By Robbin Laird and Kenneth Maxwell
In today’s rapidly evolving global order, middle powers find themselves in an increasingly complex position as they balance economic opportunity against strategic independence. Two nations, Australia and Brazil, offer a fascinating case study in how different countries are responding to China’s rise while pursuing their own national interests.
A Tale of Two Middle Powers
Despite being on opposite sides of the Southern Hemisphere, Australia and Brazil share remarkable similarities. Both are resource-rich middle powers with significant economic ties to China. However, their geographic, political, and historical contexts have led to distinct approaches in managing this crucial relationship.
Brazil is actually slightly larger than Australia in terms of landmass (by about 10%), yet their terrains couldn’t be more different. While Australia is dominated by desert and semi-arid land (approximately 70%), Brazil features nearly 60% rainforest cover. These natural endowments shape not only their resource bases but also their climate vulnerabilities and economic structures.
The China Connection: Trade and Dependence
Australia’s China Relationship
The Australia-China economic relationship is truly massive, with two-way trade reaching $325 billion in 2023-24. Australian exports to China exceeded $212 billion, forming the bedrock of Australia’s global trade. This relationship is dominated by resources, with iron ore alone accounting for over 150% of goods exports to China.
The China-Australia Free Trade Agreement (ChAFTA), in effect since 2015, has been progressively eliminating tariffs. By 2029, most resources and energy exports will be duty-free, with tariffs already reduced or eliminated on products like barley, beef, wine, and wool.
Beyond commodities, services trade has grown significantly, with tourism and international education seeing a 40% increase in 2023-24. The trade pattern is clear: resources and food flow from Australia to China, while manufactured goods move in the opposite direction.
Brazil’s China Relationship
Brazil’s trade with China is similarly substantial, exceeding $181 billion in 2023. However, Brazil’s export mix is even more concentrated on raw materials than Australia’s, dominated by what analysts call the “soy and steel connection.”
Soybeans represent Brazil’s top agricultural export to China, worth nearly $32 billion in 2022 – more than two-thirds of Brazil’s total soy exports. China sources approximately 60% of its soybean imports from Brazil. Iron ore forms the second pillar, with Brazil sending about $18 billion worth in 2022, roughly 63% of its total iron ore exports. Oil is the third major export, with nearly 40% of Brazil’s oil exports headed to China.
Chinese investment in Brazil is growing beyond resources, particularly in energy (especially renewables), electricity transmission, and increasingly, electric vehicles. Since 2021, all new Chinese automotive investment in Brazil has focused on electric or hybrid vehicles, with companies like BYD and Great Wall Motors establishing operations.
Manufacturing Decline and Economic Transformation
Both countries have experienced significant drops in manufacturing as a share of GDP over recent decades. Australia’s manufacturing peaked in the 1960s and fell below 10% by 2020, while Brazil’s high point came in the mid-1980s before dropping to around 11% recently.
The timing differs notably: Australia’s decline began earlier (1970s-80s), often linked to domestic trade liberalization policies before China became a major global player. Brazil’s more intense deindustrialization period coincides more directly with China’s economic surge in the 2000s.
Australia reportedly lost between 53,000 and 80,000 manufacturing jobs due to Chinese imports between 1991 and 2006. Brazil may have experienced an even more direct impact, as its manufacturers often produced similar goods to Chinese factories, facing tougher competition both domestically and internationally.
This has led to what economists call “primarization” – an increased focus on commodity exports at the expense of manufacturing – which has reportedly affected wages and formal employment in Brazil’s manufacturing sector.
Public Perception and Political Responses
Australia’s Balancing Act
In Australia, the China relationship represents a constant balancing act between enormous economic benefits and legitimate security concerns, particularly regarding China’s military presence in the region.
This tension played out in Australia’s 2025 election, with the Labor government highlighting improved relations and the lifting of some Chinese trade restrictions after 2022. The opposition Coalition employed tougher security rhetoric while simultaneously softening their tone on trade, recognizing the economic importance of the relationship.
