The future of ASEAN, US and China trade

(Part 1)

At the end of the month, ASEAN leaders will convene in Kuala Lumpur, where on top of the agenda will be the future of trade between ASEAN and the US, between ASEAN and China and among ASEAN members. Collectively, ASEAN-US trade in 2024 amounted to about $555 billion compared with $968 billion for ASEAN-China trade.

The first part of this series will look at the status of bilateral trade negotiations among individual ASEAN countries and the US. Part 2 will look at the implications for ASEAN-China trade and Part 3 will look at implications for intra-ASEAN trade.

Vietnam: With the fourth-largest trade surplus with the US ($123.5 billion in 2024), Vietnam faces the steepest threatened duty of 46%. Hanoi has moved decisively. It held high-level talks in May and has already cut tariffs on many US goods. Vietnam is also cracking down on Chinese products routed through its ports to dodge US tariffs — a key American gripe. In return, it seeks to preserve critical export sectors (electronics, apparel) that have boomed thanks to US markets. The negotiations are accelerating: a second round of talks in Washington went through late May. Vietnam is dangling big-ticket deals to please Washington — from state oil firm PetroVietnam agreeing to buy more ExxonMobil crude, to Vietnamese companies planning new factories in the US. Officials hint a deal is within reach, as both sides aim to avoid a 46% tariff that would “disrupt Vietnam’s growth” and upend supply chains for US firms manufacturing there.

Indonesia: Southeast Asia’s largest economy had about $18 billion of US goods surplus last year. It faces a 32% tariff threat. Jakarta’s negotiators, led by economics tsar Airlangga Hartarto, insist on a “fair and square” deal serving Indonesia’s interests. They’ve adopted a pragmatic tone — no retaliation, just quick engagement. Indonesia has offered to buy an extra $18 billion to $19 billion in US commodities like wheat, soybeans, LPG and crude oil, effectively vowing to erase its surplus. It also just loosened its local content rules (cutting the required local input in government purchases from 40% to 25%) to address a top US complaint. In talks, Jakarta is pushing for US investment and tech cooperation in areas like critical minerals, agriculture tech and healthcare. American officials, meanwhile, seek removal of Indonesian nontariff hurdles — from import licensing to its new rule forcing exporters to park earnings onshore. Indonesia hopes moving first will earn goodwill (President Trump has hinted at favoring early movers). As Finance Minister Sri Mulyani put it, Jakarta expects its swift concessions to be “rewarded” by Washington — perhaps via a tariff reprieve or a selective trade deal that spares key Indonesian goods.

Malaysia ships far more to America than it buys. US imports from Malaysia were $52.5 billion in 2024 versus $27.7 billion exports to Malaysia. That $25-billion deficit translated into a 24% US tariff threat. Kuala Lumpur reacted with a charm offensive. Trade Minister Tengku Zafrul Aziz raced to Washington in April, signaling Malaysia is “open to negotiate” on reducing its surplus and even exploring a broader trade agreement. Talks began in earnest in May, including sideline meetings at APEC in Korea. Though bound by a nondisclosure pact, Zafrul says discussions cover strategic sectors like aerospace and semiconductors, which are central to Malaysia’s economy. Indeed, chips are Malaysia’s lifeblood — nearly half its exports to the US (especially semiconductor devices and equipment) have been exempted from the tariffs. That buffers the immediate impact. Still, Malaysia is keen to protect its role in tech supply chains. The government is reportedly prepared to address US nontariff concerns and is even considering cuts to its own import duties in exchange for tariff relief. As ASEAN’s chairman this year, Malaysia also floats the idea of US-ASEAN cooperation. Washington has asked how the bloc might respond. Optimistically, officials say a “win-win” solution is in sight before the 90-day pause expires.

