State Department who lobbied for Australia to receive an exemption.¹⁶³ Japan managed to head off the threat of car tariffs by promising to eliminate certain import quotas for US agricultural products. The EU promised to import more US soybeans and liquefied natural gas, leading to spikes in both. China pledged a massive increase in imports from the United States in a deal that ultimately delivered almost nothing.

A second Trump administration promises to go back to the tariff well, only bigger and broader. Trump has talked about tariffs on China of at least 60 per cent as well as a general tariff of 10 per cent on all US imports.¹⁶⁴

A second Trump administration promises to go back to the tariff well, only bigger and broader. Trump has talked about tariffs on China of at least 60 per cent as well as a general tariff of 10 per cent on all US imports.

Doubling down on China, Trump has promised to revoke China’s most-favoured nation status.¹⁶⁵ He has also promised to adopt a four-year plan to phase out all imports of essential goods from China — on everything from electronics to steel to pharmaceuticals — and block Chinese ownership of any vital US infrastructure.¹⁶⁶ Trump has painted IPEF as a wrecking ball aimed at American workers and promised to withdraw from it, which would be a repeat of what happened with the Trans-Pacific Partnership.¹⁶⁷

The narrative around a second Trump term tends to be: “This time we’re serious.” Plans appear more developed and Trump loyalists would be less likely to encounter resistance from establishment Republican figures who pushed back on a number of trade issues in the first administration. Most eyes are on Robert Lighthizer, Trump’s former US Trade Representative, who appears destined to play an even bigger role in a future Trump administration’s economic policy. Lighthizer has penned multiple op-eds and a book in favour of tariffs and decoupling¹⁶⁸ and has criticised the WTO as being “wholly inadequate to deal with China.”¹⁶⁹

The US flag flies over a container ship unloading its cargo from Asia at the Port of Long Beach, California, August 2019.Source: Getty

Lighthizer argues that tariffs are “the vital part of any serious reindustrialisation” by the United States.¹⁷⁰ Traditional trade agreements are seen as a disaster, while China is viewed as the biggest threat the United States has faced in its history. His 2023 book No Trade is Free: Changing Course, Taking on China, and Helping America’s Workers gives the flavour of where he comes from.¹⁷¹

There are nuances between Lighthizer and his would-be boss. Whereas Trump has tended to fixate on bilateral trade deficits, Lighthizer sees tariff policy as a way of dealing with persistent US trade deficits over time.¹⁷² But on all the key trade issues, Lighthizer is a Trump true believer.

The question arises — what, if anything, can be done to deter or mitigate the impact of a “Trump shock” on trade? As is often the case, the most persuasive messages can often be delivered not by trading partners but by financial markets (and perhaps the Trump donor class).

What Australia should do

For Australia, some well-worn arguments will be necessary, though perhaps not sufficient. First, the United States has a trade surplus with Australia. Second, it is a staunch ally committed to lifting its defence spending and investing in the US industrial base as part of AUKUS.

Beyond this, Australia needs to remain flexible and agile, both economically and diplomatically, to manage the risks of greater US protectionism and take advantage of opportunities that may present. Initiatives on critical minerals seen as bolstering US national security remain a good starting point.

Long-term trends

The revival of an ambitious industrial policy agenda is one of the standout features of the Biden presidency. No matter who wins the US election in November, this embrace of a more interventionist approach to economic policy will continue, based on the urge to “reshore” key manufacturing industries, “de-risk” supply chains and reduce economic interdependence with China.

Industrial policy can be defined broadly as government support for specific industries or technologies deemed to be of strategic importance. It can take a variety of forms, including subsidies, tariffs and other trade restrictions, tax incentives, government procurement measures and preferential access to credit. The Biden administration has gone big on direct subsidies and tax credits designed to grow key sectors, accelerate the green energy transition, maintain US technological leadership and boost investment in struggling regions.

The revival of an ambitious industrial policy agenda is one of the standout features of the Biden presidency.

An American tradition of industrial policy goes back to the early days of the Republic and the manufacturing push by the first Treasury Secretary, Alexander Hamilton, in the 1790s. The “Hamiltonians” are again grabbing the wheel in both major parties, albeit with different destinations in mind. As one commentator noted in March 2024:

"At an intellectual level, it’s quite clear that there’s a big pendulum shift happening on the political left in America, and to a certain extent on the right, as well. Both have embraced tariffs, subsidies and other government interventions. The state will certainly be more dominant no matter who wins the US presidential election in November."⁷⁰

There is a consensus within the United States and among key allies that the China challenge demands sustained investments to support key sectors and technologies. Whether Biden or Trump wins the election, the United States will continue down a path of reshoring manufacturing capacity — but don’t expect a future Trump administration to talk much about “friendshoring.”

Economic disengagement between the two superpowers — “de-risking” if not full-blown “decoupling” — is not only being driven by the United States. Under President Xi Jinping, China continues to enhance its economic self-sufficiency and reduce economic linkages with the West. The feeling is mutual.

The signature example of where bipartisan support exists on industrial policy in Washington is reshoring semiconductor production, off the back of the 2022 CHIPS and Science Act. This law earmarked US$52 billion in subsidies, along with an estimated US$24 billion worth of tax credits over eight years. It aims to reverse a slide that has taken the US share of global chip production from close to 40 per cent in 1990, to around 12 per cent in 2022.⁷¹

The Biden administration has set a goal of having 20 per cent of the world’s advanced semiconductors made in the United States by 2030. With a big chunk of semiconductor subsidies going into Republican states, there will be no unwinding of this push. Indeed, efforts to get Taiwan Semiconductor Manufacturing Company, the world’s largest chip foundry, to build a fabrication plant in Arizona began under the Trump administration.⁷²

Another area where bipartisanship should prevail is around supply chains for critical minerals and rare earths. Whether the goal is decarbonisation or sustaining US military superiority, there is an increasing desire in the “Global West” to break China’s stranglehold on everything from processed graphite and refined lithium to rare earth metals.

Blue Book

What happens under Biden

The Biden industrial policy agenda purports to be a radical departure from so-called “trickle-down economics” and the market-oriented “Washington consensus” of the 1990s. The likes of Treasury Secretary Janet Yellen see it as a form of modern supply-side economics aimed at crowding-in private investment and boosting innovation. In practice, it can appear equally as a vehicle for rewarding parts of the Democratic Party coalition including organised labour and environmental groups.

What’s distinctive about the new enthusiasm for industrial policy in Washington is the sheer size of the incentives on offer and the breadth of goals it seeks to achieve. The three signature pieces of industrial policy legislation in Biden 1.0 — the 2021 Infrastructure Investment and Jobs Act, the 2022 CHIPS and Science Act and the 2022 Inflation Reduction Act — come at an estimated cost of about US$2 trillion.⁷³ There is a high degree of “conditionality” written into various laws — everything from labour standards and childcare requirements to China-related investment restrictions and clean technology supply chain requirements.

What’s distinctive about the new enthusiasm for industrial policy in Washington is the sheer size of the incentives on offer and the breadth of goals it seeks to achieve.

Expect Biden 2.0 to be mostly about industrial policy implementation rather than new spending, especially in an economy running at near-full capacity. A surge in factory investment is underway, but further progress will be fraught with the challenges of reshoring manufacturing activity, reducing reliance on East Asian supply chains, and meeting clean energy targets.⁷⁴

In the context of the global energy transition, Australia’s main interest lies in sectors like critical minerals and hydrogen. However, it is important not to overlook the large industrial policy element of the Pentagon’s budget with opportunities in specific technology areas (including AUKUS Pillar II technologies) and in critical minerals. Passage of the Fiscal Year 2024 US National Defense Authorization Act in December 2023 positions Australia as one step from being a “domestic source” under Title III of the US Defense Production Act.⁷⁵

President Joe Biden arrives to speak on rebuilding US manufacturing through the CHIPS and Science Act at the groundbreaking of the new Intel semiconductor manufacturing facility near New Albany, Ohio, September 2022.Source: Getty

Australian companies looking to take advantage of provisions in the Inflation Reduction Act (IRA) continue to work through a blizzard of complex implementation guidance. In some cases, this guidance has emerged relatively recently.⁷⁶

As a vehicle for seizing opportunities, the Albanese government has put considerable store in the Australia-United States Climate, Critical Minerals, and Clean Energy Transformation Compact, announced in May 2023.⁷⁷ This is touted as the “third pillar” of the alliance. As a free trade agreement partner, Australia already has favoured status for supplying critical minerals into US supply chains under the IRA, but other (non-FTA) countries are scrambling to secure similar treatment. The art will be turning Australia’s significant deposits of lithium, cobalt, vanadium and rare earth elements — all crucial to clean energy technologies — into tangible commercial deals over the coming years.

What Australia should do

As the demandeur on the compact, Australia should be pushing to align standards and remove regulatory barriers preventing projects getting up in both countries. The new battery supply chain working group and the Australia-US Taskforce on Critical Minerals provide channels for this work program if Biden is re-elected.⁷⁸

Red Book

What changes under Trump

Visiting Australia for the Australian-American Leadership Dialogue in 2023, former Wisconsin Republican Congressman Mike Gallagher characterised his party as sceptical but divided over what he called President Biden’s “great experiment” on industrial policy. Outside of defence and national security, Reagan-era Republicans were prone to dismiss industrial policy as “picking winners” and “corporate welfare.”

US President Donald Trump speaks during a tour of a Honeywell International plant in Phoenix that manufactures personal protective equipment, May 2020.Source: Getty

More recently, however, conservative organisations like American Compass and the America First Policy Institute have taken to championing industrial policy as part of a more active role for government in shaping the US economy.¹⁷⁶ High-profile Republican Senators such as Marco Rubio and Tom Cotton have become forceful advocates for reshoring US manufacturing.¹⁷⁷ Again, the emphasis is on building supply chain resilience, reducing economic dependence on China and providing new economic opportunities in communities hollowed out by deindustrialisation.

