Southeast Asia’s role as a collective middle-power bloc has never been more critical. Indonesian President Prabowo Subianto underscored this reality during a recent media conference with Malaysian Prime Minister Anwar Ibrahim in Langkawi. “Only via unity among the ASEAN countries, only with good cooperation between us, will our voices be heard, will we be given consideration by powers far bigger than us,” he said.
Although President Prabowo only mentioned the European Union as a larger power, Southeast Asia’s challenges extend far beyond its ongoing palm oil dispute with Brussels. With new green regulations emerging from the EU, ASEAN policymakers are also bracing for a potential flood of cheap Chinese goods and mounting pressure from the United States under President Donald Trump’s renewed trade offensive.
China’s slowing economy has already sent shockwaves across Southeast Asia. The situation may worsen if President Trump follows through on his recent announcement of a 10% tariff hike on Chinese imports, escalating tensions in a trade war that many thought had reached its peak during his first term.
Mari Pangestu and Shiro Armstrong, experts on regional trade issues, warn that the ripple effects of these tariffs will likely trigger a “tsunami of cheap Chinese goods” that could overwhelm Southeast Asian markets. With Chinese manufacturers looking for alternative destinations as the US market becomes increasingly hostile, ASEAN member states are already grappling with the consequences.
Indonesian policymakers have floated the idea of imposing a sweeping 200% tariff on Chinese imports, though this drastic measure has yet to materialize. The bankruptcy of Sritex, Indonesia’s largest textile manufacturer, has fueled calls for protectionist measures, as domestic industries seek shelter from a surge of cheap imports.
Other ASEAN nations have taken similar steps, implementing anti-dumping measures to shield their markets. Yet these unilateral moves carry the risk of fragmenting regional economies, undermining ASEAN’s collective strength.
As Pangestu and Armstrong caution, “tariffs tend to be contagious.” If one ASEAN country resorts to extreme protectionism, others may follow suit, leading to a trade war within the region that could harm its long-term economic health.
To avoid this scenario, ASEAN needs a coordinated policy response that respects World Trade Organization (WTO) rules. By acting collectively, ASEAN can exert more effective agency on the global stage and push back against unfair trade practices.
One promising avenue for ASEAN cooperation is the Multi-Party Interim Appeal Arbitration Agreement (MPIA), a workaround to the current dysfunction in the WTO’s dispute settlement process. However, only the Philippines and Singapore have signed on so far, leaving ample room for other member states to demonstrate their commitment to a rules-based trading system.
Even as ASEAN manages its relationship with China, it faces growing challenges from the United States. President Trump has signaled a more aggressive trade policy, targeting both adversaries and allies alike. With Southeast Asia’s persistent trade surplus with the US, the region is at risk of punitive tariffs.
There are concerns that the rapid growth in Southeast Asian exports to the US may be seen as Chinese firms using ASEAN nations to bypass US tariffs. Trump’s administration has made it clear that it will target firms based on their nationality, not their location.
Economist Jayant Menon warns that this policy could dissuade Chinese firms from investing in ASEAN as a way to evade tariffs, undermining the region’s appeal as an investment destination.
Some ASEAN policymakers view the US-China trade war as an opportunity for trade diversion, which could benefit regional economies as companies relocate operations from China to Southeast Asia. However, this optimism may be misplaced.
“Trade wars have no real winners,” Menon cautions. “The short-term benefits of trade diversion are often outweighed by long-term economic instability and uncertainty.”
Southeast Asia must tread carefully, using its diplomatic tools to push for de-escalation. While ASEAN may not have the power to end the global trade war, it can advocate for a temporary ceasefire and work toward more stable trade relationships.
ASEAN’s strength lies in its ability to act collectively. By presenting a united front, the bloc can leverage its combined economic and political weight to influence major powers. However, this requires a renewed commitment to cooperation and a rejection of unilateral protectionist measures.
The leadership of figures like President Prabowo and Prime Minister Anwar will be crucial in guiding ASEAN through this turbulent period. Both leaders have demonstrated an understanding of the importance of regional unity and diplomacy.
ASEAN has long served as a platform for middle-power diplomacy, and its role is more vital than ever. By strengthening internal cooperation and engaging with global partners, the region can navigate the challenges ahead and safeguard its economic future.
As the world faces rising geopolitical and economic tensions, ASEAN stands at a crossroads. The decisions its leaders make in the coming months will shape the region’s trajectory for years to come.
By championing a coordinated response to external pressures, defending the rules-based trading system, and pushing for diplomatic solutions, ASEAN can emerge stronger and more resilient. The path forward is fraught with challenges, but with unity and strategic diplomacy, the region can secure its place in the global order.
For ASEAN, the stakes have never been higher — but neither have the opportunities.
