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Business Times
2 hours ago
- Business
- Business Times
Asean walks trade war tightrope
WITH its pauses and U-turns, Donald Trump's tariff agenda continues to defy firm forecasts. Still, it remains worthwhile to explore how the US president's trade wars have impacted South-east Asian economies and could continue to do so going forward. South-east Asian economies are strategically important to both China and the United States as trading partners, geographical interests and military bases, particularly for the US. Yet, for the past decade, the region has repeatedly found itself caught in the middle as these two global powers compete for economic supremacy. With a population of over 690 million – or around 8 per cent of the world's population – Asean accounts for over 3.5 per cent of global gross domestic product and 7.4 per cent of global exports, demonstrating the bloc's increasing importance to the world's economic activity. Asean is China's largest trading partner, while ranking as the US' fourth-largest trading partner, after Mexico, Canada and China. First Trump term: Unintended beneficiaries During Trump's first presidency, tariffs of 10-50 per cent were imposed on various categories of Chinese products, primarily aimed at addressing concerns over intellectual property theft, forced technology transfers, and the substantial trade deficit with China. While tariffs were subsequently halved on the premise that China would import an additional US$200 billion from the US, only around US$30 billion in additional US goods were actually imported to China between 2020 and 2024. The tariff on Chinese imports created an unexpected opportunity for Asean and Mexico through supply chain realignment. Vietnam and Mexico emerged as particular beneficiaries. Vietnam's exports to the US surged from just US$49 billion in 2018 to US$137 billion in 2024, while Mexico's exports rose from US$344 billion to US$506 billion over the same period. The rapid increase can be attributed to the relocation of Chinese manufacturing facilities and rerouting of goods, reflected in the parallel rise in goods imports from China to both Asean countries and Mexico, predominantly in partially finished or finished goods. China's supply chain realignment strategy proved remarkably successful. Mexico is now the largest exporter to the US, replacing China in 2023, while the Association of Southeast Asian Nations (Asean) now ranks as the fourth-largest exporter to the US after Mexico, China and Canada. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Strategic positioning and political complexity This shift was hardly surprising, as Asean has long been strategically important to China from multiple angles: as manufacturing bases, investment destinations and for political influence. The region's significant overseas Chinese population and close proximity to China have helped Asean countries grow closer to the country over the years. Since 2018, the bloc has become a critical hub for Chinese companies seeking to mitigate tariff exposure from the US-China trade war. Chinese firms have rerouted exports through Asean or established factories in countries like Vietnam, Cambodia, Thailand and Malaysia to bypass tariffs, making the definition of 'origin of goods' and 'value-adding' increasingly opaque. Deja vu: The second Trump term Fast-forward to 2025, and investors face a deja vu moment as Trump's second presidential term took off with the strongest push yet for broad-based tariffs, maintaining significant focus on China. This reflects growing concerns about America's enormous total trade deficits with the world, which have grown to just shy of US$1 trillion. The US now understands the implications of imposing tariffs on China alone – the supply chain realignment has rendered previous tariffs ineffective in reducing the trade deficit. Asean economies once again find themselves caught in the crossfire between the world's two largest powers. This time, however, the implications are far more significant. The realignment of China's manufacturing supply chains has created jobs and entire industries over the past five years. Another shift could unwind parts of this manufacturing ecosystem and threaten people's livelihoods. The geopolitical balancing act There is also a broader geopolitical challenge. With escalating US-China tensions, Asean faces increasing pressure to align with one side or the other. Thailand and the Philippines, as examples, are notably taking a more muted stance towards geopolitical alignments. This balancing act is particularly delicate – both countries host existing US airbases while also relying heavily on China for investments, tourism and manufacturing. Given China's strong dominance as a trade partner and investor in the region, plus with the US serving as both a major export destination and source of political influence for many Asean economies, this equilibrium requires careful navigation. Asean must continue to strengthen intra-regional ties and leverage trade deals such as the RCEP and CPTPP to insulate itself from global volatility. The path forward for Asean economies must be both strategic and deliberate to safeguard the region's long-term interests. The