Southeast Asia Global Relations Outlook Part 4: China, the US, and EU
In this fourth installment of our short series analyzing Southeast Asia’s Global Relations Outlook for 2025, we discuss the relationship of ASEAN countries with global superpowers and longstanding partners amid shifting geopolitical dynamics and risks at the regional and global levels.
China
China to Continue Prioritizing ASEAN
ASEAN is expected to remain a diplomatic priority for China in 2025, especially if member states’ relations with the United States (US) under the second Trump presidency proceed to deteriorate. It will be in Beijing’s interest for ASEAN member states to exercise their ‘strategic autonomy’ (i.e. to not stand with the US against China), and the Chinese will no doubt seek to draw member states closer by stepping up cooperation.
President Xi Jinping make state visits to several ASEAN member states in 2025. Xi may visit Indonesia, for instance, to reciprocate President Prabowo’s visit to China last year, as well as to attend the 3rd Asian-African Summit and the 70th anniversary of the Bandung Conference, both of which will be hosted in Indonesia.
Another country Xi may visit is Malaysia, given Prime Minister Anwar Abrahim’s and King Sultan Ibrahim’s high-level visits to China in 2024. Anwar has invited Xi to attend the ASEAN Summit and the ASEAN-Gulf Cooperation Council + China Summit, both of which will be hosted by Malaysia. China will also be keen to be seen as lending support to Malaysia, the ASEAN Chair for 2025, and steer the ASEAN-China agenda to focus more on cooperation rather than contentious issues such as the South China Sea disputes. Finally, Xi may visit Singapore to commemorate the 35th anniversary of Singapore-China diplomatic relations this year.
BRICS, of which China is a founding member, provides a framework for China’s further collaboration with select ASEAN member states. At the time of writing, Indonesia is a new member of BRICS, while Malaysia, Thailand, and Vietnam are partner states that have expressed desire to join as full members. As BRICS continues to expand and develop, we can expect to see continued collaboration between China and its Southeast Asian partners.
Economic Relations to be Strained
Economic ties remain the bedrock of China-ASEAN relations. In 2020, ASEAN overtook the European Union (EU) to become China’s largest trading partner. In 2023, trade with the bloc accounted for 15.9% of China’s total foreign trade, an increase from 10.5% in 2022.1 Total bilateral trade in 2023 stood at USD 468.8 billion. As of end 2022, the cumulative stock of Chinese foreign direct investment (FDI) in ASEAN reached USD 154.66 billion.2
ASEAN also remains China’s largest trading partner for intermediate goods, with bilateral trade in intermediate goods amounting to USD 576.2 billion in 2023.3 This figure is indicative of the unique nature of the economic relationship between China and ASEAN, as manufacturing in ASEAN significantly depends on Chinese-sourced inputs and raw materials, making many ASEAN economies net importers from China. The reconfiguration of global production away from China and towards Southeast Asia in the wake of the US-China trade war has only exacerbated this dynamic. This may pose a dilemma for many ASEAN economies in terms of future relations with the US under Trump 2.0, especially if the latter seeks further decoupling from China. As such, there may be greater American scrutiny of Southeast Asian imports. In response, ASEAN economies may feel obliged to tighten rules on product labelling and origin criteria to appease US concerns.
Trade tensions may develop between ASEAN and China over the latter’s export glut, caused by overproduction by Chinese manufacturers coupled with tepid domestic demand. This has resulted in a surplus of Chinese goods, most of which has been directed to Southeast Asian markets. This influx of relatively cheap Chinese goods – combining both small-ticket items like textiles and clothing alongside big-ticket products such as electric vehicles, lithium batteries, and solar panels – is generating pressure on Southeast Asian industries, sparking factory closures and job losses in countries like Indonesia and Thailand. In response, ASEAN countries have enacted measures such as anti-dumping tariffs and taxes on low-cost imports. Should economic ties between China and the US continue to deteriorate, we can expect to see a further pivot of Chinese exports to Southeast Asia.
South China Sea Disputes to Continue
Tensions in the South China Sea will remain elevated in 2025, and may in fact worsen. The year 2024 saw tensions between China and the Philippines surge to heightened levels, as the Marcos administration in Manila sought to deepen security relations with Washington while pushing back against Chinese encroachment in its Exclusive Economic Zone, particularly around the Second Thomas Shoal. Several incidents were reported last year involving Chinese and Filipino naval units, with the Chinese Coast Guard ramming and firing water cannons at Philippines’ Coast Guard vessels, injuring several Filipino coast guard personnel.