Should Trump win in November, the key question surrounds which parts of Biden’s industrial policy he would seek to unwind. Trump slashed Obama-era environmental regulations on fossil fuel production and he has taken to labelling Biden’s policies as the “Green New Scam.”¹⁷⁸ Green transition programs that are most at risk include attempts to incentivise Americans into electric vehicles (EVs). This may not be straightforward, with large chunks of money already committed to new EV and battery factories in states like Ohio, Tennessee, and North Carolina.¹⁷⁹ While slicing back spending programs is one thing, taking away tax credits from voters is a tough ask for politicians keen on lower taxes.

If Trump wins, the Albanese government would be wise to double down on efforts to shore up supply chains for critical minerals and rare earths.

Whereas Democrats are passionate about subsidising clean “industries of the future,” expect a future Trump administration to rely heavily on trade interventions to protect sectors like steel and aluminium. Just as he did through both his signature 2017 tax legislation and extensive executive orders, Trump would look to once again slash his predecessor’s regulations on business, in this instance paying particular attention to those attached to industrial policy provisions on environmental or social policy grounds.¹⁸⁰ According to the US Chamber of Commerce, the Biden administration has issued about twice as many regulations considered “economically significant” (defined as having at least a US$200 million annual effect on the US economy) relative to the Trump administration.¹⁸¹

A Trump administration could be more aggressive in using government levers to force US firms — especially on Wall Street — to disengage from China. Whereas Biden administration officials such as Jake Sullivan use calibrated language about a “small yard, high fence” strategy to deny China access to advanced technologies, many Republicans are keen to expand the yard into other sectors to stop US pension funds, venture capitalists and the like investing in Chinese companies.¹⁸²

What Australia should do

If Trump wins, the Albanese government would be wise to double down on efforts to shore up supply chains for critical minerals and rare earths. This would narrow the focus of the “third pillar” compact, but in a way that is clearly beneficial to both sides. Talking up Australian investments in the US defence industrial base under AUKUS would not hurt either.

Long-term trends

Entrenched and bipartisan support for an assertive US approach to China will continue regardless of who wins the 2024 election. This bipartisan support undoubtedly began during the Trump administration, which redefined the debate on China when it broke the conventional wisdom that deepened US engagement with China would result in changes in China’s politics, economic behaviour and foreign policy.

The Biden administration broadly embraced the Trump administration’s views on China. As incoming Secretary of State Antony Blinken told Congress in his January 2021 confirmation hearings: “President Trump was right in taking a tougher approach to China ... I disagree very much with the way that he went about it in a number of areas, but the basic principle was the right one, and I think that’s actually helpful to our foreign policy.”⁷⁹

China’s President Xi Jinping and US President Joe Biden meet on the sidelines of the G20 Summit in Bali, November 2022.

An embrace of their predecessor’s assertive approach as well as increased risk threshold became quickly visible in the Biden administration’s maintaining of considerable tariffs on Chinese goods and — perhaps most infamously — its exceptionally undiplomatic behaviour at the administration’s first bilateral summit with China in March 2021, where the two countries’ top diplomatic officials engaged in what media characterised as a “war of words” in Alaska.⁸⁰

In Congress, this more competitive US approach led to then-Speaker of the House Nancy Pelosi’s August 2022 visit to Taiwan. It also led to the April 2024 votes for aid to Taiwan and the Indo-Pacific (385 in favour and 34 against) — particularly in comparison to aid to Ukraine (316 in favour and 94 against) — as well as the thoroughly bipartisan conduct of the House of Representative’s Select Committee formed in 2023 on “Strategic Competition between the United States and the Chinese Communist Party.” Maintaining such bipartisanship in an election year is no small feat.

This bipartisan consensus on China will likely remain unchanged for the next presidential administration because the circumstances driving it — most notably China’s destabilising military and economic behaviour — remain unchanged.

China’s persistently destabilising behaviour in the security realm includes undergoing the largest military build-up since the Second World War, a quadrupling of its nuclear capabilities, chronic refusals to maintain lines of communication with the US military in times of crises, growing militarisation of its territorial disputes, ramped up harassment of US treaty allies and Taiwan, and ever-increased coordination with and support for Iran and Russia — and Russia’s invasion of Ukraine.

This bipartisan consensus on China will likely remain unchanged for the next presidential administration because the circumstances driving it — most notably China’s destabilising military and economic behaviour — remain unchanged.

As much as Xi Jinping has repeatedly met with business leaders across the developed world to court much-needed investment in China’s slowing economy, it is unlikely Beijing’s security and economic policies will revert to the halcyon days of US trade with China in the early 2000s. Indeed, further limits to the US-China trade relationship can be expected regardless of who wins in 2024 because, again, Beijing’s behaviour in this area remains unchanged. This includes continued intellectual property theft of US technologies in the pursuit of Chinese technological supremacy over the United States, antagonising (and sometimes even arresting) US entities in China, and persistent state subsidies resulting in overcapacities that flood global markets.

The anticipated flood of artificially priced and state-subsidised Chinese green goods — including solar panels and batteries but particularly EVs — will not be accepted with open arms by any White House. It will only further fuel the US pursuit of de-risking, including but not limited to financial sanctions of certain Chinese entities and subjecting goods to significant tariff increases.

Strategic competition with China — particularly in the military, technological and economic realms — will undoubtedly remain a bipartisan priority in Congress and across the US national security establishment during the next administration. Whoever wins the 2024 presidential election will seek high-level bilateral meetings with Xi Jinping in order to decrease the likelihood of misunderstandings. More specifically, however, the primary area where both candidates agree at this juncture is the need to alter China’s trade practices.

Beyond the well-known necessity of continued burden sharing, Australia will need to prepare for increased levels of pressure resulting from strategic competition, as well as a clear-eyed assessment of where such pressure aligns — or doesn’t — with its own interests. Benefiting from a Free Trade Agreement, robust alliance, and deeply bipartisan support, Australia has arguably never been more influential in Washington. Australia should leverage that influence in support of more multilateral efforts and institutional approaches towards Beijing.

Blue Book

What happens under Biden

As a career politician with half a century of experience in Washington and as the former vice president of an administration that arguably accommodated China’s rise more than contested it, some worried that President Biden and his administration would be risk-averse and avoidant of strategic competition with China. The extensive publications by the administration’s foreign policy team ahead of the 2020 election,⁸¹ its undiplomatic summit with China in Alaska in early 2021, and its subsequent policies and approach embracive of strategic competition helped disabuse many of that concern.

Yet it is important to highlight what contributed to the Alaska summit’s tensions and how they differed from prior instances of bilateral tensions. Chinese leaders may have been surprised by the newly elected Biden administration’s assertiveness, with Secretary Blinken telling Chinese officials in Alaska that US policy towards Beijing “will be competitive where it should be, collaborative where it can be and adversarial where it must be” instead of reverting to the Obama administration’s more accommodative approach towards Beijing. Chinese leaders were probably more taken aback, however, by the scope of what Secretary Blinken said animated the Biden administration’s “deep concern with actions by China.” Pivoting away from the Trump administration’s more mercantilist concerns that prioritised a bilateral trade deal and the Obama administration’s limited concerns about China’s conduct in the South China Sea, Blinken dramatically broadened the areas of US grievances with China to include “Xinjiang, Hong Kong, Taiwan, cyberattacks on the US [and] economic coercion of our allies.” Explicit criticism of China’s internal human rights abuses was not common practice in bilateral meetings with preceding US administrations, with President Biden’s most immediate predecessor reportedly indifferent to Xinjiang, Hong Kong and Taiwan.

A little over a year after the contentious Alaska summit, Secretary Blinken further outlined the administration’s policy on China to a framework of “invest, align and compete.” Within this framework, the administration sought to simultaneously pursue unprecedented domestic investments in future-oriented US industries, implement an aggressive limit on China’s own technological development, and dramatically increase alignment with allies and partners in opposition to China’s revisionist behaviour.

The bolstering and expansion of bilateral US alliances in Asia into what Jake Sullivan calls a “latticework of alliances and partnerships globally that are fit for purpose for the 21st century” makes clear that, unlike its predecessors, the Biden administration will not change its approach to China in pursuit of a bilateral trade deal. The fact that significant aspects of the “invest, align and compete” initiatives and legislation — ranging from AUKUS and the Indo-Pacific Economic Framework to the 2022 CHIPS and Science Act — will likely only bear results in the 2030s (long after a second Biden term ends) underlines the significance and the expected timeframe of the US view of strategic competition.

A bilaterally-oriented approach to China — which characterised the early years of the Obama administration as well as many aspects of the Trump administration — will continue to be of lesser importance to a second Biden administration. A broader US approach to China will continue, both in terms of greater incorporation of regional allies and partners’ viewpoints as well as challenging a wider scope of Chinese behaviour. Ultimately, the Biden administration has decisively concluded that, while lines of bilateral communication with Beijing should remain open, US interests in the region are best pursued by engaging with those around China, not China itself.

Ultimately, the Biden administration has decisively concluded that, while lines of bilateral communication with Beijing should remain open, US interests in the region are best pursued by engaging with those around China, not China itself.

Today, after unprecedented domestic investments resulting in a new era of US industry policy as well as the reinvigoration and deepening of alignments with partners and allies, the Biden administration is now charting a course of “responsibly managed competition” with China. This is most notable in supporting lines of communication between militaries and people-to-people ties. As one senior State Department official told media in April 2024, ahead of Secretary Blinken’s second trip to China in less than a year: “We have set out to stabilize the bilateral relationship without sacrificing our capacity to strengthen our alliances, compete vigorously, and defend our interests.”⁸²

What Australia should do

As a result of the China challenge, in a second Biden administration, Australia should be prepared for deeper engagement and collaboration with the United States in diverse fora. Economically, the turn towards industry policy and trade protectionism that China spurred, both in the United States and globally, presents both opportunities and challenges for further US-Australian cooperation. Strategically, Australia should continue efforts that expand regional deterrence by ever deeper coordination with US allies and partners in the region while remaining aware of Beijing’s efforts to undermine the US alliance network. Closer coordination with the United States and US allies and partners on economic and technological issues will be crucial to safeguarding freedom, rights and prosperity in the Indo-Pacific and mitigating Chinese coercion.