group should focus on maintaining a delicate balance between the two global superpowers by adopting a neutral stance, while simultaneously strengthening internal resilience through enhanced intra-regional trade and improved competitiveness in manufacturing, trade and foreign direct investments. To prepare for potential geopolitical decoupling, Asean should diversify its network of economic partners and deepen institutional integration, drawing lessons from the European Union to strengthen its collective influence on the global stage. For businesses and investors, this evolving landscape presents dual-edged prospects: risks of supply chain disruptions, but also significant opportunities to position Asean as a key hub in future global trade and supply chain. Implications for bond investors While the temporary pause in new trade tariffs has brought some relief to bond investors, we view Trump 2.0 as bringing unprecedented growth risks for Asean. We expect a further economic decoupling between China and the US, which will negatively impact global growth as trade declines. In the near term, this uncertainty warrants further rate cuts from Asean central banks as inflation stabilises, growth slows and unemployment inches higher. Local currency bonds should therefore remain well-supported. We also expect to see some net international investment position flows from US assets returning to Asia, lending further support to local currency asset prices and Asian currencies. However, we remain mindful of the longer-term effects on potential economic growth from supply chain realignment and global slowdown, which can have lasting impacts on Asean economies. The writer is portfolio manager, Asia Fixed Income, at M&G Investments
Asia Times
2 days ago
- Politics
- Asia Times
Hedging ways out of troubled waters in South China Sea
The South China Sea has long been a bubbling geopolitical hotspot. Recently, a series of moves by the various nations claiming a stake in the waters has stirred up yet more trouble. Malaysia has, of late, reaffirmed its commitment to oil and gas exploration in waters claimed by China while quietly building up its military on the islands off Borneo. Meanwhile, Chinese coast guard vessels have deployed water cannons against Filipino fishing boats. And the accidental grounding of a Chinese boat in shallow waters around the Philippines' Thitu Island on June 8, 2025, was enough to put Filipino forces on alert. Vietnam, too, has been active in the disputed waters. A Beijing-based think tank on June 7 flagged that Vietnamese engineers had been busy reclaiming land and installing military-related ports and airstrips around the Spratly Islands. What the three Southeast Asian nations of Vietnam, the Philippines and Malaysia have in common is that they, along with others in the region, are trying to navigate a more assertive China at a time when the US policy intentions under the second Trump administration are fluid and hard to read. And in lieu of a coordinated response from the regional body Association of Southeast Asian Nations, or ASEAN, each member nation has been busy charting its course in these choppy waters. Why is China trying to assert control in the South China Sea? In a 2023 speech, President Xi Jinping noted that 'Western countries led by the United States have implemented all-around containment, encirclement and suppression of China.' This fear has been long held in Beijing and was reinforced by a US Indo-Pacific policy announced in 2011 of rebalancing military forces away from Europe and toward Asia to confront China. In response, China has in recent years embarked on an ambitious policy of attempting to outmuscle US naval power in the South China Sea. China is now the world's leading builder of naval vessels and is estimated to have 440 battleships by 2030, compared with the United States' 300. And it comes at a time when US naval power is spread around the world. China's, meanwhile, is concentrated around the South China Sea, where, since 2013, Chinese vessels have pumped sand onto reefs, turning them into islands and then weaponizing them. Satellite imagery shows the Fiery Cross Reef in the South China Sea, part of the Spratly Islands group, being built by Chinese dredges. Image: Maxar via Getty Images / The Conversation Then there is the activity of China's maritime militia of approximately 300 nominally fishing boats equipped with water cannons and reinforced hulls for ramming. This so-called gray zone fleet is increasingly active in confronting Southeast Asia nations at sea. The US response to China's militarization in the sea has been through so-called 'freedom of navigation' exercises that often deploy carrier groups in a show of force. But these episodic displays are more performative than effective, doing little to deter China's claims. The US has also strengthened military alliances with Australia, India, Japan and the Philippines, and has increased coast guard cooperation with the Philippines and Japan. A fleet from the U.S. Navy patrolling the Pacific Ocean. Photo: Sean M. Castellano / US Navy via Getty Images / The Conversation Yet the battle over control of the South China Seas is more than just geopolitical posturing between the two superpowers. For adjoining