Under the new Trump administration, Manila is expected to build upon the defense gains it made with the US in 2024, with Trump having previously identified the Philippines as a crucial security partner vis-à-vis China. However, whether the Trump administration will follow up with meaningful cooperation remains in question. Tensions may also develop with Vietnam over China’s ongoing and extensive land reclamation work in the Spratly Islands.
Separately, in October 2024, Malaysia’s Prime Minister Anwar Ibrahim called for accelerating negotiations on a code of conduct for the South China Sea, with an aim for completion by 2026. Talks on a code of conduct have been ongoing since 2014, with sticking points including its geographical scope and whether it should be legally binding. At present, it is considered unrealistic for negotiations to be concluded anytime soon.
United States
Trump’s Tariffs Remain Biggest Concern
For most of the export-dependent economies of ASEAN, the planned tariff policy of the second Trump presidency remains the biggest concern. During his 2024 presidential campaign, Trump had promised to implement a 60% tariff on all Chinese imports as well as between 10% and 20% tariffs on all imports entering the United States. The stated aim of these tariffs is to lower America’s trade deficits vis-a-vis most other countries, as well as bring more manufacturing home to the States. Given that presently five of the ix largest ASEAN economies enjoy trade surpluses with the US, the region is particularly vulnerable to Trump’s planned tariffs. Countries such as Vietnam with particularly large and growing trade surpluses with the US also risk inviting extra scrutiny and additional punitive tariffs.
It has been suggested that ASEAN economies may benefit from the relocations of Chinese production facilities into Vietnam, Malaysia, Indonesia, and other countries in the region. However, these gains may be limited and will be contingent on the ability of each country to navigate trade tensions and strengthen domestic production capabilities. Should Chinese-based manufacturing shift operations to Southeast Asian countries to ensure continued US access, trade surplus these countries enjoy with the US will only widen, potentially exacerbating tensions with Washington. Countries suspected of being used for transshipment of Chinese products to the US or of using a significant number of Chinese components and raw materials in their final assembly may invite greater American scrutiny.
Given Trump’s distrust of multilateralism, it is likely that the US will pull out of the Biden administration’s signature Indo-Pacific Economic Framework (IPEF) agreement. IPEF is an economic framework that seeks to deepen engagement between member countries in the areas of trade, supply chains, the green transition, and anti-corruption measures. The withdrawal is expected to damage American credibility and influence within the region, reminiscent of the US withdrawal from the Trans-Pacific Partnership (TPP) agreement under the first Trump presidency. Whether the ASEAN members of IPEF – namely Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Brunei Darussalam, and Singapore – press forward with the agreement absent the US (perhaps by modifying it to reflect greater regional interests) remains to be seen.
Return To ‘Shopping Diplomacy’
Trump sees tariffs as a leverage in negotiating a series of mercantilist trade agreements that will attempt to ‘fix’ the US’ trade imbalances and benefit American business. Indeed, during Trump’s first term, several Southeast Asian leaders had carried out what has been dubbed ‘shopping diplomacy’, which involved ASEAN leaders travelling to Washington to announce large-scale commercial purchases of American goods in line with Trump’s “Buy America” mantra. Goods ranged from military hardware and airlines, as well as investments into US equity and infrastructure projects.
Mercantilist trade agreements, however, have been argued as a suboptimal trade solution, given that trade agreements dictated by government fiat rather than market forces create a series of economic inefficiencies that cascade throughout the larger economy.
Trump’s trade policy might open the possibility of self-serving interest groups. For instance, the Trump Organization’s deal with Vietnamese developer Kinh Bac City Development to build a USD 1.5 billion golf course in the Vietnamese province of Hung Yen during the 2024 US Presidential Elections is seen as having been driven by Hanoi’s interest in fostering positive relations with a potential Trump presidency. The Trump Organization is President Trump’s family business. During Trump’s first presidency, concerns had also been raised within the US about the blurred lines between the Trump Organization and the Trump administration, and whether Trump was leveraging the system to benefit his own family. These concerns over conflict of interest could very well arise again during his second term, and may well influence how certain Southeast Asian governments approach relations with Washington.
Focus on Boosting Bilateral Ties
Trump showed little interest in ASEAN multilateralism during his first term, having never attended the bloc’s signature East Asia Summit and never appointing an ambassador to ASEAN or to Singapore. This time, it is more likely that Trump will build upon the Biden administration’s strategy of boosting bilateral ties with select ASEAN member states with an eye on containing China. In September 2023, Biden visited Vietnam, where US-Vietnam ties were raised to a comprehensive strategic partnership. The Biden administration also reinvigorated defense ties with the Philippines through the rapid institutionalization of bilateral defense cooperation, including by expanding US military deployment under the Enhanced Defense Cooperation Agreement (EDCA).