Red Book

What changes under Trump

Few actions of the Trump administration had a wider impact than its breaking of conventional wisdom on China and introducing strategic competition. Yet as much as the former president is widely perceived to have been tougher on China than any of his recent predecessors, most notably through his initiating a trade war with China in July 2018, it is important to note that he did not necessarily want the bilateral relationship to remain as aggressive.

In January 2020, President Trump heralded the signing of the “Phase One” bilateral trade deal with China, requiring China to purchase an additional US$200 billion in US goods and services while undergoing modernising reforms to its economy. By the next month, a period during which the Chinese Government actively suppressed information about the coronavirus, President Trump boasted of “the best relationship we’ve ever had with China, including with President Xi.” Covid would eventually limit further progress in Trump’s bilateral ambitions. By 2022, data indicated that China only bought 57 per cent of what it pledged to buy and had moved further away from implementing economic reforms the United States had sought.¹⁸⁵

Trump’s intense focus on the bilateral relationship, specifically the trade deficit, often came at the expense of issues that the majority of Congress and the rest of his administration cared about, ranging from China’s takeover of Hong Kong and Uyghur internment camps in Xinjiang to the treatment of Chinese firms ZTE and TikTok.¹⁸⁶ Furthermore, Trump’s well-known indifference to Taiwan now sees the former president maintaining “strategic ambiguity” about whether he would defend it against a Chinese invasion or not while adding that he sees Taiwan as an economic rival, publicly saying “Taiwan did take all of our chip business … We should have taxed them. We should have tariffed them.”¹⁸⁷

China’s President Xi Jinping and US President Donald Trump at a welcoming ceremony in Beijing, November 2017.Source: Getty

The moderating impact of Congress and those in his administration, including the National Security Council and a conventional vice president, should not be overlooked. Whether or not a second Trump administration will feature the calibre of national security personnel who pushed back against the president in his first term remains debated. Yet there is little question that Congress will limit Trump’s ability to carry out destabilising behaviour, having already inserted language in legislation in 2023 that limits the president’s ability to withdraw from NATO.¹⁸⁸

Within the laser-like focus on the bilateral trade relationship, the former president has already committed to implementing tariffs of 60 per cent — or even more — on imports from China in his second administration. Likely members of his cabinet, including former US Trade Representative Robert Lighthizer have supported ending permanent normal trade relations with China and the prohibition of any Chinese company from operating in the United States without reciprocal access to US firms.

US-China relations today are significantly different than they were during the Trump administration. As much as the first Trump administration unilaterally broke convention, a second Trump administration wanting to exact substantive and lasting changes to China’s economic behaviour or limit China’s technological development will need to prioritise building multilateral coalitions.

What Australia should do

Canberra, like other capitals around the world, is both more familiar with and better prepared for a Trump presidency than it was in 2016. With that said, Australia ultimately ended up arguably faring better than any other country in the world during the first Trump administration in no small part due to its strategic and pragmatic approach to an exceedingly unconventional administration. Australia will need to, once again, double down on engagement with a diverse array of US counterparts during a second Trump administration while bolstering ties with US allies like Japan and South Korea and partners like Taiwan. It will also need to assume more responsibility for matters that President Trump will likely be indifferent to but that remain in Australia’s national interests, including democracy and human rights in the Indo-Pacific.

Long-term trends

Three important constants need to be factored into any analysis of the coming presidential term and its implications for Europe, regardless of a Democratic or Republican presidential victory. In the realm of foreign and security policy, the bipartisan consensus is indisputable — outcompeting China will be the key policy preoccupation for both a second Biden or Trump administration.⁸³ Consequently, bolstering US influence in the Indo-Pacific region will remain the long-term strategic priority despite the acuteness of security crises in Europe and beyond.

On the economic policy front, the adoption of industrial policies as a cornerstone of US China strategy is also a point of convergence between the Democratic and Republican parties, signalling the end of the conventional neoliberal paradigm of unbridled trade liberalisation.⁸⁴ The shift towards protectionism and economic nationalism suggests that European states will have to continue to craft their economic policies against the backdrop of a fragmented global economic order, characterised by heightened competition. In brief, initiatives such as the Transatlantic Trade and Investment Partnership (TTIP) are a remnant of a bygone era. Europe will have to navigate its economic relations with the United States which will continue to vigorously pursue industrial policies and likely implement further trade restrictions.

Lastly, the spectre of continuing political polarisation in the United States looms large, threatening to impede effective governance on both domestic and foreign policy fronts.⁸⁵ Under such conditions, we can expect legislative gridlock, budget crises, and tensions between federal and state levels of government. There are myriad ways this can spill onto foreign policy — from immediate doubts about US commitment and credibility to outright policy failures due to the lack of appropriate resourcing. In recent times, this was most vivid in the context of splits within the Republican party and interbranch struggles over the US commitment to NATO.⁸⁶

Blue Book

What happens under Biden

If President Biden wins a second term, his legacy will be that of the last Atlanticist president, bookending an era characterised by a deep-seated commitment to transatlantic alliances forged in the aftermath of the Second World War. Regardless of the party affiliation of the US president who enters the White House in 2029, European partners and allies would be well advised to prepare for a Biden successor to be someone who will lack the visceral memory of that era and may not possess the same level of commitment to cooperation with Europe. This shift in generational perspective within both parties has profound implications for the future of transatlantic relations.

Source: Getty

Precisely because of this and with the understanding that second terms are usually all about legacy, President Biden will undoubtedly invest efforts into pressing for the strengthening of NATO in a way that would make European allies more capable of providing for their own security in the long run.⁸⁷ This will need to include supporting dialogue and coordination between NATO and the European Union, as the latter becomes a more significant geopolitical actor with much greater ambitions in defence and security policy.⁸⁸ In brief, the Biden administration’s approach to the alliance will be one marked by well-meaning proofing for the post-Atlanticist presidents that will follow him by asking Europeans to continue to invest in their defence and better coordinate those efforts.

At the same time, there is little reason to believe that on a declaratory level, the second Biden term in office would be anything less than supportive of Ukraine’s struggle against Russia. However, these assurances will be tempered by the political challenges at home, particularly if the GOP ultimately gains control of one or both of the chambers of Congress, or if the Democrats only hold a slim majority. Moreover, there is a heightened risk of policy drift, which has already been at play to an extent as Ukraine is becoming sidelined amidst broader geopolitical developments and other pressing security crises.⁸⁹

Where the Biden administration has been particularly vocal is in its efforts to foster cross-regional cooperation between allies across the Euro-Atlantic and Indo-Pacific theatres. This represents a notable departure from traditional siloed thinking about alliances and reflects a recognition of the interconnectedness of global challenges and the importance of collaboration in addressing them.⁹⁰ As European states and entities increasingly understand the importance of the Indo-Pacific to their own security, the Biden administration will know how to utilise the convergence in interests ranging from China’s unfair economic practices to supporting regional development and resilience.⁹¹

As European states and entities increasingly understand the importance of the Indo-Pacific to their own security, the Biden administration will know how to utilise the convergence in interests ranging from China’s unfair economic practices to supporting regional development and resilience.

Moreover, compared to Trump’s potential second term, Biden’s tenure brings about greater prospects for friend-shoring and consensus-building on trade issues. Initiatives such as the EU-US Trade and Technology Council (TTC) may not have borne much fruit in his first term, but a second Biden term may, similar to the second Obama term of office, help give the administration more trade ambitions.⁹² Additionally, coordinated efforts on sanctions and export controls will continue to demonstrate a shared commitment to upholding international norms and addressing common security threats. However, European partners should also understand that President Biden’s trade agenda is trying to tackle multiple challenges at once — from job creation and responding to climate change, to managing great power competition, which will make difficult trade-offs inevitable.⁹³

What Australia should do

For Australia, the shifting dynamics in transatlantic relations present both challenges and opportunities. Cooperation with NATO becomes more seamless during periods of Atlanticist leadership in the United States. As such, Australia should seize this opportunity to deepen its relations with NATO and European allies, leveraging existing frameworks for collaboration on security and defence-related matters in frameworks such as NATO and the IP4 which also includes Japan, the Republic of Korea, and New Zealand, bilateral and minilateral security cooperation with key European powers, and cooperation on pressing global challenges such as climate change.

Red Book

What changes under Trump

It would hardly be an exaggeration to state that the potential return of former president Trump to the White House poses an existential challenge to US-Europe relations and cooperation. In recent presidential terms, a notable split between Democratic and Republican priorities in theatre selection has emerged, reflecting ideological differences. President Trump’s administration notably shifted focus towards the Middle East over Europe, contrasting with Democrats who agree with Republicans in prioritising the Indo-Pacific but rank the Euro-Atlantic region as the nation’s second most important region, particularly after Russia’s full-scale invasion of Ukraine.

There is little evidence to suggest that a second Trump administration would be more sympathetic towards European allies and partners. This reflects the would-be president’s zero-sum view of international relations as he perceives the United States as bearing disproportionate burdens in terms of security commitments to Europe while suffering trade imbalances.¹⁹³ Granted, criticisms of European defence underspending hail back to the early years of the Cold War, but former president Trump is unique in the way he has tied security commitments to trade relations, as well as openly questioned defending smaller states in the alliance.¹⁹⁴ However, having said that, even during his first term his administration continued assurance policies started under President Obama and he maintained positive relations with Central and Eastern European countries.¹⁹⁵ Moreover, he has a proven affinity towards illiberal leaders in Europe, which could translate into greater favour for those countries should he be re-elected.¹⁹⁶ At the same time, the question also remains as to the extent to which European leaders would be willing to engage in transactional deals with the Trump administration on specific issues such as defence and trade based on their experience during his first term.¹⁹⁷

More than anything else, the spectre of Trump’s return to power has raised concerns that his presidency could precipitate actions that would undermine US membership in NATO.