countries, the sea is a valuable biological resource with rich fishing grounds that provide a staple of fish protein for close to 2 billion people. There are estimates of 190 trillion cubic feet of natural gas and 11 billion barrels of oil. The UN Convention on the Law of the Sea, or UNCLOS, guarantees a nation an exclusive economic zone (EEZ) of 200 nautical miles from around its coastline. China is a signatory of the UNCLOS. Yet it views ownership of the South China Sea through the lens of its nine-dash line, a reference to the boundary line that Beijing has invoked since 1948. While the claim has no legal or historical basis, the delineation makes major incursions into waters around Vietnam, the Philippines and Malaysia and, to a lesser extent, Brunei and Indonesia as well. Despite China's expansive claim to the South China Sea being dismissed in 2016 by the international Permanent Court of Arbitration, Beijing continues to assert its claim. Screenshot Hedging positions As I explore in my recent book 'Hedging and Conflict in the South China Sea,' part of the problem Southeast Asian nations face is that they have failed to forge a unified position. ASEAN, the regional bloc representing 10 nations in Southeast Asia, has long been governed by the principle that major decisions need unanimous agreement. China is a major trading partner to ASEAN nations, so any regional country aligning too close to the US comes with the real risk of economic consequences. And two ASEAN members, Cambodia and Laos, are especially close to China, making it difficult to generate a unified ASEAN policy that confronts China's maritime claim. Instead, ASEAN has promoted a regional code of conduct that effectively legitimizes China's maritime claims, fails to mention the 2016 ruling and ignores the issue of conflicting claims. Further complicating a united front against China is the competing claims among ASEAN nations themselves to disputed islands in the South China Sea. In lieu of a coordinated response, Southeast Asian nations have instead turned to hedging — that is, maintaining good relationships with both China and the US without fully committing to one or other. Malaysia's approach sees its government partition off the South China Sea dispute from its overall bilateral ties with China while continuing to promote an ASEAN code of conduct. Until recently, Malaysia's oil and gas activities were well within Malaysia's EEZ and not far enough out to fall into China's nine-dash claim. But as these close-to-shore fields become exhausted, subsequent exploration will need to extend outward and into China's nine-dash claim, putting Malaysia's dealings with China under pressure. China's nine-dash line claims a significant amount of Vietnam's EEZ, and the contested maritime area is a source of friction between the two countries; China's maritime militia regularly harasses Vietnamese fishermen and disrupts drilling operations in Vietnam's EEZ. But Vietnam has to tread carefully. China plays a significant role in the Vietnamese economy as a major destination of exports and an important provider of foreign investment. China also has the ability to dam the Mekong River upstream of Vietnam — something that would disrupt agricultural production. As a result, Vietnam's hedging involves a careful calibration to avoid angering China. However, part of Vietnam's heavy hedging involves the promotion of the South China Sea dispute as a core issue for domestic public opinion, which limits the Vietnamese government's ability to offer concessions to China. A Philippine coast guard ship and fishing boats are seen in El Nido, Palawan, Philippines, on May 26, 2025. Photo: Daniel Ceng/Anadolu via Getty Images / The Conversation China's nine-dash claim also includes a wide swath of the Philippines' EEZ. The Philippines has zigzagged in its dealings with China. The presidencies of Gloria Macapagal Arroyo (2001–2010) and Rodrigo Duterte (2016-2022) pursued a pro-China tack that downplayed Filipino claims in the South China Sea. Presidents Benigno Aquino (2010-2016) and Ferdinand 'Bongbong' Marcos Jr (2022-present), in contrast, have given US forces greater access to their maritime bases and mobilized national and international opinion in favor of their claims. Since coming to power, Marcos has also pursued even closer naval ties with the US. But this has come at a cost: China now views the Philippines as a US ally. As such, Beijing sees little to be gained by pulling back from its assertive activity in and around its waters. In the shadow of two major powers battling for power in the South China Sea, Southeast Asian nations are making the best of their position along a geopolitical fracture line by advancing their claims and interests while not overly antagonizing a more assertive China or losing the support of the US. This may work to tamp down tensions in the South China Sea. But it is a fluid approach not without risk, and it could yet prove to be another source of instability in a geopolitically contested and dangerous region. John Rennie Short is professor emeritus of Public Policy, University of Maryland, Baltimore County This article is republished from The Conversation under a Creative Commons license. Read the original article.
