Prime Minister Scott Morrison is optimistic persistent trade tensions between the United States and China can be resolved soon, aided by a meeting between their leaders at this weekend's G20 summit.
China is vowing to "fight to the end" while also saying it doesn't want the spat to descend into a full trade war.
Mr Morrison has warned of the collateral damage to other nations and the global economy from the strained relationship between the economic giants.
Australia will not be a passive bystander as they work through their differences, he says.
"We should not just sit back and passively await our fate in the wake of a major power contest," he told a Bloomberg event in Sydney on Wednesday.
"There are practical steps that we can pursue. So we will play our part. We will not be passive bystanders."
The US-China tensions are likely to dominate the G20 summit in Japan on Friday and Saturday, with US president Donald Trump and Chinese leader Xi Jinping expected to meet.
Mr Morrison is also attending the summit and says he maintains his usual optimistic disposition about the outcome of that meeting.
"We are looking to them to put that broader global economic interest to the fore, which is what the G20's all about ... It's not the G2, it's the G20," he said.
"It may take longer than we'd hoped but so long as we're always making progress then I think that is cause for optimism."
China's ambassador to Australia, Cheng Jingye, says his country does not want a trade war.
"China is willing to work together with the US to reach a win-win solution on the basis of equality and mutual respect," he told an Australia China Business Council event in Canberra before the prime minister's speech.
"As we have made it clear, China is open to negotiations but we will also fight to the end if needed."
Asked about the comment, Labor's trade spokeswoman Madeleine King said she had confidence in the Chinese leadership to find a resolution.
"They can feel put-out at some of things that have been said about them and their attitudes, and that is understandable," she said.
"But I have confidence the Chinese (administration) knows ... we will have to work together to keep this world trading system going."
Mr Morrison says America holds legitimate concerns that the existing rules-based trading system cannot cope with China's economic structure and policies.
"The rules-based system is in need of urgent repair if it is to adequately respond to these new challenges, including the rise of large emerging economies, changing patterns of trade and new technologies," he said.
The push to update the World Trade Organisation rules is one of the G20 discussion topics.
His comments came as the annual Lowy Institute poll showed Australians' trust in China was at the lowest level for 15 years.
Just 32 per cent said they trusted the Asian giant a great deal or somewhat to act responsibly in the world - a dramatic 20-point drop from last year's result.
Mr Cheng said trust and cooperation were indispensable to strengthening Australia's ties with China, likening them to two wheels.
"The relationship between China and Australia can only be steadily and increasingly improved when both wheels are spinning with the same speed and in the same direction, mutually reinforcing each other," the ambassador said.
Mr Morrison said it was important to keep going back to the fundamentals of the relationship as it became more complex.
Australian Associated Press