Thailand was slapped with a roughly 36% to 37% tariff threat — unsurprising given America’s sizable $45-billion trade deficit with Bangkok last year. Thai exports of vehicles, machinery and electronics to the US are hefty, while imports, mostly aircraft and soybeans, lag. The Thai government has been quieter publicly, but it is also in talks. Local media report that US negotiators are pressing Thailand to open its market further — for example, easing auto import restrictions and agricultural quotas — to address the imbalance. Bangkok’s leverage is its strategic value: it hosts major US firms and is a regional hub for automobile and hard disk drive production. There are hints Thailand may agree to buy more American planes and arms (bolstering its aging F-16 fleet, for instance) as part of a deal. Like others, it could also reduce certain tariffs. Thailand imposes high duties on pickup trucks and food imports to show “reciprocity.” With elections and political changes fresh in 2024, Thai leaders are keen to avoid an economic shock from US tariffs that could knock a projected 3% growth off course. An accord that boosts US imports while preserving Thailand’s US-oriented factories, which employ hundreds of thousands, would be a delicate balance, but both sides have an incentive to find a common ground.

The Philippines is unique among ASEAN-6: it enjoys a relatively modest US trade surplus of about $4.8 billion. Manila was hit with the lowest tariff rate in the region (17%), and a large share of its exports — notably electronics like semiconductors — are exempt from the duties. This positions the Philippines, in theory, to gain as investors divert supply chains away from harder-hit neighbors. But Filipino officials aren’t celebrating. They worry Trump’s tariffs could crimp the economy and sap funds for defense. The Philippines has been deepening military ties with Washington to deter China’s maritime claims, including pursuing a $5.6-billion purchase of F-16 fighter jets. Manila has sent a delegation to negotiate “on the basis of mutual benefit.” Signs point to a deal where the Philippines commits to buying US military hardware and other goods, thereby plowing its surplus back into America. The Philippine ambassador neatly framed it: the jet sale would turn its $4.8-billion surplus into “a $1-billion surplus in favor of the United States.” That “quid pro quo” logic is driving many of these negotiations. Given its lower risk profile, the Philippines is also eyeing opportunities: with only a 17% levy and only two-thirds of exports subject to it, it could attract orders and investments that might flee higher-tariff neighbors. But to capitalize, it must urgently improve infrastructure and logistics at home — a reminder that trade windfalls require domestic reforms.

Singapore stands apart in ASEAN. It has had a free trade agreement with the US since 2004 and ran a goods trade surplus in America’s favor — around $2.8 billion in 2024. Thus, Singapore isn’t targeted by Trump’s “reciprocal” tariffs beyond the 10% base duty across the board. In fact, Washington often holds up Singapore as a model free-trader with near-zero tariffs. Still, Singapore has skin in the game. As ASEAN’s financial and shipping hub, it benefits from regional stability, and it will suffer if US-China tensions or beggar-thy-neighbor tariffs upend Asian supply chains. Singapore is also a linchpin in strategic sectors: it’s a major semiconductor manufacturer and pharmaceutical producer for the US market. Tellingly, chips and pharma ingredients were exempted from Trump’s tariff plan precisely to avoid disrupting supplies. In negotiations, Singapore’s role is more as a facilitator and honest broker — it can help coordinate an ASEAN response and advise neighbors on navigating US demands, drawing on its close ties with Washington. Economically, Singapore’s focus is on preserving the free flow of goods and technology and diplomatically to maintain ASEAN centrality. It may seek US assurances that new export controls or security measures, like those Section 232 probes into chips and pharma, won’t unwittingly hamstring Singaporean industries that are vital links in US supply chains. In short, while not under the tariff gun, Singapore is working to keep the US-ASEAN trade web intact, and to remind everyone that multilateral trade ideals need not be dead in the water.

In Part 2 of the series, I will look at the implications of these dynamics for ASEAN-China trade and in Part 3, at implications for intra-ASEAN trade.

Eduardo Araral, Jr. PhD is an associate professor at the Lee Kuan Yew School of Public Policy, National University of Singapore. This op-ed is written in his personal capacity.