Australia could join a proposed economic alliance dubbed 'The Quad' with the US, Japan and India to reduce reliance on trade with China as tensions between Canberra and Beijing reach new heights.
US Deputy Secretary of State Stephen Biegun has proposed the four-country grouping as a way of filling a trade power vacuum in the Indo-Pacific region.
He added Washington could eventually invite South Korea, Vietnam and New Zealand to join the alliance.
If Australia were to join the trade group it could lead to further souring in diplomatic relations with China, which has worsened since Scott Morrison's proposal for an independent inquiry into the origins of the coronavirus pandemic.
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Australia could join a trade organisation called 'The Quad' with the US, Japan and India following a proposal by the US government
Amid a continuing war of words over Mr Morrison's strengthening of Australia's relationship with the US, the communist country has imposed harsh tariffs on Australian farmers - including an 80 per cent tax on barley.
Mr Biegun specifically named China as he laid out plans for 'The Quad' in a speech on August 31.
He said the group could act as a bulwark against 'a potential challenge from China' and resemble the North Atlantic Treaty Organisation.
'The Indo-Pacific region is actually lacking in strong multilateral structures,' Mr Biegun said.
'They don‘t have anything of the fortitude of Nato or the European Union.
'The strongest institutions in Asia oftentimes are not inclusive enough and so … there is certainly an invitation there at some point to formalise a structure like this.'
US President Donald Trump and first lady Melania Trump with Australian Prime Minister Scott Morrison and his wife Jenny Morrison. The US and Australia could form half of an organisation which would look to emulate the North Atlantic Treaty Organisation
China is Australia's largest trade partner in terms of both imports and exports.
Figures released in August showed China's share of Australian exports had reached 48.8 per cent - an all-time high - at a cost of $14.6billion.
On Sunday, Department of Foreign Affairs and Trade secretary Frances Adamson said it was now more important than ever to stand up to the Asian powerhouse.
'Australia should, Australia must, Australia is, standing up for its interests because if we don't we are on a very slippery slope,' she told The Australian.
Ms Adamson said confronting China amid the coronavirus crisis had prompted Australia's most difficult diplomatic challenge in a generation.
China is responsible for 48.8 per cent of Australia's export and the international body could reduce the national reliance on the communist body for trade. Pictured: A Chinese Navy member stands in front of a Shandong aircraft carrier
Activists burn a poster of Chinese President Xi Jinping in India in June. US Deputy Secretary of State said the organisation could act as a bulwark against 'a potential challenge from China'
The former Australian ambassador in Beijing from 2011 to 2015 explained the Asian power was becoming more assertive.
'We've seen China seeking to assert itself in this region, in the Indo-Pacific and globally, in ways that suits its interests but don't suit the interests of countries like Australia,' she said.
Ms Adamson said Australians wanted 'a peaceful, stable, prosperous region' and the government would not tolerate any interference with these ideals.
She warned that democratic institutions Australians take for granted, like the legal system and parliament, were 'at stake'.
Michael Smith (pictured) from the Australian Financial Review returned to Sydney on Tuesday after a five-day diplomatic stand-off with China
Bill Birtles is seen at Sydney airport on Tuesday following the frightening rush to leave China
'We need to make sure our institutions are strong and that we can defend ourselves. And this is where the role of diplomacy comes into play,' Ms Adamson explained.
She said Australia needed to 'take action' to counter the 'direct challenge' posed by China's assertion and aggression.
The DFAT secretary also said the narrow escape of two Australian journalists from China was the latest example of 'difficult issues' between the two countries.
Bill Birtles from the ABC and Michael Smith from the Australian Financial Review returned to Sydney on Tuesday after a five-day diplomatic stand-off.
Chinese President Xi Jinping reviews troops from a car during a military parade at Tiananmen Square in Beijing
Government travel advice website Smartraveller (pictured) was updated on 7 July to warn Aussies they face the risk of arbitrary detention in China
Chinese police told the journalists they were people of interest after another Australian journalist and business anchor, Cheng Lei, was detained in Beijing.
Mr Birtles and Mr Smith sheltered in Australian diplomatic compounds for days as their travel rights were revoked.
Consular officials eventually secured safe passage back to Australia after the pair agreed to be interviewed.
The Australian government has advised all Australians not to travel to China, warning they could face arbitrary detention.
Daily Mail Australia has contacted DFAT for comment.
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