More than anything else, the spectre of Trump’s return to power has raised concerns that his presidency could precipitate actions that would undermine US membership in NATO either through the ongoing and open questioning of America’s commitment to collective defence as outlined in Article 5 of the Washington Treaty or more concrete steps such as executive and legislative action. At present, European NATO states are ill-prepared for such a possibility although there have been some major announcements as to how NATO could be “Trump-proofed.”¹⁹⁸

Furthermore, Trump’s reactions to Russia’s war against Ukraine underscore the potential challenges of a second term. If elected, the former president has made it clear that he would exhibit a greater appetite for expedient and swift talks with Russia at the expense of Ukraine’s interests, as well as conditioning financial and military support in the form of loans rather than aid to Ukraine.¹⁹⁹ Certainly, during a potential Trump presidency, congressional leadership from GOP ranks would find it much harder to challenge the president’s stance. Moreover, given the vast partisan differences in public support to Ukraine, Republicans in the legislature would not be facing such pressure to vote for large aid bills as they have had with President Biden in the White House.²⁰⁰

US president Donald Trump during a press conference at the NATO Summit in Brussels, July 2018.Source: Getty

Additionally, Trump’s propensity for trade wars and economic nationalism could further strain relations with Europe. The future Trump administration is bound to keep the narrow reading of “made in America” as the key organising principle. Few aspects of Trump’s long career in the public eye have been more consistent than his trade protectionism. This means that rather than seeing some opening for ally- and friend-shoring, there would be little else but onshoring. His presidency would also usher in further waves of deregulation, particularly in the finance sector and regarding climate governance, thereby further contributing to the transatlantic rifts.²⁰¹

Finally, while the Biden administration has acted as spiritus movens in supporting and encouraging different modes of cross-regional cooperation between its Euro-Atlantic and Indo-Pacific allies, a second Trump administration is more than likely to abdicate this role. Instead, it is more than reasonable to expect that it would opt for discrete bilateral and minilateral approaches to promote US interests at the expense of other frameworks.

What Australia should do

In light of these developments, Australia must remain vigilant and proactive in navigating these shifting dynamics. Where possible, the Australian Government should lobby the Trump administration for cooperation with like-minded countries, recognising that partnering with European partners is integral to defence and deterrence against shared threats posed by China, Russia, North Korea, and Iran. Moreover, Australia should pursue partnerships with European countries independently, leveraging existing frameworks and exploring possibilities for new arrangements to contribute to the preservation of the rules-based order and to deepen cooperation on security, trade, and other areas of mutual interest.

Long-term trends

No matter which candidate returns to the White House in 2025, US foreign assistance budgets will face strong downward pressure. There are two reasons for this.

Fiscal challenges

First, with annual US Government budget deficits near US$1 trillion per year, the pressure on Congress to cut overall spending will not abate. Fiscal conservatives in Congress have been demanding cuts to discretionary spending across the board with foreign aid a particularly vulnerable target.

From 2010 to 2023, US assistance declined in real terms from US$63 billion to US$54 billion in annual obligations (with the notable exception of 2022 when COVID, Ukraine and other global crises caused a temporary jump to US$70 billion).⁹⁴ The 2024 foreign aid budget is slated to take a six per cent cut,⁹⁵ one of the sharpest cuts in US Government spending this year.

Waning political support

Second, bipartisan political support for the US foreign assistance program is faltering in several ways. The recent rise of isolationism on the right side of the political spectrum has had its sharpest impact on foreign assistance, which has ever fewer Republican champions in Congress. In the past generation for example, bipartisan coalitions in Congress authorised a massive anti-HIV/AIDS program⁹⁶ and a huge bilateral food and agricultural assistance program,⁹⁷ but those days may be coming to an end. The recent Congressional approval of Biden’s supplemental national security spending for Ukraine, Israel and Taiwan may be an anomaly.

The easy (and incorrect) criticism of international aid — that it benefits foreigners at the expense of Americans — has always been present, but now has new salience as former president Trump drives an “America First” message. Congressional Republicans are increasingly from states and districts where the Democratic Party, whose candidates are more likely to champion foreign aid, cannot field competitive candidates. With a congressional Republican incumbent’s likely political threat from the populist right in a party primary contest, these legislators are happy to adopt Trump’s criticism of foreign aid as an easy way to show their support for the nationalist message.

A US Air Force Hercules aircraft drops humanitarian aid into the Gaza Strip, March 2024.Source: Getty

Impact of Ukraine dilemma

The lack of US political consensus on military aid for Ukraine, while not an official development assistance effort, has driven uncertainty over other projects, such as humanitarian assistance to the Middle East, including Gaza, Yemen and Sudan. Whether or not to provide weapons to Ukraine has become the focus of the political debate on the US global leadership role. Most Republicans in Congress have now voted against military aid for Ukraine, while many progressive Democrats have publicly expressed support for a negotiated solution to the conflict.⁹⁸

Humanitarian and global health projects under threat

Even the United States’ flagship global health program of the last quarter century, the President’s Emergency Plan for AIDS Relief — which began during the George W. Bush administration and is estimated to have saved up to 25 million lives⁹⁹ — has suffered from shakier political support this year. Instead of the usual bipartisan vote to reauthorise the program for five years, Congress opted for a one-year extension as key Republicans used specious abortion arguments to undermine support for the once-popular project.¹⁰⁰

Humanitarian assistance programs — primarily food and shelter for those impacted by war or climate change — are also losing support. Once the politically strongest component of the US foreign aid program, food aid support is suddenly weakening. Political sensitivities among Democrats over the Gaza war and growing isolationism among Republicans are the immediate cause. Long-term, the lack of a direct voter connection to food aid programs may be to blame.

Who decides?

Although presidential leadership and policy choices are tremendously significant, Congress is the true decider when it comes to US foreign assistance budget levels.

During the first Trump administration, the president requested massive cuts in foreign assistance, which Congress largely ignored. Congress, under Republican leadership in the administration’s first two years and then Democratic leadership in the latter two years, funded foreign assistance at relatively stable levels throughout those four years. Also at that time, Republicans and Democrats in Congress drove the creation of the US International Development Finance Corporation (DFC), a significantly larger entity than its predecessor, the Overseas Private Investment Corporation, to meet the challenge of China’s Belt and Road Initiative. The DFC has been a smart improvement and is playing a key role in supporting the Ukrainian wartime economy.

It is notable that US aid levels are now lower under President Biden than under President Trump (which in turn were lower than under President Barack Obama). Democratic priorities — primarily climate and gender programs — have very little support on the Republican side of the aisle. Meanwhile, Republican priorities — meeting China’s foreign aid and influence efforts and supporting vulnerable allies, particularly Israel — have some support among Democrats.

What happens under Biden

A second term for Biden would likely further expose weaknesses in political support for the current foreign assistance program, which, absent significant changes, is likely to continue its gradual budgetary decline. Even modest congressional cuts in funding could lead to desperate reform proposals from the White House. Foreign assistance advocates on the left side of the political spectrum have long desired a more substantial role for the leading US aid element, the US Agency for International Development (USAID), in the national security bureaucracy. Putting the USAID Administrator formally into the Cabinet could be done by executive action. Transforming the agency into a “Department of Development” would only be possible with large Democratic majorities in both chambers of Congress. It is not clear that either action would dramatically impact political support for the overall aid program.

A more bipartisan approach to reform would be to reconfigure aid programs and aid structures to meet the challenges posed by China’s foreign aid and influence efforts. Republicans in Congress might support higher aid levels if it was demonstrated that the funds were more concretely addressing national security concerns, particularly in the Pacific and Southeast Asia. For example, US aid programs should be a component of diplomatic and other incentives to turn Pacific Islands Forum nations away from Chinese influence. The United States cannot afford for the 2022 security pact between China and the Solomon Islands to be replicated in the region.

Somewhat quixotically, congressional Democrats may push Biden to take a more “tied aid” approach to food aid. They have often led the fight against local and regional purchase of food aid, as it disadvantages marginal Democratic constituencies of organised labour, farmers and shippers. “MAGA” Republicans would likely be supportive of this effort.

What Australia should do

Australia can collaborate with Biden administration initiatives and perhaps encourage internationally-minded congressional Republicans such as Senators Lindsey Graham and Marco Rubio and Representatives Darrell Issa and Ann Wagner to also support pragmatic programs that address real needs in the region. The China challenge will lead to changes in the US aid program, and Australia can provide badly needed guidance, particularly in the Pacific and Southeast Asia.

Under the USAID Agricultural and Rural Development Program, 10 tonnes of vegetable seeds were transferred to more than 200,000 households in frontline and de-occupied communities in the Kyiv region of northern Ukraine, March 2024.Source: Getty

Red Book

What changes under Trump

A second Trump administration would continue to call for reduced aid budgets, but Congress — regardless of which party is in the majority — will likely largely ignore these calls and fund foreign assistance at or just below current levels. In a Congress that is fairly evenly divided between the two parties, votes from both Democrats and Republicans will be needed to pass spending bills, so moderation will rule the day, as was seen in the recent passage of the national security supplemental for Ukraine, Israel and Taiwan.

A second Trump administration would continue to call for reduced aid budgets, but Congress — regardless of which party is in the majority — will likely largely ignore these calls and fund foreign assistance at or just below current levels.

A second Trump administration would also likely promote new initiatives, most notably in increased usage of loans and conditionality on aid, that look much like US aid programs of the early Cold War. Trump’s current support for aid to Ukraine being in loan rather than grant form has found some uptake among Republicans in Congress, notably appropriator and Trump protégé Senator Lindsey Graham (and was partially included in the recent supplemental). This emphasis on loans — a tactic discarded in the 1970s and 80s as inefficient and unsuccessful — could see a broader resurgence if deemed politically saleable to Trump’s populist base, which is sceptical of unfettered handouts both domestically and internationally.

A return to conditionality

Another tactic used to promote military aid to Ukraine to congressional Republicans — that the programs benefit domestic US jobs in the defence industry — could also be expanded in a second Trump term. As mentioned above, US international food assistance, which increasingly is structured around purchases in and near the country of need to minimise costs,²⁰⁹ is losing domestic political support. A return to a program that delivers US crops on US-flagged ships, as the program was run for decades during the Cold War, could restore budget levels and political support, particularly as American farmers see value in the program. While less efficient in the field, this kind of conditional aid program is more sustainable politically.

What Australia should do

Australia has a credible voice with Republicans regarding the China challenge and should encourage a second Trump administration (and Congress) to use foreign aid tools in a pragmatic way in the Pacific and Southeast Asia. While Republicans are loath to support “climate” programs, they can be persuaded to support economic development programs that help developing countries mitigate climate effects (the most destabilising of which could provide opportunities for increasing Chinese influence) and discourage immigration.

