How lobsters help us start to make sense of Donald Trump's trade chaos

Cognitive dissonance is now part — particularly for Australia — of just being in the world.

For evidence, it's not necessary to peer very far back into history.

Yesterday will do.

Consider the epic weirdness of the diplomatic task yesterday presented for Anthony Albanese, an Australian prime minister welcomed warmly to Beijing by the leaders of a "people's democratic dictatorship" who, five years ago, banished us comprehensively into the snow.

On the agenda for enthusiastic open discussion: our common interest in clean energy! Our mutually beneficial trade relationship! (Now defrosting before a crackling fire.)

Not for discussion: America's public demands, issued as Albanese boarded for Beijing, to know for sure whose side we'd be on in any war with China. (These were delivered by Elbridge Colby, who is the American under-secretary for defence and not, as you might have assumed, a serially overlooked suitor from a Jane Austen novel)

Also off the agenda: Australia's stated intention to yank back control of the Port of Darwin, leased to the Chinese company Landbridge 10 years ago for $500 million in an NT government decision for which no-one, these days, is capable of summoning polite language.

This pair of awkwardnesses would be tricky enough to navigate on a quiet day.

But yesterday was not a quiet day.

A display of military might

It was yesterday. Which, apart from being Harmony Day in Beijing, was also day three of Exercise Talisman Sabre, a joint US-Australian military exercise involving approximately 35,000 defence personnel from 19 supportive nations (not including China) and the literal loading of US military vehicles on and off ships at the Port of Darwin.

(For anyone pulling focus at this juncture owing to the lurid nomenclature of "Talisman Sabre": Please, be grateful for small mercies. Its predecessor — launched in 1996 by John Howard and Bill Clinton — was called "Operation Tandem Thrust". I think we can move on with gratitude.)

So, yeah, to summarise: yesterday involved a thunderously large joint display of military might with our biggest defence partner (whose president won't meet with us) in which we essentially role-played being at war with our biggest trade partner (whose president hosted us for lunch).

It's often said that diplomacy requires the ability to walk and chew gum at the same time, but let's take a moment to recognise that yesterday involved a lot of walking. And a lot of gum.

Forming defence ties with like-minded democracies while pursuing trade relationships with dictatorships has never been a particularly comfortable proposition.

And it would be difficult even if you could rely on an international rules-based order to keep politics out of trade, a fantasy to which just about everyone has now wearily cancelled their subscription.

What we have now is a shifting, kaleidoscopic landscape of allegiances and actions that blur our formal ideas about friends and foes.

We've had a free trade agreement with the United States for 20 years now, and with China for 10. Both were the product of hard graft and negotiation. Neither has protected us from trade decisions that are all about politics, or inoculated our shopfront from the dizzying proliferation of knock-on effects from regional conflicts, climate change, economic sanctions and theatrical-trade-wars-to-which-we-are-not-directly-a-party.

Maybe the best way to comprehend just how genuinely chaotic these intersecting systems have become is to stop trying to think about them at a country-by-country level, and just pick a product.

A victim of their own deliciousness

Lobsters!

Let's go with lobsters.

Lobsters are a luxury item. A live lobster, regardless of whether it's caught in the waters of South Australia or Nova Scotia or Stonington, Maine — the largest lobster port in America — owes its international travel opportunities explicitly to the existence of affluent consumers.

China has — over the past decade, thanks to its burgeoning middle class — accounted for much of the increased global demand for this shy, spiny, exoskeletal creature.

Lobsters are a victim of their own deliciousness. This is clear.

But their further misfortune, in matters of global trade war strategy, is that they tend to be caught and sold by a highly specialised workforce, prone to industrial unity and nostalgic hunter-gatherer sentiment.

This makes lobster a popular go-to product when trade wars get hot.

