The Prime Minister issued the sobering warning today as he announced a $270 billion boost to defence as part of a 10-year funding model.
The announcement comes amid heightened tensions with China as a result of the coronavirus and Australia's push for an independent investigation into its origins.
"We must face that reality, the patterns of cooperation that have benefited our prosperity and security for decades, are now under increasing and I would suggest almost irreversible, strain," he said.
Mr Morrison also conceded relations between China and the United States were "fractious at best, as they compete for political, economic and technological supremacy".
"It's not just China and the United States that will determine whether our region stays on path for free and open trade," he said,
"We don't seek to entangle or intimidate or silence our neighbours. We respect their sovereignty. We champion it. And we expect others to respect ours.
"Sovereignty means self-respect, freedom to be who we are, ourselves, independence, free-thinking.
"We will never surrender this. Never."
Image: News Corp Australia