Long-term trends

By many measures, 13 April 2024 marked the beginning of a new era in the Middle East. A diverse coalition — featuring the United States, France, the United Kingdom, the UAE, Saudi Arabia, Jordan and Israel — worked together to down the 300 Iranian projectiles launched at Israel, the first such direct attack by Iran on Israel in a decades-long conflict previously primarily fought through proxies.

For a region often characterised as a “tinderbox” responsible for undermining the most determined of US presidential efforts, the coalition’s joint efforts marked unmatched progress towards a long-term and bipartisan US goal for the Middle East: a level of regional stabilisation that will finally allow a decreased US footprint.

Amid tens of thousands of deaths in Gaza and Israel, persistent threats to ships in the Red Sea, simmering conflicts in Lebanon and Yemen, Taliban control of Afghanistan and unprecedented hostilities between Israel and Iran, the Middle East is not — as Jake Sullivan posited before the October 7 attack by Hamas — “quieter than it has been for decades.”¹⁰¹ Yet regardless of the electoral outcome, it can be assured that the US president in 2025 will do everything possible to seek an ultimately quieter Middle East.

US President Joe Biden meets with members of the national security team in the White House Situation Room regarding the unfolding missile attacks on Israel from Iran on 13 April 2024.Source: Getty

This pursuit will be most visible in continued support of the Abraham Accords, the Arab-Israeli normalisation agreements initiated by the Trump administration and embraced by the Biden administration. Further alliance-like behaviour in the Middle East will be sought from the United States and expected from its Middle Eastern partners — even in the face of increased pressure on Israel over its conduct in Gaza — for three reasons in particular.

Firstly, the scope and severity of Iran’s destabilising and hostile conduct in the region has only increased. Iranian proxies across Iraq, Syria, Lebanon, Yemen and Gaza have displayed unprecedented levels of aggression. There remains debate as to whether Iran was fully aware of and directly supported Hamas’ October 7 attack, the largest murder of Jews since the Holocaust, but Iran undeniably continues to financially support the group. The Iranian-backed Houthi rebels in Yemen have become so aggressive in the Red Sea that US and allied naval forces have increased their presence in the maritime area to deter further attacks. And in Iraq and Syria, Iranian-backed Shiite militias have attacked US military and civilian targets multiple times.

The ultimate divergence between the two candidates in 2024 will be the level of risk accepted, especially in regards to US policy on Iran, in pursuit of that stabilisation objective.

Iran has been no less aggressive in its own conduct prior to the unprecedented 13 April 2024 attack, including attempting to assassinate former senior US Government officials, pursuing nuclear enrichment that prevented IAEA inspections, extensive hostage taking, and — perhaps most worrying to US interests — ever closer alignment with Russia, North Korea and China. This level of aggression and alignment with revisionist powers is not only a challenge to US and Israeli interests but also to regional stability and, therefore, Arab interests.

Secondly, the links between Israel and the Arab world, with strong US backing, have only increased in recent years.¹⁰² Jordan’s King Hussein, who rules over a mostly Palestinian population, may be a vociferous critic of Israeli conduct in Gaza but he nonetheless benefits from record levels of Israeli gas and desalinised water going to his energy-poor and water-scarce country. The Egyptian economy is so reliant on Israeli energy that Egyptians endured rolling blackouts when Israel briefly cut exports of LNG at the beginning of the war in Gaza. The UAE and Israel have only deepened commercial, political and military links in the wake of a new Comprehensive Economic Partnership Agreement and record levels of bilateral trade, investment and military sales amid a flood of Israeli tourists into Dubai.

Lastly, the implications of the well-known US bipartisan consensus on the need to shift US attention and resources to the Indo-Pacific is not lost on US partners in the Middle East. Two of the Trump administration’s top diplomatic initiatives in the region — the Abraham Accords and the negotiated agreement with the Taliban for a US withdrawal from Afghanistan — were endorsed by the Biden administration because they are the natural result of longstanding and bipartisan US sentiment that is broadly disinclined to expend further resources — or, even worse, lose US lives — in the Middle East. As much as Donald Trump championed Saudi Arabia — including choosing it to be the first country to visit after his election — he still left them and the Gulf feeling abandoned after not supporting a robust response to attacks on them during his administration.¹⁰³ In an era in which the United States is producing more of its own energy than ever¹⁰⁴ and US fears of terrorism are decreasing,¹⁰⁵ US citizens and politicians alike would much prefer its allies and partners in the Middle East take care of their own security.

The Biden response to Iran’s direct attack on Israel in April 2024 — public and private urges for Israeli restraint — makes clear that the United States has little interest in further enmeshment in the Middle East, regardless of unprecedented behaviour by Iran and its proxies.

The Biden response to Iran’s direct attack on Israel in April 2024 — public and private urges for Israeli restraint — makes clear that the United States has little interest in further enmeshment in the Middle East, regardless of unprecedented behaviour by Iran and its proxies.

There is, however, still a critical role the United States will need to play in the regional stabilisation efforts. Most notably, continued progress in Saudi-Israeli normalisation — undoubtedly the most important goal of the Abraham Accords — will prove challenging without a binding US security guarantee to Saudi Arabia, a Saudi-US civil nuclear agreement, and increased US support of an independent Palestinian state. The US military presence in the region will also continue to prove integral to uniting the diverse anti-Iranian coalition. After all, it was only through US Central Command’s extensive coordination with Israel, European allies and Arab nations that 99 per cent of Iran’s 300 projectiles were shot down.

Jordan’s King Hussein told media in June 2023 that he could envision a “Middle East version of NATO,” while also making clear that Iran’s destabilising behaviour was a catalyst for it but that Israeli-Palestinian issues would be a stumbling block.¹⁰⁶ The current situation — Iran’s increased destabilising behaviour prompting alliance-like behaviour that is limited by continued Israeli-Palestinian tensions — proved him to be farsighted.

It is too early to anticipate what the situation in Gaza or Prime Minister Netanyahu’s political position will be in January 2025 but there would likely be a cost to Australian and even US purchase on the problem if close allies splintered over these issues as a result of domestic political pressures. Any US administration will be vexed if combat remains underway in Gaza in January 2025 but they would be equally concerned if Hamas resumes attacks on Israel. Reconciling those two objectives will require close coordination with all concerned parties — and an ability to take a long-term view outside of domestic pressures — if not resolved by the next administration’s inauguration.

Irrespective of who wins in November 2024, the US president will ultimately seek a more stable Middle East that enables less of a long-term US presence in the region. The ultimate divergence between the two candidates in 2024 will be the level of risk accepted, especially in regards to US policy on Iran, in pursuit of that stabilisation objective. This level of risk will also determine how the next administration responds to the growing alignment between the three revisionist nations of Russia, China and Iran.

Blue Book

What happens under Biden

When the Biden administration took office, the president had called Saudi Arabia a “pariah” and froze military sales to it; revived US nuclear deal negotiations with Iran; rebuked Israeli settlement activity and restored hundreds of millions of dollars in aid funding for Palestinians that was cut by the Trump administration. Perhaps most notably and controversially, however, it also withdrew from Afghanistan, resulting in chaos that shattered confidence in US leadership as well as Biden’s approval rating. Arguably neither has recovered.

But, like many prior US administrations, the Biden administration’s approach to the Middle East has changed while still in office. Amid concerns over US inflation and regional unrest, US diplomatic ties and military sales to Saudi Arabia have been restored. And in the wake of Hamas’ October 7 attack, President Biden vociferously backed Israel and halted aid funding to Palestinians despite considerable pressure from his own Democratic Party and even his own staffers. Iran’s 13 April attack on Israel, which the United States defended, again further cemented the Biden administration’s defence of Israel — this time literally.

Yet this change in the administration’s approach to the region has seemingly not resulted from a change in US strategy. Indeed, as verbose and well-known as the Biden administration’s “Free and Open” strategy in the Indo-Pacific has been, it remains difficult — apparently even for some within the administration — to define the Biden administration’s strategy in the Middle East, most notably Iran.¹⁰⁷ Such a strategy could help US allies, including Australia, chart a clearer pathway for constructive engagement in the region.

In the absence of a coherent US strategy in the region, a second Biden administration will likely continue to support regional integration but remain reluctant to devote considerable time and resources to such efforts. And while Israeli-Palestinian tensions will continue to vex the Biden administration, the president is acutely aware of how many prior administrations have wasted limited time and resources attempting to solve that intractable challenge. One scenario that may compel a reluctant Biden administration to increase involvement in Israeli-Palestinian negotiations is if Saudi Arabia made its normalisation with Israel dependent on the Israeli-Palestinian conflict being “solved.”

What Australia should do

Australia should diplomatically support the multifaceted efforts that engender greater regional balancing against Iran — ranging from the Abraham Accords and deepened Arab-Israeli economic ties to cross-border infrastructure projects spanning the Middle East, India and Europe. Such stabilisation efforts are not only an effective counterbalance to growing ties between Iran, Russia, North Korea and China — they are also in the US and Australian national interests.

Red Book

What changes under Trump

The Trump administration is widely perceived to have accepted a higher risk threshold in pursuit of its objectives in the Middle East. This includes initiating a “maximum pressure” sanctions campaign on Iran following a withdrawal from the nuclear deal, a deepening of relations with Saudi Arabia evidenced by it being the first nation he visited as president, the relocation of the Israeli embassy from Tel Aviv to Jerusalem and approval of Israeli settlement activity, and the drone killing of Iranian General Qasem Soleimani in 2020.

