Trump’s tariffs will push Southeast Asia uncomfortably close to China

ASEAN countries fear being caught in a US–China trade war – punished by US tariffs while being flooded with Chinese goods. They will need to band together to preserve their impressive economies.

Expert comment Published 8 April 2025 3 minute READ

Ben Bland

Director, Asia-Pacific Programme

Southeast Asian leaders have long argued that they should not have to choose sides between the US and China. Indeed, trading nations such as Malaysia and Vietnam have arguably profited from heightened China–US rivalry over the last few years, attracting manufacturers keen to diversify away from China in order to maintain access to the US market. 

Beijing has long been the major target of US President Donald Trump’s opprobrium on trade. However, Trump’s so-called reciprocal tariffs, announced on 2 April, have hit Southeast Asia particularly hard, throwing countries’ short-term economic plans into disarray, undermining the basis of their long-term development models, and pushing them further into an uncomfortable embrace with China, their largest trading partner.

Many regional officials feel they are being unfairly punished for helping American companies shift their production out of China.

Southeast Asian governments were shocked to be targeted with tariff rates similar to or higher than China’s 34 per cent, from Cambodia (at 49 per cent) to Vietnam (at 46 per cent) and Indonesia (at 32 per cent). Many regional officials feel they are being unfairly punished for helping American companies shift their production out of China, in line with Washington’s call for de-risking of US supply chains.

China’s positioning

Even as it frets about the impact on its own economy, Beijing is seeking to make political capital from Trump’s missteps. China is positioning itself to Southeast Asia, and the rest of the world, as the responsible defender of the global trading system and rules-based order, in contrast to American unilateralism and economic coercion. 

Xi Jinping…wants to see greater economic integration with Southeast Asia and more market access for Chinese companies.

Xi Jinping, the General Secretary of the Chinese Communist Party, is likely to emphasize that message if he proceeds with a possible visit to Cambodia, Malaysia and Vietnam later this month. 

As China and its neighbours risk being squeezed out of the US market, he wants to see greater economic integration with Southeast Asia and more market access for Chinese companies. Xi will also advance his vision of an ‘Asia for Asians’, where China dominates and the US is marginalized.   

His Southeast Asian counterparts will be receptive to the economic offer but wary of the broader strategic implications. Frustration with the US runs deep in Southeast Asia, but there is justified concern about Beijing’s response to the intensifying trade and technology war, and how it will affect the region. 

Southeast Asian government officials and local manufacturers fear that Chinese factories will flood their markets with cheap goods, seeking alternatives to the heavily tariffed US. They also worry that Beijing will have the financial firepower to support its industries through a period of trade war, while their own fiscally and monetarily constrained governments will struggle. 

And they are concerned that a broader breakdown of the open global trading system will irreparably harm their development models. All are based on integrating production with China and exporting to the US, Europe and other advanced economies.

The trajectory of the trade and technology war in Southeast Asia will have major global implications. The regional body, the Association of Southeast Asian Nations (ASEAN), is not as integrated as the European Union. But taken together it represents the world’s fifth biggest economy, with 680 million people. 

Southeast Asia has become an increasingly important connector in global supply chains, producing semiconductors for Intel, high-end trainers for Nike and smartphones for Samsung, among other goods. 

Geopolitically, the region has become the main crucible for competition between China, on one hand, and the US and its allies on the other. Territorial and sovereignty disputes over the South China Sea and Taiwan are shaping the nature of economic competition and cooperation in the region, and vice versa. And the extent and character of China’s rise will be determined, in many ways, by the conduct of its relationships with its Asian neighbours.

Anwar Ibrahim, the prime minister of Malaysia, holds ASEAN’s rotating chair. He has made the right noises, saying that Southeast Asian nations will reach out to the Trump administration to negotiate together, while looking to diversify trade relationships beyond the US.

But Vietnam, which is more economically reliant on the US than many of its neighbours, has already tried to cut its own deal with the White House – mirroring the beggar-thy-neighbour unilateralism that has characterized other nations’ responses to the Trump tariffs.

Acting together

A joint negotiating position on US tariffs is unlikely. But Southeast Asian leaders could do much more to promote intra-regional trade.

Southeast Asian governments will have to heed Anwar’s advice to pull together if they are to shield themselves from an unpredictable US and avoid being pulled further into unbalanced economic relationships with China.

A joint negotiating position on US tariffs is unlikely. But Southeast Asian leaders could do much more to promote intra-regional trade. That could include removing non-tariff barriers by better aligning regulations, improving cross-border connectivity, and facilitating the integration of burgeoning digital industries.

Even if governments are not able to agree on region-wide measures, they should also accelerate domestic economic reforms to lower the many barriers to private enterprise, attract more foreign investment and increase productivity.

And, as in other regions of the world, Southeast Asian governments will need to seriously reassess their assumptions about the direction of the global economy and multilateral system. Anwar rightly said that the breakdown of the existing order ‘transcends any single country’s policy choices’. It is not just driven by Trump and Xi but by broader shifts in society, technology and politics.

While the small and medium powers of Southeast Asia are not able to singlehandedly determine the region’s future, they have agency, as well as an extensive economic and diplomatic toolkit. But their options are narrowing. 

They will have to work harder and smarter to preserve their room for manoeuvre between the great powers and maintain their records of impressive economic performance. Otherwise, the gravitational pull of China will be ever more difficult to resist.