Trump tariffs tilt Southeast Asia towards China

In Brief

Trump’s abrupt 2025 tariff hikes have shaken Southeast Asia’s confidence in the United States, threatening regional supply chains and investment plans built on US market access. Countries like Vietnam scrambled to secure bilateral deals, while ASEAN leaders called for regional unity and deeper integration. Though China cannot replace the US market, it is positioned to benefit geopolitically. The tariffs may mark yet another milestone in accelerating Southeast Asia’s long-term drift toward China.

Until the 2 April 2025 reciprocal tariffs announcement, Southeast Asian countries appeared more sanguine than others about Donald Trump’s return to the US presidency. The 2025 ISEAS State of Southeast Asia survey showed the region had warmed to Trump before ‘Liberation Day’, with more participants preferring the United States over China than in 2024 if forced to choose.

Trump’s announcement of steep tariffs has surely shaken the region from this complacency. For countries whose economic development has been driven by the export of manufactured goods through their participation in regional supply chains, it is hard to imagine a more concerning scenario than facing such barriers to the US market. With Vietnam taking the lead, Southeast Asian countries scrambled to negotiate better deals with the United States. Hanoi reportedly offered to buy aircraft and liquefied natural gas from the United States and fast-tracked approval for a Trump-family golf course in Vietnam.

The need to preserve access to the US market is acute, especially for countries like Vietnam and Malaysia, which have benefited from a post-pandemic push to build more diversified supply chains. This global trend drove strong foreign direct investment into Southeast Asia, leading to a surge in new manufacturing projects across various sectors. But much of that investment rested on the assumption Southeast Asia would maintain relatively unrestricted access to the US market, especially compared to China — a premise that is now in doubt.

The uncertainty created by Washington’s abrupt and unpredictable tariff changes will exacerbate financial market stability, delay consumption and investment decisions and may create recessionary conditions. Even with bilateral deals with the Trump administration or the reduced ‘Liberation Day’ tariffs that Washington extended to some, the region’s supply chains will be less lucrative. The Vietnam deal already appears to be facing difficulties, and the threat of future abrupt changes weighs heavily on any agreement with a mercurial Trump. Investment and growth will undoubtedly take a hit.

While pursuing bilateral deals with the Trump administration is the region’s main game, Malaysian Prime Minister and current ASEAN Chair Anwar Ibrahim has also sought to lead a unified regional response. At the May 2025 summit, ASEAN leaders issued a statement, relatively strong by ASEAN standards, committing the region to avoid retaliatory or unilateral action and calling for deeper economic integration within ASEAN.

Anwar requested a special US–ASEAN summit but this was rejected as Trump sought to divide and conquer with bilateral tariffs and trade deals. A coordinated approach was always going to be a lofty objective. Still, Anwar appears to have salvaged relations by securing Trump’s agreement to attend the ASEAN summit in October after Trump personally interceded when a brief border conflict between Thailand and Cambodia erupted.

Southeast Asian countries have also identified trade diversification as their other main response to the risk of high US tariffs. In June 2025, Malaysia’s Deputy Minister for Trade and Investment Liew Chin-Tong said: ‘The Trump administration will set goalposts and change them at the last minute. We should think about the long term and rewire the way we think about trade’. This interest in diversification is one reason why Malaysia convened a special summit involving ASEAN, the Gulf Cooperation Council and China.

What will be the long-term impact of Southeast Asia’s efforts to reduce US exposure? The region’s post-Cold War geopolitics have been marked by inflection points: the 1997 Asian Financial Crisis, when China was seen as providing stability and assistance; the 2008 Global Financial Crisis, when China capitalised on the perception of US decline; and the COVID-19 pandemic, when China was quicker on the ground to support a health response. In isolation, these episodes appear as ad hoc fluctuations in relations with the United States. In retrospect, they may prove to be milestones in the region’s long-term drift towards China.

Trump’s tariffs mark yet another such milestone that accelerates the sense of disconnect between the United States and Southeast Asia. Chinese President Xi Jinping has already begun to capitalise on concerns about US protectionism, positioning China as the bastion of free trade and urging unity among an ‘Asian family’ during his April 2025 tour of Vietnam, Malaysia and Cambodia.

The perception that US trade policy is destabilising and unpredictable advantages China. But Beijing’s ability to profit directly from the situation is constrained by economic circumstances. China does not offer substitute demand for exports originally destined for the US consumer market. While Southeast Asia and China are each other’s largest trading partners, China’s imports from the region have been lagging as domestic demand continues to stagnate.

Instead, Chinese firms will seek alternative export markets to redirect excess goods supply from the United States and Southeast Asia will top the list — in 2023 ASEAN was already China’s largest export market. Many of these exports are capital or intermediate goods crucial for Southeast Asia’s own export industries, feeding into exports to the United States and the rest of the world. But increasingly, China is exporting final goods for consumption.

Southeast Asian countries have been slow to raise trade barriers against China compared to the rest of the world, making its producers more vulnerable to an export surge from China. If Chinese firms represent an additional competitive pressure in foreign and domestic markets at a time of economic pain, this could complicate any political gains China hopes to secure in the region.

While China is a central presence in Southeast Asia, the United States continues demonstrating not only its perennially underdone engagement strategy that predates Trump, but also a chaotic and unpredictable approach that diminishes the attractiveness of the United States as a long-term economic partner.

Trumps tariffs thus represent another inflection point reinforcing the shift towards China. Just how far will depend on how well China and Southeast Asia navigate the new tariff era.