Israel’s Prime Minister Benjamin Netanyahu, US President Donald Trump and Foreign Affairs Minister of the United Arab Emirates Abdullah bin Zayed bin Sultan Al Nahyan at the signing ceremony of the Abraham Accords at the White House, September 2020.Source: Getty

But a closer look indicates a more nuanced approach to the region by the former president. Firstly, President Trump did not retaliate when more than 100 US servicemembers suffered traumatic brain injuries from an Iranian-backed attack on US troops in Iraq in January 2020.²¹⁶ Secondly, the Trump administration negotiated the US agreement to withdraw from Afghanistan, which the Biden administration was left to execute. And as much as the president championed Israel while in office, in March 2024, he nonetheless urged it to conclude the war in Gaza, saying “Israel has to be very careful, because you’re losing a lot of the world, you’re losing a lot of support, you have to finish up… you have to get on to peace.” Lastly and arguably most impactfully for the region, the White House also displayed a consistent unwillingness to endorse any retaliation after Houthi attacks on Saudi and Gulf interests during the Trump administration.

Regardless of the Trump administration’s close ties to Saudi Arabia, the perceived US abandonment of its regional partners has only further propelled regional efforts to building a diverse anti-Iranian coalition. A second Trump administration will want to build on these trends and seek to formalise Saudi-Israeli normalisation but doing so will require the Trump administration to significantly change its approach to Palestinians — including potentially recognising an independent Palestinian state — in order to give Saudi Arabia the political cover necessary for normalisation with Israel.

Australia should prepare for an unconventional US policy in the Middle East that will not be constrained by the risk aversion that characterised the Biden administration’s early years.

What Australia should do

Australia should prepare for an unconventional US policy in the Middle East that will not be constrained by the risk aversion that characterised the Biden administration’s early years. With the likely return of maximum pressure on Iran, it will remain important for Australia to lobby for the strategic importance of the Indo-Pacific theatre. At the same time, however, Australia should also keep in mind the growing interconnectedness of the region given increasing Iranian ties with Russia, North Korea and China.

Long-term trends

The clean energy transition in the United States will continue to accelerate, regardless of who wins in November.¹⁰⁸ While the pace of change is likely to vary by administration, growth in clean energy technologies will continue to outpace fossil fuels due to falling prices, baked-in policy support, and growing consumer demand. In 2023, over 95 per cent of new electricity generation capacity being planned in the United States was renewable,¹⁰⁹ a record high and a strong indication of private-sector momentum. US electric vehicle (EV) adoption has become more polarised,¹¹⁰ yet with 50 per cent annual sales growth¹¹¹ and continued price declines as battery technology improves,¹¹² the number of EVs on American roads is expected to double every 14 months — even in the likely scenario that Chinese EVs face increased US tariffs. However, the politicisation of EVs is likely to diminish¹¹³ as large investments in EV and battery manufacturing capacity come online in red states over the coming years,¹¹⁴ creating direct employment benefits that could translate into political support.¹¹⁵

US international engagement with the energy transition is likely to become increasingly characterised by competition with strategic rivals and limited cooperation with allies, rather than internationally coordinated efforts. As clean energy industries take on greater significance to economic growth and energy security, competition for market share in supply chains will intensify. China’s share of global manufacturing capacity is greater than 80 per cent in 11 of the 14 major clean energy segments,¹¹⁶ which, regardless of who sits in the Oval Office, will put pressure on the United States to push further trade protectionist measures in green industries.¹¹⁷ Limited supplies of key critical minerals¹¹⁸ will also increase competition for influence in these markets through demand guarantees, foreign direct investment, and technology transfers. While China’s market share is particularly dominant in critical minerals processing,¹¹⁹ rather than mining, it also has a much more established network of trade partnerships and overseas investments to secure the supply of these commodities than its Western competitors.

As competition to realise the economic opportunities in the energy transition heats up, cooperation amongst allies is likely to increasingly focus on targeted areas; a “small yard, high fence”¹²⁰ approach. What Biden’s National Security Advisor, Jake Sullivan calls “fit-for-purpose partnerships”¹²¹ reflect an increasingly transactional approach to alliances that was set in motion under the Trump administration and is likely to continue in the climate change space beyond 2025. This competitive, transactional approach to climate cooperation is likely to further erode the significance of global efforts, such as the annual COP summits.¹²² As countries have turned towards industrial strategy efforts to accelerate the clean energy transition, and turned away from carbon pricing and emissions targets, the international summit architecture has become less impactful on climate change mitigation. Increasingly, minilateral and industry-focused bodies, such as the Financial Alliance for Net Zero or First Movers Coalition — which are designed to solve targeted decarbonisation challenges in arenas like finance or hard-to-abate sectors — are driving global decarbonisation, rather than the United Nations.¹²³ This seems unlikely to change, regardless of the US election result.

Blue Book

What happens under Biden

In a second administration, Biden has promised to “finish the job,” which from a climate change perspective, largely means implementing its domestic legislative successes while continuing to embed its “new Washington Consensus”¹²⁴ into the international climate architecture. Between the 2021 Bipartisan Infrastructure Law, the 2022 CHIPS and Science Act, and the 2022 Inflation Reduction Act (IRA), the Biden administration and congressional Democrats successfully put more government funding — as much as A$2.3 trillion — towards clean energy investment than any country in history. This legislation is expected to help the United States cut its carbon emissions by 42 per cent by 2030 compared to 2005 levels; well within reach of its 50 per cent by 2030 target.¹²⁵ The dramatic expansion in US clean energy investment is also expected to further drive down the costs of these technologies, potentially having a much greater impact on long-term global emissions through technological change than it does through local deployment.¹²⁶

President Joe Biden during a meeting at the World Leaders’ Summit of the COP26 UN Climate Change Conference in Glasgow, November 2021.Source: Getty

Biden’s team has acknowledged that there is much left to do to capitalise on these investments and help the United States close the gap between its current emissions trajectory and its climate pledges. Domestic priorities are likely to include siting and permitting reform, continued investments in local manufacturing capacity, further research and development in emerging technologies, and stricter restrictions on heavily emitting sectors. These efforts would be significant tests of US state capacity and political resolve, as the industrial policy agenda runs into local supply constraints and global competitiveness challenges, particularly vis-à-vis China.

In a second term, the Biden administration would likely focus on a more ambitious and legacy-building climate agenda, both at home and abroad. The White House has already indicated that it plans to prioritise the climate and trade nexus,¹²⁷ for example, and Janet Yellen’s recent trip to China¹²⁸ showcased how trade, China, climate, and supply chains are interacting in complex ways that are stress-testing the “New Consensus”¹²⁹ approach articulated by Jake Sullivan.

Continued implementation of Biden’s domestic climate legislation would likely benefit Australia through heightened demand for its exports, further downward pressure on the cost of clean energy technologies, and the continued normalisation of a ‘green industrial strategy’ approach to decarbonisation. Several IRA initiatives are potential boons to the Australian economy by increasing demand for its critical minerals and offering foreign investment opportunities that will bring profits and technology back to Australian shores. These initiatives are likely to remain under a second Biden term.¹³⁰ The EV tax credit, in particular, mandates that the batteries are potentially for Australian-refined and processed materials as well.

Australia should put significant federal resources behind the US-Australia Climate Compact and seek to develop this ‘third pillar’ of the alliance into a model partnership for the ‘green industrial strategy’ era.

Greater demand from US deployment as well as greater supply from US producers are likely to put downward pressure on the costs of clean energy technologies over the medium term, improving Australia’s ability to decarbonise without additional government subsidies. Australia, for example, has some of the most expensive EVs in the world,¹³¹ significantly slowing the transition away from Internal Combustion Engines. Additional competition from US and Chinese auto manufacturers will help lower costs globally.

Perhaps most significantly, a second Biden administration would normalise the sort of ‘green industrial strategy’ approach advocated for by the Albanese government. Much as the deregulation and privatisation agenda of the late 1980s and 90s in the United States preceded Australia’s own reforms under the Hawke-Keating government, the normalisation of a new US economic paradigm under a second Biden term may provide ex-ante inspiration and ex-post cover for what would be the most significant shift in Australian economic policy in a generation. From a climate perspective, it is readily apparent that only a ‘green industrial strategy’ approach can balance the political-economy constraints of decarbonisation in the Australian context. Through both an extension of its domestic agenda and further implementation of its New Consensus foreign policy, a second Biden term would further normalise ‘green industrial strategy’ and in so doing, bolster Australia’s ability to pursue effective decarbonisation efforts.

What Australia should do

Under a second Biden term, Australia should put significant federal resources behind the US-Australia Climate Compact and seek to develop this ‘third pillar’ of the alliance into a model partnership for the ‘green industrial strategy’ era. This will likely require a broad range of domestic and international efforts, including continued industrial policy at home to complement US policies, bilateral agreements on supply chain and technology transfer questions, and support for the United States’ ‘new consensus’ approach in multilateral forums.

Red Book

What changes under Trump

A Trump victory in 2024 would be a significant setback to the climate efforts the Biden administration has pursued. Trump would significantly slow down (if not reverse) key pieces of the US clean energy transition, eliminate every climate-specific foreign policy initiative, and significantly complicate the ‘green industrial strategy’ agenda. In his first term, Trump rolled back Obama-era regulation, including on toxic air pollution, methane emissions, and energy efficiency, while pulling out from the global Paris Agreement, doubling down on domestic oil and gas production, and gutting several key federal climate agencies, such as the Environmental Protection Agency and Loan Programs Office. Similar actions could occur in a second term. All told, one credible analysis estimates a Trump victory could add four billion tonnes to US carbon emissions by 2030, or about 70 per cent more than Australia’s entire emissions output over that period.²³³

Additionally, in “Project 2025,”²³⁴ the influential Heritage Foundation spells out conservative priorities for a second Trump term, leaving no doubt about Republicans’ hostility to climate mitigation efforts.²³⁵ For example, the report recommends that “the Biden Administration’s climate fanaticism will need a whole-of-government unwinding,” or that there should be support for the “repeal of massive spending bills like the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA),” and the elimination of many Department of Energy offices responsible for climate efforts, among a range of other anti-climate actions.