Hindustan Times
2 days ago
- Politics
- Hindustan Times
Dinesh K Patnaik set to be India's new envoy to Canada
Senior diplomat Dinesh K Patnaik, currently India's envoy to Spain, is expected to be the new high commissioner to Canada as the two sides reset their relationship, people familiar with the matter said. Patnaik is expected to be replaced in Spain by Jayant Khobragade, currently India's ambassador to the Association of Southeast Asian Nations (Asean), the people said on condition of anonymity. The process for securing an agrément, or the formal agreement whereby a state receives a foreign country's envoy, for Patnaik is already underway, the people said. During their first meeting on Tuesday on the margins of the G7 Summit in Canada, Prime Minister Narendra Modi and his Canadian counterpart, Mark Carney, agreed on several steps to reset bilateral ties, which had plunged to an all-time low because of a diplomatic row over the killing of a Khalistani separatist in 2023. Among these steps was the appointment of new high commissioners in each other's capitals. HT first reported in March that Patnaik, from the 1990 batch of the Indian Foreign Service, was the front-runner for the post of high commissioner in Ottawa. He is one of India's senior-most diplomats and served as deputy high commissioner to the UK during 2016-2018, a position that required handling the Khalistan problem within the Indian diaspora, as is the case with Canada. Patnaik has more than 30 years of experience in assignments within India and abroad. He has served in the missions in Geneva, Dhaka, Beijing, and Vienna, and in the divisions focusing on Africa, Europe (West), the UN, and external publicity in the external affairs ministry. Patnaik was the deputy chief of mission at the Indian embassy in Austria during 2009-2012, the ambassador to Cambodia during 2012-2015, and the envoy to Morocco during 2015-2016. Though Khobragade was officially named as India's envoy to Poland in January, the posting did not go ahead because of various reasons, the people said. Khobragade is from the 1995 batch of the Indian Foreign Service and has done a stint in the Indian embassy in Spain in the past. He has also served in the Indian missions in Russia, Pakistan, and Kazakhstan, and served as the ambassador to Kyrgyzstan. Within the external affairs ministry, he has served in the disarmament and international security division and the West Africa Division. He has also served on deputation with the Department of Atomic Energy from 2017 to 2020. Khobragade was appointed the ambassador to Asean in Jakarta in 2021, months after Pakistan refused to accept his posting as the charge d'affaires in Islamabad.
Arab Times
2 days ago
- Politics
- Arab Times
Kuwait-Manila bonds gain momentum: ambassador
KUWAIT CITY, June 18: 'The Kuwaiti-Philippine relations are historic and both countries are keen to further strengthen cooperation in various fields,' says Assistant Foreign Minister for Asian Affairs Ambassador Samih Hayat. Hayat made the statement on the sidelines of his participation in the Philippine Embassy's celebration of the 127th anniversary of the independence of country. He praised the results of the meeting between the His Highness the Crown Prince Sheikh Sabah Al-Khaled -- the representative of His Highness the Amir Sheikh Meshal Al- Ahmad Al-Jaber Al-Sabah, and President of the Philippines Ferdinand Marcos Jr. on the sidelines of the two summits held in Malaysia between the Gulf Cooperation Council (GCC) and the Association of Southeast Asian Nations (ASEAN), and the GCC and China. On the other hand, Philippine Ambassador to Kuwait Jose Cabrera III praised the deep-rooted friendship between his country and the State of Kuwait, stressing that these relations are witnessing growing momentum, thanks to the high-level meetings between the leaderships of the two countries and the ongoing cooperation in various fields. He indicated that his country aspires to host the first round of bilateral consultations in Manila this year, which will address important issues such as maritime safety, combating human trafficking, sports, and international security. He expressed his country's appreciation for the contribution of more than 220,000 Filipinos residing in Kuwait to the economic and social development of both countries, while commending the measures taken by the Kuwaiti authorities to improve labor conditions and protect them. He recalled the struggles of forefathers who sacrificed their lives for the independence of the Philippines and the first raising of the flag on June 12, 1898, emphasizing that the Philippines remains committed to the values of peace, democracy, and human rights despite all the challenges. He also affirmed that the Philippines has become an attractive destination for investment, especially in the sectors of agriculture, services, electric vehicles, renewable energy, and space technology -- benefiting from a young and skilled workforce.