It is possible that a second Trump presidency will build upon these bilateral gains with Vietnam and the Philippines as part of a more hawkish approach to China. In the case of the Philippines, Trump had previously described the country as “the most important prime piece of real estate from a military point of view”. Many of Trump’s choices for his second administration, including Secretary of State Marco Rubio and National Security Advisor Mike Waltz, have also expressed support for the US-Philippines alliance. In the case of Vietnam, most recent polls in the run up to the 2024 election showed a significant majority of Vietnamese respondents favoring Trump over Kamala Harris. Commenting on the polls, Lena Le from Vietnam National University suggested this preference may stem from a belief that Trump will promote regional stability and assist Vietnam in the South China Sea. Suggestions of extensive public goodwill on the part of Vietnam may provide avenues for further security collaboration between the US and Vietnam during Trump’s second term.
That being said, while Trump may double down on the current preference for bilateral negotiations with individual ASEAN Member States, this will evidently come at the expense of ASEAN’s centrality to the regional geopolitical architecture. This may cause discomfort to many within the bloc who prioritize ASEAN centrality and geopolitical neutrality, creating possible fissure points over the coming years.
European Union
Robust Economic Ties
Economic ties between ASEAN and the EU remained robust in 2024. Trade in goods would reach EUR 262 billion, a slight drop from EUR 270 billion in 2023. EU foreign investment into the bloc reached EUR 47 billion the same year, while total EU investments have reached over EUR 90 billion since the end of the COVID-19 pandemic. The economic relationship remains bolstered by frameworks such as the EU-Singapore Free Trade Agreement (FTA) and the EU-Vietnam FTA.
Analysts point to several areas that hold great potential for further trade cooperation, such as sustainable development. European expertise in renewable energy and green technologies could significantly support ASEAN’s transition to a low-carbon economy, especially in the wake of the US pulling out of global green funding pools under Trump. Furthermore, digital transformation is another avenue for collaboration, with Southeast Asia’s booming digital economy offering substantial prospects for EU technology and innovation-driven enterprises. The EU-ASEAN Digital Partnership signed in 2023 provides the necessary framework for deeper engagement in this regard.
However, challenges remain to deeper trade collaboration between the EU and ASEAN, such as divergences in regulatory frameworks and trade standards. This has particularly been the case with the EU’s recent environmental policies. The European Union Deforestation-Free Regulation (EUDR), which aims to restrict imports of commodities such cocoa, coffee, palm oil, and other forest products if they are linked to deforestation, has been criticized by ASEAN Member States for its potential adverse impact on millions of smallholder producers. Initially scheduled to go into effect by end-2024, EUDR has been postponed to December 2025 for large companies and June 2026 for smaller enterprises. This will provide more time for regional businesses to adjust to these regulatory changes, thereby lessening tensions.
Hopes to Sustain High Level of Engagements from 2024
2024 saw high levels of engagement between ASEAN and the EU. In February 2024, both blocs held the 24th ASEAN-EU Ministerial Meeting in Brussels. Later in October, a Partners’ Dialogue forum was held in Jakarta, preceded by sectoral dialogues on issues such as technology management. President of the European Council Charles Michel would also attend the annual ASEAN Summit as well as the subsequent East Asia Summit in Laos (in comparison, then-President Joe Biden and Chinese President Xi Jinping were not in attendance).
In May 2024, ASEAN and the EU launched he ASEAN-EU Blue Book 2024-2025. Underscoring the strategic partnership between ASEAN and the EU, the book also showcased new cooperation programs under the EU’s “Global Gateway” strategy. It was noted that under the “Global Gateway” initiative, the EU would mobilize EUR 10 billion in investments for green and connectivity programs in ASEAN. It is hoped that the cadence of high-level engagements between ASEAN and the EU can continue this year.
About the Southeast Asia Public Policy Institute
The Southeast Asia Public Policy Institute is a research institute based in Bangkok and Singapore, working across the region. Our mission is to support the development of solutions to the most pressing public policy challenges facing Southeast Asia in the 21st century. The Institute undertakes in-depth research to develop actionable policy solutions on a range of issues across sustainability, technology, public health, trade, and governance. We convene dialogues with stakeholders and decisionmakers to drive discussion on the challenges and opportunities facing markets across the region. The Institute draws on a network of in-market researchers, advisors, and partners to provide insights and recommendations for governments, policymakers, and businesses.
- “Cambodia’s economy is projected to grow by 6.3% in 2025,” China Briefing, August 9, 2024, https://www.china-briefing.com/news/china-asean-trade-and-investment-relations/ ↩︎
- Ibid. ↩︎
- Ibid. ↩︎
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