When China instituted its diplomatic revenge in 2020 against the Morrison government's call for an investigation of its links to the COVID-19 virus, the Australian lobster industry was a primary victim; more than 90 per cent of its product went to China, and the import ban announced in that year (the official reason was suspected heavy-metal contamination, a classic of the pseudo-scientific justification genre) decimated the Australian industry, taking sales to China from $US316 million ($482 million) in 2020 down to $US19 million in 2021.

This was terrible news for Australian lobsterfolk.

But it was better news for American lobster exporters. They'd been in a slump since the first Trump trade war with China back in 2018, in which Beijing slapped a 25 per cent tariff on the American delicacy.

By 2019, US lobster exports to China had dived by about 85 per cent.

This US-specific lobster tariff from China exacerbated the US's threat from regional lobster export giant Canada, which in 2017 had cemented a deal with the European Union zeroing out tariffs on Canadian lobster imports.

(This development enhanced an unrelated windfall for Canadian lobsterfolk: boom-level productivity gains from the waters around Nova Scotia, warming thanks to climate change).

The Trump administration freaked out and quickly haggled a "mini-deal" with Brussels: American lobster would enjoy the same access to EU markets as their Canadian brethren in return for America halving its tariffs on a truly random array of EU imports, including prepared meals, crystal glassware and cigarette lighters.

This deal expires in about a fortnight — July 31. Bookmark this thought.

Global lobster industries are entwined

Canadian lobster exports to China, meanwhile, exploded in 2020 after the import ban on the Australian product. In three years, the Canadian export market to China doubled to just over $US1 billion.

But in March this year, Beijing hit Canadian lobster with a 25 per cent tariff in retaliation for Ottawa's duties on Chinese electric vehicles.

One thing to remember: the US and Canadian lobster industries are hopelessly entwined. Canada is better at processing lobster than America is; four out of 10 lobsters caught in Maine are sent over the border to Canada for processing, which is why the Trump administration's announcement earlier this year of a blanket tariff on Canadian imports was so upsetting for the lobstermen of Maine. A lobster caught in Maine, then sent to Canada for processing, then returned to the US — and this is not an uncommon trajectory — would collect a comedic tax burden if both countries stood their ground.

Maine lobstermen are a politically powerful group, too. The Second Congressional District of Maine is one of only 13 congressional districts to, at last year's presidential election, vote for Trump in the presidential stakes while returning a Democratic congressional representative; this explains the lengths to which the first Trump administration went to preserve their access to the European market.

Just this past weekend, Trump announced — summarily — a 30 per cent blanket tariff on imports from the European Union. The EU's prepared list of revenge tariffs includes multiple hits on American lobster, among other iconic products like bourbon and motorcycles. (Are tariffs rational? No, mesdames and messieurs, they are not. They rarely are. They are designed to kick recipient nations in their softest and most indulgent parts).

The special EU deal on American lobster expires on July 29.

For the first time in forever, Australian lobsterfolk find themselves — what are the odds? — in a curiously advantageous position. The Chinese market has reopened like a lotus. In January this year, southern rock lobster exports to China from SA reached 60 per cent of the annual all-time high in 2019. Canadian and American lobster exporters are multi-directionally trussed by real and potential tariff complications.

As the Council on Foreign Relations recently put it: "The irony is that the country best poised to benefit from the US–EU–China lobster war is Australia. Let that sink in. Australia does not claim to have any leverage and does not even see itself as being involved in this fight. But its lobstermen could steal market share, and guard it jealously."

Life is complicated, of course. And as Kyriakos Toumazos — a South Australian lobster industry stalwart — explains, the relief of operating without calamitous and random market restrictions is one thing.

The current marine heatwave in South Australia is another. For months now, rising ocean temperatures have delivered grotesque scenes of dead sea creatures washing up on SA beaches. A resultant algal bloom chokes aquatic life. "We're seeing things we've never seen before," says Toumazos, who has fished SA waters for 30 years.

"Mature lobster stocks are doing OK. But what does this phenomenon mean for the future?

"The reality is, we don't really know."