Trump's Tariffs Drive ASEAN Closer to China
ASEAN refrains from retaliating
By: B A Hamzah
Driven by his obsession with MAGA strategy, US President Donald Trump seems determined to arrest America’s decline by weaponizing tariffs, with the ASEAN countries in the bullseye, expected to pay a significant price if they don’t align their interests with Washington’s. For example, the 10 countries that make up the Association of Southeast Asian Nations treaty organization stand to lose critical economic diversification as they become more integrated with China’s massive markets, although this is not a new phenomenon. The entire maritime states in Southeast Asia have been doing business, mainly barter trading of exotic products, for thousands of years even before the arrival of the Western powers in the region.
Trump seems to ignore this historical relationship, pushing them to close ranks with the US as it confronts a China that they do not regard as a threat. The dilemma persists: those who resist the US overtures may lose access to US military support, intelligence cooperation, and training facilities.
However, the action of switching political alliances which involves intricate considerations of national interests, economic and security concerns, is a calculated move to minimize any such adverse impact. ASEAN’s leaders are not blind to the challenges. They have been on the lookout for alternative markets (like BRICS). Almost all member countries, including Singapore, the only economy that runs a deficit trade balance with the US, are strategizing on how to improve their respective trade balances with the US. However, it is not in their DNA, nor likely their best interest, to retaliate.
Prime Minister Anwar Ibrahim of Malaysia has emerged as a key figure in attempting to steer ASEAN toward a unified response. As ASEAN Chair, to date, Malaysia has failed to bring about any result, partly because the tariffs target countries individually, which complicates any joint effort. While ASEAN can talk about unity all it wants, when it comes to action, every country is on its own. One by one, they have been falling in line to assume onerous tariff burdens. Collective effort is further undermined by policy fragmentation. Although the treaty organization has a larger population base than the EU with 27 members and a Custom Union, its economies are less integrated. Intra-EU trade is almost three times larger than ASEAN’s. This factor alone gives the EU a stronger retaliatory voice.
The EU is likely to receive better treatment after agreeing to buy US weapons for Ukraine to fight Russia. The arm sales, worth billions of US dollars, will reduce the EU’s total deficit with the US. At the same time, the decision by NATO countries to hike defense expenditures to 5 percent annually means more business for America and further reduces the trade deficits over time.
Compared with the EU, which has temporarily suspended countermeasures against Trump’s tariffs in the hope of getting a better deal before August 1, ASEAN doesn’t have the same economic, political, military, and cultural clout to retaliate. While the EU’s strength lies in its internal market cohesiveness, ASEAN’s biggest challenge is from within, quietly fracturing along strategic lines between countries leaning toward China and those aligning with the US. Such strategic fault lines can dilute its collective ability to act as a group even AS the member states muster the political will to act swiftly. Notwithstanding the fragile structural problem within ASEAN, the leaders have resigned to the fact that the Trump administration is not likely to change its mind on ASEAN’s (except for the Philippines) preference for China.
As the member countries prioritize their economic survival over strategic alignment, as a group, they have refrained from retaliating, not because they agreed with Trump but because they fear his unpredictability could further damage the goodwill and civility they have established with the US before he became President.
But despite early appeasement by a few member states, the overall coercive trade policy may backfire as the ASEAN member states’ economies become more integrated with the Chinese market. This will defeat the purpose of Trump’s policy of using tariffs to undermine Beijing. Trump is playing with economic fire, bullying the Asean countries into abandoning relationships with neighboring China that span thousands of years for the US, despite the current ongoing squabble over ownership of the South China Sea. The strategic, security, and political disagreements far outweigh mere trade statistics — and blunt economic threats will only harden ASEAN's instinct to hedge rather than to bandwagon with Washington.
For ASEAN, true strategic strength lies not in choosing between the United States and China, but in maintaining a careful balance that preserves economic freedom, political autonomy, and regional stability. It is also a manifestation of sovereignty and pride. The rise of China and the decline of Pax Americana reflect a historical reality: “that all empires, no matter how powerful, eventually decline and fall”.