The complexity of managing the U.S. alliance alongside the China relationship adds another layer of difficulty, especially with concerns about being caught in potential U.S.-China trade conflicts.
Brazil’s Approach
Brazil’s view of China reflects different dynamics, with clearer divisions based on economic interests. Manufacturing sectors tend to be critical of Chinese competition, while the agricultural sector generally embraces the China connection due to massive purchases of soy and beef.
Political attitudes have varied significantly. Former President Bolsonaro adopted an anti-China stance at times, while current President Lula has prioritized the relationship, visiting China in late 2024 and discussing a “community with a shared future.” Lula views China as a key strategic partner crucial for Brazil’s development and global standing, while still attempting to maintain good relations with the United States – a pragmatic form of non-alignment.
Unlike Australia, Brazil has been more cautious about directly confronting China on sensitive issues, though concerns about economic dependence, deindustrialization, and controversies around Chinese investment persist.
Diversification Strategies
Australia’s Urgent Pivot
Australia’s diversification strategy appears driven by greater urgency, spurred by geopolitical tensions and past trade disputes. Key elements include:
- Focusing on Asia, particularly India (through the ECTA trade deal, roadmap, and investment funds) and ASEAN countries
- Expanding globally through trade pacts like CPTPP and negotiations with the EU and UK
- Developing domestic manufacturing and critical minerals through the Critical Minerals Strategy 2023-2030 and tax incentives
- Reducing vulnerability in supply chains, often partnering with “like-minded” countries
- Growing the service sector with more diverse student sources, specialized tourism, and financial hub ambitions
Brazil’s Regional Focus
Brazil’s diversification efforts appear more regionally oriented:
- Emphasizing Mercosur, the South American trade bloc, especially regarding the potential EU-Mercosur trade deal.
- Exploring a possible Mercosur-China FTA in the longer term.
- Boosting manufacturing and innovation through tech parks and the “New Industry Brazil” initiative.
- Leveraging their clean energy mix for competitive advantage.
- Using e-commerce to sell directly to Chinese consumers.
- Attempting to benefit geopolitically from US-China tensions.
- Focusing on critical materials like lithium and rare earths to build higher-value green tech industries.
- Using Chinese investment strategically for technology transfer.
Comparative Approaches
While both countries share the common challenge of asymmetrical trade dependence on China, their responses differ significantly.
Australia’s strategy appears more explicitly oriented toward the Indo-Pacific region and traditional Western allies, with a clearer goal of reducing China dependency. The focus on critical minerals, advanced manufacturing, and “friend-shoring” supply chains reflects geopolitical calculations.
Brazil’s approach seems more regionally focused and less explicitly concerned with reducing Chinese influence. The emphasis on Mercosur, the potential EU deal, and even exploring a Mercosur-China possibility suggests a strategy of geopolitical balancing rather than decoupling.
Both nations aim to climb the value chain by developing more sophisticated products and capturing more value domestically, though they face different obstacles. Australia contends with the entrenched economic complementarity with China and China’s dominance in mineral processing, while Brazil struggles with innovation coordination, energy costs, political stability, and private R&D investment.
Conclusion: Lessons for a Multipolar World
The contrasting approaches of Australia and Brazil offer valuable insights into how middle powers can navigate the complex challenges of the emerging global order. Their strategies reflect the specific constraints and opportunities they face, suggesting there is no one-size-fits-all solution for balancing economic engagement with China while maintaining strategic independence.
As the global system continues to evolve, other middle powers will likely look to these examples to inform their own approaches. The key question remains: which principles work best for protecting national interests while participating in an increasingly interconnected global economy? The answers may well determine how successfully countries navigate the shifting tides of global power in the coming decades.
Note: in 2026, the authors are publishing their book entitled: The Australian, Brazilian and Chinese Dynamic: An Inquiry into the Evolving Global Order.
