Between Trump and Xi: Southeast Asia on a geopolitical tightrope

Already during Trump’s first term, the U.S.–China trade war drove investment into the ASEAN region. International—particularly Chinese—companies expanded their production in Southeast Asia to circumvent trade barriers. While this influx of investment is welcomed by the region, it comes with a catch: the rising trade surplus with the U.S. and the perception of tariff circumvention have placed Southeast Asia in the crosshairs of Trump’s second administration. Since April, Southeast Asian countries have topped Trump’s tariff list. The threat of massive punitive tariffs—though initially suspended—has sent shockwaves through the region’s export-driven economies.

Pressure from China is less blunt, but no less problematic. Southeast Asian companies are suffering from a wave of low-priced Chinese exports, which are intensifying domestic competition—particularly in photovoltaics, steel, textiles, and electronics. This wave may be turning into a tsunami: Chinese exports to ASEAN countries are rising as fast as Chinese exports to the U.S. are falling.

More significant in the long run is what Southeast Asia’s integration into China-dominated supply chains means for local industries. If the main driver of Chinese investment remains the circumvention of trade barriers via final assembly in ASEAN countries, then the region’s economic entanglement with China brings little structural benefit to its industries.

Moreover, ASEAN–China economic ties are always overshadowed by security concerns. Territorial disputes in the South China Sea are a constant factor in strategic calculations. For Southeast Asian claimants, economic dependence on China carries security risks.

Beijing’s response? A charm offensive in the south. While Donald Trump brandishes tariff threats, Xi Jinping tours Vietnam, Malaysia, and Cambodia, portraying China as a reliable partner. Armed with investment promises, China is seizing the moment created by U.S. tariff pressure to ease Southeast Asian doubts about closer ties with Beijing.

Malaysia and its Prime Minister Anwar Ibrahim play a special role in this context. Malaysia—one of China’s closer allies in the region—currently holds the rotating ASEAN chair and is hosting the ASEAN Summit at the end of May. Ahead of the summit, which will focus on the region’s positioning amid geopolitical tensions, Anwar has emphasized the importance of the revised ASEAN–China free trade agreement. At the summit itself, Malaysia will host not only the consultations among the ten member states but also an expanded format including China and the Gulf Cooperation Council (GCC)—a signal directed at Washington.

Southeast Asia’s governments are seeking agency within the power structure of global geopolitics. Some, like the Philippines, are aligning more closely with one great power—in this case, Washington. Most, however, are trying to maneuver between the U.S. and China, hoping to turn the competition between the two to their own advantage. Yet only a few hold true strategic cards, like Indonesia, which is leveraging its nickel wealth to assert a degree of independence from both powers. Most ASEAN states are forced to react rather than act—accepting that the future of their region will be determined primarily in Washington and Beijing.