China has long been trying to pull ASEAN closer through initiatives like the Belt and Road Initiative (BRI), RCEP trade agreement, and bilateral investments. Tariffs from the U.S. would make ASEAN countries more dependent on China that provides access to a growing an alternative market, more investment and at the same time Southeast Asia's proximity to mainland China make the region a preferred China Plus One destination.
Trump's tariffs on ASEAN have accelerated Southeast Asia’s pivot toward China and will weaken Washington’s position in the region without the latter firing a shot. Geopolitically, this means China’s influence in ASEAN will grow even faster, and US influence will shrink, wasting the efforts of the previous administration to shore up alliances in the region. Meanwhile, Beijing will present itself as the "responsible and steady partner” as it cements its primacy in Asia.
B A Hamzah is former Director General of Maritime Institute of Malaysia (MIMA), a former Fellow at the Institute of Strategic and International Studies in Malaysia, and a regular contributor to Asia Sentinel on ASEAN affairs. The views are his own. He can be reached at bahamzah8@hotmail.com
B A Hamzah is making stuff up when he says none of the ASEAN states think China doesn't pose a regional threat to their territorial sovereignties. Except for Cambodia, Burma and perhaps Laos, all ASEAN members of sorts, none of them have embraced China as their newest trade patron and savior. They, on the whole, remain cautious of China as they might -- might -- also be of the US. Hamzah might want to look beyond tariffs to arms trade, most of which being purchased are from the US. It's no secret that ASEAN remains dependent on the US security umbrella since at least the early 1950s. If Hamzah is serious about doing history, he shouldn't be selective in this regard to put his spin on historical facts.
Trump's tariffs, by all metrics I've seen, will end up hurting US consumers as US consumer prices of imports rise. The last inflation number is already starting to show this, but, given lag time, we won't have a fuller picture until the end of the year. There's also the confusion based on TACO Trump's in-out tariffs calculations. Fact is nobody really knows the impact of these tariffs on not just the US economy any more than on exporting countries' economies. But if you do macroeconomics,Trump's tariffs will see a further erosion of US dollar hegemony. Trump bullying the Federal reserve to reduce its short-term interest rate policy won't help rebound the US dollar either. Then again there isn't, yet, a currency to challenge US dollar hegemony. Not even gold or bitcoins. Or for that matter barter trade. US dollar hegemony is an old story that has been doing the rounds since Nixon killed off the gold standard in 1970/71. It reared its ugly head again in the mid to late 1980s with the Plaza and Louvre agreements that in the end fell flat on their faces, as did the Japanese economy.
Likewise, ASEAN "integration" remains a long, long way from being fully integrated into a cohesive whole. Hamzah would do well to study ASEAN economic integration going back to the mid to late 1970s to see just how many times "economic integration" is mention, promised, declared -- and then flopped big time. I'll wager Hamzah this much: If for any reason TACO Trump does the full TACO and kills off his tariffs because American hip-pockets are hurting and unemployment is rising as fast as inflation and the might US dollar is sinking (directly linked to US geopolitical hegemony), ASEAN states will be far less reliant on the China big brother deal and gleefully return to embrace the US again. Trump's tariffs aren't going to fix America's economic and financial problems. Too late for that now. And if China cannot take full advantage of Trump's tariffs stupidity, and Trump is a stupid oaf, but avoids undertaking very painful structural reforms of its own sick economy, guess what will happen to ASEAN's economies? China is, let me as always put this crudely, in deep shit, and Xi has no real answers. So, like Trump, he'll look to divert the attention of the Chinese people away from their economic uncertainties and pain toward -- guess who? -- Taiwan. He'll manufacture something.
Speaking of manufacturing, all the s-called MOUs of foreign investments that are promised to fly into ASEAN economies like Malaysia will inevitably put their own budgets at big risks, and will have direct impact on their currencies, jobs and inflation rates. So if anybody believes that ASEAN economies are "free market" economies, keep on dreaming!
if proposed policies (in reaction to tariffs) are enacted, america's top 5 trading partners will ALL benefit more than america itself. only a chunk of this comes from improved partnerships with other. (ref : macro&money, joeri s.)
which leaves one to ask what strategy for the gop exists other than to allow trump to garner bribes on 1-on-1 tariff talks (shown by game theory to be useless in a complex dependency environment).