First, it can be argued that Australia started this trade war. Long before China put any restrictions on imports from Australia, we were putting "anti-dumping" tariffs on Chinese steel. The ban on Huawei is a bit dodgy. You wouldn't want every mobile router in Australia to come from the same Chinese vendor. But the choice we actually have is between N networks with western hardware, or N+1 networks where the extra one uses Chinese hardware (and is possibly a lot cheaper and a bit shonkier than the others). It's not clear how that extra network would cause the collapse of Australian democracy: no one is forcing us to use it. On the other hand, it's very clear how it might cause a collapse in the profit margin of a monopolistic telecom company with close ties to the Liberal Party.
Secondly, there's that thing which everyone knows but pretends not to: trade benefits consumers much more than producers. For farmers in Australia, this means plowing some crops into the ground and delaying buying their kids the latest smart phone. For farmers in China, it means feeding their kids a diet of mercury, cadmium and melamine, when they lose access to safe and unadulterated produce. That isn't a very smart way for the Chinese government to spend its political capital, and you have to suspect this is more about vanity than deliberate strategy.