People march from the US Capitol to the White House for the People’s Climate Movement to protest President Donald Trump’s environmental policies, April 2017.Source: Getty

From a climate perspective, likely the most important factor will be whether a second Trump term is accompanied by a majority of Republicans in the House and Senate, in order to repeal major pieces of the IIJA and IRA. While large swathes of these bills would be cut in a Republican trifecta scenario, there is a high likelihood that many of the tax credits would remain, given the historical ‘stickiness’²³⁶ of changes to the tax code. The original clean energy tax credits, for example, were first passed under the George W. Bush administration in 2005 and have survived multiple Republican Congresses since.²³⁷ On the other hand, more politically visible provisions, such as the Department of Energy’s Loan Programs Office and Office of Clean Energy Demonstrations, would likely see their funding and mandates diminished considerably, as evidenced by the current pace at which they are attempting to get appropriated funding out the door before the election.²³⁸

The Trump campaign has suggested that it will take an even harder line on China in a second term, adding to the debate in Australia over whether to cooperate or compete with China’s clean energy efforts. China is not only a critical source of clean energy technology imports but has long been considered an important stakeholder in climate cooperation efforts. This has changed in recent years, with less emphasis expressed by both parties on incorporating China into multilateral forums and more on calling out China’s transgressions with regard to the ‘rules-based order.’ Trump has promised to further punish China for its perceived unfair trade practices by imposing tariffs on China of at least 60 per cent as well as a general tariff of 10 per cent on all US imports, which could significantly escalate a trade war in all goods, but particularly in the increasingly important EV and battery market. This is in contrast to the “small yard, high fence” approach of the Biden administration, which would focus on only a very limited set of strategic technologies.

Under a second Trump term, Australia should endeavour to contain the damage to climate efforts at the multilateral level while making the transactional case for continued bilateral efforts in major supply chains.

Finally, the Australia-US alliance is likely to be reduced to items where the president sees a transactional benefit, which in the climate space would likely be limited to limited supply chain investment discussions. Key initiatives such as the US-Australia Climate Compact and the Indo-Pacific Economic Framework are highly unlikely to survive a second Trump term.

What Australia should do

Under a second Trump term, Australia should endeavour to contain the damage to climate efforts at the multilateral level while making the transactional case for continued bilateral efforts in major supply chains. The Trump administration is likely to unwind much of the Biden administration’s approach to domestic and global climate initiatives, many of which remain in Australia’s long-term strategic interests. Australian policymakers should reframe these initiatives in transactional terms that a Trump administration can support.

Long-term trends

The House

At this juncture, many months before the election, it is most likely that the House of Representatives will be retaken by the Democrats.

Going into the election, Republicans have a majority in the extremely low single digits — the smallest margin of control in modern American political history. Both 2023 and 2024 have been marked by immense upheaval within the Republican conference on who should be leader, and what forces control the party’s direction on legislation and foreign policy. The first Republican speaker in the current Congress, Kevin McCarthy, needed 15 ballots to finally become speaker, and was ousted after only nine months in office — the shortest speakership in modern history. His successor, Mike Johnson, has been threatened repeatedly by tensions within the conference. House Republicans have been divided principally on issues around the budget, the size of government, efforts to control immigration, and impeachment efforts targeting President Biden and Secretary of Homeland Security Alejandro Mayorkas. Both speakers entered into budget agreements with President Biden that at least half of their conference felt were irresponsible capitulations to Biden and the Democrats.

These tensions were also evident in the stalemate that persisted for months on funding for Ukraine. This reflects the emergence, under the influence of former president Trump’s “America First” agenda, and Trump’s ability to command loyalty from Republican politicians, of a vigorous assertion of isolationism, particularly regarding Europe, the Middle East and Asia. This represents an evolving transition away from globally oriented US leadership on a wider array of foreign policy issues championed by President Ronald Reagan.

Members of the US House of Representatives vote for the third time on whether to elevate House Judiciary Committee Chairman Jim Jordan to Speaker of the House in the US Capitol, October 2023. Source: Getty

The chaos and division in House Republican ranks has been overtaken by more steadiness and unity among Democrats under Minority Leader Hakeem Jeffries. Democrats have routinely voted in lockstep on Biden’s domestic policy legislation (infrastructure, clean energy, health care, education, voting and abortion rights) sought by the White House, and Biden’s foreign policy vision — especially on Ukraine, the threat posed by Russian President Vladimir Putin, and advancing the cause of democracy against authoritarian leaders across Europe and Asia. Some divisions have emerged regarding the Israel-Gaza war among House Democrats on whether to cut or condition aid to Israel.

The chaotic exercise of power by Republicans and their extremism on policy issues — such as abortion rights, voting rights and gun control — will likely enable the Democrats to take control of the House in 2025.

The Senate

Democrats currently have a very slim two-vote majority in the 100-seat Senate. With a third of the Senate up for election every two years, nine seats held by Democrats that they won in 2018 — West Virginia, Montana, Ohio, Nevada, Arizona, Pennsylvania, Michigan, Wisconsin and Maryland — are vulnerable. The November election will likely flip Senate control to the Republicans.

In the current Senate under Majority Leader Chuck Schumer, Democrats have similarly exhibited steady and consistent unity in voting on all major issues, from the budget to foreign policy, even with some tensions among Democrats arising from the Israel-Gaza war over the scale and scope of aid to Israel. There have been Democratic defections on a handful of executive agency and judicial nominees and some domestic policy issues, such as energy and climate, but they have on the whole protected President Biden and his legislative program.¹³²

The Republicans under Senator Mitch McConnell have proved to be bipartisan on major budget and pending deals, and have been unified, but outvoted, on their overall opposition to Biden’s legislative, regulatory and social initiatives. On foreign policy, most of the Senate Republicans have been with Biden on Ukraine and Israel and have been willing to compromise with Democrats on one of the most difficult and contentious issues — the treatment of immigration and border security. The populist, isolationist forces are significantly smaller among Senate Republicans than with their colleagues in the House and may signal further manoeuvring room in the new Congress.

Blue Book

What happens under Biden

Because the House will likely be retaken by Democrats, this means that in 2025-26, the House will continue to support President Biden if he is re-elected. If the Republicans gain control of the Senate, there would be only very limited cooperation between the Senate and the president. However, with Trump defeated, the pull of Trumpism on policy in the Republican ranks in the Senate will be diminished — opening further opportunities for major bipartisan legislation. Earlier this year, senators from both parties worked out significant changes to border security and immigration policies. Trump’s opposition caused the Republican supporters of the compromise to back away from what would have been landmark legislation. A divided Congress, however, will continue to limit the success of the most sweeping of Biden’s proposals for his second term.

With Trump defeated, the pull of Trumpism on policy in the Republican ranks in the Senate will be diminished — opening further opportunities for major bipartisan legislation.

What Australia should do

If President Biden is re-elected, the consequences for Australia are more predictable and manageable. In essence, there will be a continuation of the current flow of issues and how they are being handled today on Capitol Hill. Australia has ties of great depth and strength with both parties in the House and Senate. Australia enjoys the highest degree of bipartisanship on issues of concern to the Albanese government, especially on AUKUS, Asia and trade issues, such as expanding commerce for the US and Australia throughout the Indo-Pacific. Australia can therefore anticipate no extensive change from what has occurred in Biden’s first term, notwithstanding any switch in party control of the House or Senate. Even more importantly, given the enduring strength of ties between President Biden and Prime Minister Albanese, the default position of the White House, the State Department and the Pentagon is to be very receptive to initiatives proposed by Australia.

Red Book

What changes under Trump

Assuming the House will likely be retaken by Democrats, this means that in 2025-26, the House will vigorously oppose President Trump if he again takes office. Democrats will be on guard for any and every “abuse of power” that Trump initiates. The threat of a third impeachment of Trump will be in the air throughout his presidency. Democrats will be extremely hawkish on Trump’s legislative proposals. This in turn means that Trump will not be able to advance his legislative agenda in Congress because the House Democrats will block it at every opportunity.

This state of play means that Trump will go around Congress (and any accountability to Congress) and will resort to extensive use of executive power in issuing orders and regulatory diktats to advance his policy agenda. This will especially affect immigration, trade, environmental rules, energy drilling and production, and the deployment and reassignment of US troops across the world.

President Donald Trump delivers the State of the Union address in the chamber of the US House of Representatives, January 2018. Source: Getty

In the new Senate, there will be a new Republican leader following the retirement of Mitch McConnell — one of the most effective Senate leaders in its history who tempered many of the Trump administration’s more destabilising impulses on foreign policy, especially regarding Ukraine.²⁴⁰

If Trump is in the White House, the Senate Republicans will be in firm lockstep with the president’s agenda.

What Australia should do

If Trump is elected to the presidency, the consequences for Australia are potentially highly volatile. In a second term of office, conclusively demonstrating his dominance, the deference to him and his leadership within Republican ranks in the House and Senate will be even higher than it was in his first term.

This will greatly test Australia’s clout on Capitol Hill because, in winning the election, Trump will have sealed his dominance over the Republican Party, making the price for Republicans who oppose his policies even higher than that paid by so many members of Congress in Trump’s first term.²⁴¹

Trump is highly likely to initiate a review of all facets of US policy in Asia, including AUKUS, US military posture including ties and the numbers of US troops stationed in Japan and South Korea, and the US relationship and objectives with China. But the bipartisan support for robust US leadership in Asia — especially with respect to China — will likely lead to Senate Republicans pushing back on any significant reductions or retreat from US commitments to the region.

This will present enormous challenges to Australia. Australia will need to double down its presence and posture in Washington on several fronts:

• Establishing solid workable ties with Trump’s Cabinet — especially the secretaries of State, Defense, Commerce, Agriculture and White House staff (National Security Council) and key agencies (US Trade Representative).
• Reinforcing the existing supportive posture of key members of the House and Senate who deal with issues critical to Australia, especially including the chairs and members of the committees on Foreign Relations, Armed Services, and the House Ways and Means and Senate Finance Committee on trade issues. The projected changes in control in both the House and Senate will place a premium on working with the new chairs and ranking members of the key committees in both chambers.
• Building a strong lobbying presence on issues of concern to Australia with all the major companies doing business in the United States that have a vital stake in the outcome of these issues.

What this analysis suggests for Australia is that there needs to be developed, on an urgent basis, wargaming of worst-case scenarios of what President Trump will try to achieve on the issues of most importance to Australia — from foreign policy and US military deployments to trade — and working through contingency plans to control the damage that can be done to Australia’s foreign policy, national security and trade interests. Australia made a full-court press in Trump’s first term to reverse a decision to impose tariffs on Australian steel and aluminium — and won.²⁴² Canberra should expect many such battles in a second Trump term.