Yomiuri Shimbun
4 days ago
- Business
- Yomiuri Shimbun
Mahathir Urges ASEAN to Create United Front Against U.S.; Warns High Tariffs Will Be ‘Very Damaging for America'
The Yomiuri Shimbun Former Malaysian Prime Minister Mahathir Mohamad Members of the Association of Southeast Asian Nations should create a united front in negotiations with the United States, former Malaysian Prime Minister Mahathir Mohamad said in a recent interview with The Yomiuri Shimbun. The following is excerpted from the interview, which was conducted by Yomiuri Shimbun Correspondent Tetsuya Mizuno. *** America is a big market. High tariffs affect the market; it hurts the market. Exporters to America face troubles. They can't sell as much as they used to. But America itself is going to face a lot of troubles. This is because America needs import; without it, the American industries cannot function, especially without micro-processors or microchips. [U.S. President Donald] Trump has put a pause on electronics because he knows that he needs the electronics to keep supplies in the American industries. He has already given in. Later, he has to give in more. Things will be expensive in America. Other countries will also suffer. Other countries should work together to continue this world trade. The trade should go on with an enhancement. They should take the place of America to supply certain things. It will take time. It is disruptive. I think very soon America will have to solve Trump's high tariff. The high tariff will create a shift away from America. This would be permanent. America will lose a lot of its trade because people will be able to get from other sources. Once they have been identified from other sources, they will not go back to America. It is inevitable the U.S. reduces its trade by high tariffs. People will have to look for other partners. China provides good partnership. China has great technological capabilities. It can produce whatever the U.S. produces. It will take a little time. It will be soon. Trump does not want to side with ASEAN. He wants to deal with individual countries, because the country will be weak. ASEAN coming together and putting a united front in negotiation with the U.S. is the best approach. The better future for ASEAN is when there is no dominant country, not China, U.S., nor anyone. It is not that ASEAN is leaning toward China. It is America who pushes ASEAN to China. If America does not impose high tariffs, we [ASEAN] want to be friendly with the U.S. and China, which both are big markets. But America rejects ASEAN, pushing us toward China. We need a market. China is the biggest market for Malaysia. If America pushes us, we have no choice but to go to China. The recovery after World War II was partly due to the Marshall Plan. The package supported the European countries' recovery. Following that, there are trends on globalization and the borderless world, which has contributed to world trade. What Trump is doing now is to reverse the Marshall Plan. We should go back to the world trade system. We should give more power to the WTO. Japan is a great investor. Malaysia had been able to industrialize because of the Japanese investment. Japan has a big role to play to help countries in Southeast Asia with industrialization and trade. Right now, Japan is in the trough. But I have great faith in Japan and Japanese people who are coming up with new ideas and products, especially in the field of medicine. I think Japan will catch up and recover. It may not be in the industrial products, but there are other sectors where Japan can excel. A democratic system has failed in a selection of leaders. A lot of bad leaders like people who do not believe in climate change, people who believe that the solution to the conflict is to go to war, these people are now in charge in many countries. That is why we have the problems. Japan should not be a neighbor of the U.S. only, but a neighbor to the rest of the world. It should be an enabler for the rest of the world. Japan should consider the best thing for Japan in the world, not as a partner of the U.S. Mahathir Mohamad Mahathir, 99, entered politics after working as a general practitioner. He served as Malaysian prime minister twice, from 1981 to 2003 and from 2018 to 2020. He promoted the modernization of his country, advocating the Look East Policy, an economic policy modeled after Japan and other countries.
