(Bloomberg) -- China’s emergence as an economic and geopolitical power in the Asia-Pacific is causing tensions between traditional allies the U.S. and Australia, according to a Sydney-based think tank.

“There are frustrations between Canberra and Washington,” the University of Sydney’s United States Study Centre said in a report released Thursday. The U.S. is urging Australia “to be less cautious about calling out China’s destabilizing activities, and to lessen its commercial dependence on China,” it said.

At the same time, Australia wants the U.S. to “clarify its objectives, strategy and resources in greater detail and to be clearer about what it would like Australia to do,” the report said. “It would also like the U.S. to refrain from counter-productive actions, such as picking fights with allies over issues that could be resolved quietly and behind closed doors.”

President Donald Trump’s administration welcomed the unexpected re-election of Prime Minister Scott Morrison’s conservative government last month. Still, the report highlights the increasingly difficult terrain the Australian leader must traverse to keep sound relations with its main ally, which is waging a trade war against China, Australia’s biggest trading partner.

Australian ties remain frosty with China after the government passed laws aimed at negating Beijing’s influence in national affairs and barred Huawei Technologies Co. from building its 5G network.

Signs of China’s disgruntlement have since emerged, including criticism in Beijing-backed newspapers and a slowdown on Australian coal imports into Chinese ports.

Weakening Alliance

Chinese hackers are among the suspects who may have caused a huge security breach revealed this month at the Australian National University, while one of Morrison’s lawmakers said an unannounced visit by three Chinese warships to Sydney last week showed “Beijing can dictate terms and we just acquiesce.”

“In Australia, the government needs to be more upfront with its public about the challenge China poses to its interests and values, its efforts to weaken the alliance with the U.S. and Beijing’s attempts to revise key aspects of the existing rules-based order,” the United States Study Centre said in its report, authored by Charles Edel and John Lee.

It urged Australia, the most China-dependent developed economy, to cultivate more markets for its exports, which include iron ore, coal and food, to reduce the threat of China using trade as a weapon against it.

“If Australia can identify and tap into a more diverse array of export markets and sources of investment, it would spread risk and enable greater economic and political resilience in the event of political displeasure from Beijing,” the report said.

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Jon Herskovitz

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