One measure of success in managing these issues and policies will be the extent to which there is a vigorous and vocal echo chamber in Congress, in both the House and Senate, from leaders in both parties, who articulate the need for the United States to preserve, protect and advance the alliance between the United States and Australia and the policies and programs that define it.

Long-term trends

Over the past eight years, Australia has enjoyed bipartisan political support in the United States which has nevertheless been hampered by congressional deadlock and legislative inefficiencies. This dynamic appears set to continue regardless of who wins in November. Given the strong likelihood of split control of Congress between a Democratic House of Representatives and a Republican Senate, Congress will constrain the domestic agenda of the next presidential administration. The margin in both chambers is likely to be thin, regardless of which party takes control — or who wins the White House. The domestic agendas of either Biden or Trump, and any related opportunities for Australia, are therefore likely to face significant hurdles to implementation.

Red Book

What happens under Biden

In a second term, the Biden administration has made clear that its focus will be on “finishing the job.”¹³⁴ In essence, this means the implementation of policies the Biden administration began in its first term. The scope of the legislation that the Biden administration successfully passed is significant, including the 2022 Inflation Reduction Act, 2022 CHIPS and Science Act, 2021 Infrastructure Investment and Jobs Act, and the 2021 American Rescue Plan Act. These bills authorised trillions of dollars of economic stimulus and approximately US$1.9 trillion in new federal funding for pandemic relief, infrastructure investment, and climate action. Biden’s other first-term domestic policies included significant gun control reforms,¹³⁵ student loan forgiveness measures,¹³⁶ and expanded abortion access after the Dobbs decision.¹³⁷

President Biden gives remarks on student debt relief at Delaware State University, October 2022.Source: Getty

Biden’s fiscal year 2025 budget proposal flags some of the key policy proposals for a second Biden term,¹³⁸ including:

• Measures to reduce drug prices, including expanding eligibility for a US$35 insulin cap to those with commercial insurance.
• Reinstating tax credits introduced under the 2021 American Rescue Plan Act of up to US$3,600 per child under six, which lapsed after a year.
• Raising the corporate tax rate from 21 per cent to 28 per cent, though this would remain below the pre-2017 level of 35 per cent.
• A 25 per cent minimum income tax on those with wealth exceeding US$100 million.
• Further measures to alleviate student loan debt by eliminating student loan origination fees.
• Universal preschool and two years of tuition-free community college.

Several of Biden’s policies may unintentionally contribute to inflationary pressures that could continue to distort global markets, with possible economic implications for Australia. Other policies, such as drug pricing reform, could have unintended knock-on effects on Australia’s access to global markets and consumer product pricing. Moreover, many elements of Biden’s sprawling and complex industrial policy and domestic legislation from his first term are yet to be interpreted and applied. Much of that work is still to come during a second Biden term, and Australia would maintain its ability to influence the form and implementation of relevant policy in Congress and through international engagement.

As many presidents before him have done in their second terms of office, Biden may ultimately turn to foreign policy initiatives to secure his legacy against intractable domestic debates.

Biden’s overall focus on cost-of-living measures would likely continue in a second term. However, his more ambitious domestic policies — including the majority of those outlined in his 2025 budget proposal, ranging from free community college to a wealth tax — will likely be curtailed by a gridlocked Congress. Even with the benefit of a Democratic-controlled House and Senate prior to the 2022 midterm elections, many elements of Biden’s Build Back Better plan, such as free community college and pre-kindergarten, failed to pass into law.¹³⁹ Biden may, therefore, turn to executive orders in his second term to achieve more incremental progress on these priorities. As many presidents before him have done in their second terms of office, Biden may ultimately turn to foreign policy initiatives to secure his legacy against intractable domestic debates.

What Australia should do

Under a second Biden administration, Australia would enjoy governmental continuity and a broad values alignment between Biden and the centre-left Albanese government, though tensions over economic policy settings may persist. Congressional division would likely continue to feed political logjams in the United States, but official channels of communication between Australian and US officials would remain robust and reliable. As the Biden administration seeks to operationalise its first-term domestic legislative accomplishments, Australia could leverage its influence in Washington to negotiate the details of policy implementation and ensure it is in Australia’s national interest.

Red Book

What changes under Trump

In a second term, Trump’s key domestic focus would be a significant restructuring of the federal public service to eliminate the “deep state” elements that the former president and his supporters blame for derailing his first term domestic policy agenda. Trump himself has stated that “the State Department, the defence bureaucracy, the intelligence services, and all the rest need to be completely overhauled and reconstituted to fire the Deep Staters and put America First.”²⁴⁴ Since leaving office, Trump has explicitly endorsed specific reforms that would overhaul the federal bureaucracy. This would include bringing independent regulators — such as the Federal Communications Commission and Federal Trade Commission — under presidential authority,²⁴⁵ and requiring all federal employees to pass a “Civil Service” test based on knowledge of US free speech and religious liberty protections.²⁴⁶

Former US President Donald Trump looks on during a campaign rally in Pennsylvania, July 2023Source: Getty

Trump has referred to his political rivals as “vermin,”²⁴⁷ and, in 2023, stated that he would “appoint a real special prosecutor to go after the most corrupt president in the history of the United States of America, Joe Biden, and the entire Biden crime family.”²⁴⁸ He has repeatedly signalled that in a second term, he would exercise direct control over the Justice Department to pursue his political opponents and those whom he feels betrayed him during his first term.²⁴⁹ Doing so would upend decades of established norms around the independence of the Justice Department that are intended to avoid political interference in the courts. Some conservatives argue that there is no legal or constitutional basis for such independence, though others argue it would contravene the Constitution’s 14th amendment.²⁵⁰ Ongoing debate over the constitutionality of such a move would likely have to be settled by a Supreme Court challenge. However, the erosion of de facto independence would provoke concern both domestically and abroad over the stability of US institutions and checks and balances to the president’s power.

The far-reaching implications of Schedule F

Key to Trump’s second term agenda is the reinstatement of ‘Schedule F’ reforms to the federal workforce, involving reclassifying up to 50,000 public service workers in “policy-determining, policy-making or policy-advocating” positions as political appointees.²⁵¹ Although this would represent a single-digit percentage of the overall federal workforce, these workers would occupy influential policy positions and represent an enormous increase to the current number of roughly 4,000 political appointees who already fill senior executive and policy roles. Such a measure would strip civil service protections from these workers, making them significantly easier to fire and eliminating the need for competitive hiring processes for their positions. Organisations such as the conservative Heritage Foundation have created databases of thousands of pre-vetted candidates who could fill such political appointee roles.²⁵² In the final months of his first term in 2020, Trump issued an executive order to begin creating Schedule F positions, but the order was rescinded by President Biden soon after his inauguration before any employment changes were made.²⁵³ The reinstatement of the order has become a key Trump policy position for his second term and was supported by a number of his rival Republican candidates during the 2024 Republican primaries.²⁵⁴

In practice, it is unlikely the Trump administration would be capable of filling all 50,000 slated Schedule F positions with political loyalists. Nevertheless, the ability to replace even a few thousand positions would likely have a significant effect on the traditionally nonpartisan nature of federal bureaucracy. Under President Biden, the Office of Personnel Management (OPM) finalised a rule that would heavily curtail a future administration’s ability to implement Schedule F reforms, by strengthening employment protections, establishing an appeals process and narrowly defining the eligibility of policy-relevant positions.²⁵⁵ The OPM regulatory guidance could be rescinded under a Trump administration, though doing so would likely require a months-long process of public consultation.²⁵⁶ Trump’s 2020 Schedule F order provided 210 days for agencies to identify affected positions, and a similar timeframe would be required if Schedule F is reinstated.²⁵⁷ Given that legal challenges would also be expected, this would likely insulate the public service from sweeping changes for the bulk of Trump’s first year back in office. Nevertheless, even if most of Trump’s attempts to enact mass civil service reform become mired in procedural or legislative hurdles, his administration’s rhetoric of uprooting long-standing civil service norms will likely promote instability and overturn in the federal bureaucracy. This would ultimately have implications for Australia, given its many diverse touchpoints of communication and engagement with US officials.

In such a scenario, Australian policymakers would increasingly engage with bilateral counterparts who are political appointees, and are therefore likely to be more ideological and lacking in government experience. As was the case in Trump’s first term, the Australian Government should prepare for high turnover in the US bureaucracy and cabinet. During Trump’s first term, the US State Department endured significant budget cuts and political pressure,²⁵⁸ which limited its ability to effectively engage with international allies and partners — a pattern that would likely be repeated in the State Department and other US government bodies in a second Trump term.

What Australia should do

Regardless of the extent to which Trump’s rhetoric on domestic policy translates into action, a second Trump term will pose challenges for both the United States and its traditional relationship with Australia. Trump’s erratic approach to governing, polarising rhetoric and disregard for institutional norms would reinforce prevalent narratives that US democracy is under existential threat.²⁵⁹ This would, in turn, undermine the idea that the United States is a reliable alliance partner for Australia.

For its domestic agenda, Canberra will need to emphasise Australia’s long-term interests in cooperation with the United States — rather than shared values.

It should be noted that while the Australian public has consistently held overwhelmingly negative attitudes towards the former president, public support for the Australia-US alliance remained high during President Trump’s term of office.²⁶⁰ The percentage of Australians who said the US alliance with Australia is important only ranged from 85 to 87 per cent throughout the Obama, Trump and Biden administrations.²⁶¹ Furthermore, the percentage of Australians who expected the United States to come to Australia’s defence only decreased from a high of 82 per cent in the Obama administration to 69 per cent in the Trump administration, and rebounded to 73 per cent in the Biden administration.²⁶²

Australia should plan to proactively engage top US officials and Congress, communicate its strategic value to the United States as an Indo-Pacific ally, and be prepared for instability that is likely to occur during a second Trump administration. For its domestic agenda, Canberra will need to emphasise Australia’s long-term interests in cooperation with the United States — rather than shared values. Finally, Canberra should recall the fact that Australia successfully navigated the chaos of a Trump administration once before, arguably better than any other US ally.