Between a new trade deal with China and a potential audience with Trump, Asean has a chance to be the architect of a new regional order
Asean is at a critical juncture. The Southeast Asian bloc, caught between the currents of the US-China trade war, is making a dive for strategic space between a new free-trade agreement with China and the possibility of a Trump tariff meeting.
Last month, China and the Association of Southeast Asian Nations finalised negotiations to upgrade their 15-year-old free-trade agreement. Set to be signed by the end of the year, the deal aims to deepen China-Asean economic integration by incorporating digital trade, green economy initiatives and supply chain connectivity.
Bilateral trade in goods exceeded US$980 billion last year – China and Asean are each other’s biggest trading partner – underscoring the deal’s strategic weight.
At the same time, Prime Minister Anwar Ibrahim of Malaysia, the current Asean chair, has written to US President Donald Trump to press for an Asean-US meeting to discuss tariffs. These include the 10 per cent baseline tariff and “reciprocal” tariffs ranging from 17 per cent for the Philippines to 49 per cent for Cambodia. Anwar is seeking a unified response to ensure trade fairness for Asean’s export-driven economies.
In this moment of tension, Asean has a critical opportunity to rise above passivity, leveraging its diplomatic agility to assert itself as a linchpin in global trade and geopolitics – and become the architect of a new regional order. Rather than being a battleground for US-China rivalry, Asean can redefine its role by fostering a neutral, inclusive trade ecosystem that prioritises regional resilience and strategic autonomy.
This opportunity hinges on Asean’s ability to exploit the US-China rivalry. Asean’s unique position of being geographically central, economically vibrant and diplomatically neutral allows it to shape trade rules rather than merely adapt to them. But this requires navigating internal divisions and external pressures with unprecedented cohesion. First, the upgraded free-trade deal positions Asean as a critical node in China’s economic orbit, enhancing the bloc’s resilience against US tariffs – but also risking an over-reliance on Beijing.
China showed strategic timing in concluding negotiations just before the Asean Summit, underscoring its commitment to fostering economic stability and regional cooperation amid US-China trade tensions. Chinese Commerce Minister Wang Wentao has spoken of China’s commitment to high-standard free trade zones and the trade upgrade aligns with Asean’s priorities in the digital and green economies.
This focus makes sense – Asean attracted a record US$230 billion in foreign direct investment in 2023, much of it in tech and renewable energy. Malaysia’s carmaking ambitions, for instance, has been boosted by Chinese investments such as Geely’s partnership with Proton to produce electric vehicles.
But while China’s exports to Asean have continued to grow, surging by 12 per cent in value last year, Asean’s exports to China have fallen by 3 per cent from the 2022 peak – an imbalance the trade deal upgrade aims to address through expanded market access. Vietnam’s recent decision to impose anti-dumping measures on Chinese steel reflects a need for cautious balancing, especially as US tariffs force Chinese exporters to seek new markets.
Asean will need to balance deeper economic engagement with China with diversification in its trading partnerships in the Indo-Pacific, Europe and elsewhere.
Second, while US tariffs expose Asean’s economic vulnerabilities, particularly for export-heavy nations, they also offer a chance to rethink the trading model – with a greater emphasis on intraregional trade.
Vietnam’s trade surplus with the United States, worth nearly US$124 billion last year, faces a 46 per cent tariff, hitting a growing electronics sector for which the US is the second biggest market. Similarly, Thailand’s key automotive, steel, energy and food industries are braced for severe impact from Trump’s 36 per cent tariff.
Despite years of integration efforts, intraregional trade accounts for just 22 per cent of Asean trade. Although nearly all the goods within the region are traded at zero tariffs, non-tariff barriers remain widespread. To address these, at the latest Asean summit, members finalised negotiations on an upgraded trade in goods agreement, expected to be signed in October. With any luck, the new agreement and tariff crisis will accelerate intraregional trade.
Third, Asean’s dual approach of pursuing a collective meeting with the US while allowing its members bilateral talks reflects a pragmatic diplomacy – but also risks fragmentation.
Countries have opened individual negotiations, with Vietnam pledging to buy more US goods and address transshipment issues, while Thailand offers enhanced market access and investment. Such moves undermine Asean’s unity, especially given Trump’s preference for bilateral deals that capitalise on divergent national interests within multilateral blocs.
An Asean-US meeting could set a unified framework, but its success depends on overcoming internal divisions. For instance, Singapore and the Philippines, which face lower tariffs at 10 per cent and 17 per cent respectively, have less urgency, creating a misalignment of priorities.
If, however, Asean can overcome its internal challenges, its diplomatic finesse could transform it into a regional linchpin.
Indeed, unless Asean wishes to remain a passive venue for superpower rivalry, it must address US tariff pressures through collective diplomacy, including coordinated actions on fair trade and transshipment issues. Expressing unified concern over US tariffs and agreeing to coordinate responses are vital for policy alignment. Platforms such as the annual Asean summit are important, as are efforts to promote the Asean outlook for the Indo-Pacific.
With a US$3.9 trillion economy and 680 million people, Asean has the leverage to influence global trading rules. By prioritising unity, broadening alliances and maintaining its strategic autonomy and cohesion, Asean can emerge from this great power competition as a vital source of regional strength and leadership.
Source: South China Morning Post
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
