Analysts break down what the protracted power plays between Washington and Beijing mean for Asian economies as they walk a tightrope of risks vs rewards
Caught in the undertow of swirling power plays between China and the United States, Asia has become like a piece of driftwood battered by the pounding of opposing tides.
With key tariff deadlines approaching in July, and in light of lingering trade tensions between the world’s two biggest economies, many countries in the region are facing a delicate, pragmatic choice: bow to Washington’s growing pressure to crack down on supply chains and enforcement – or preserve the economic ambiguity that underpins their deep ties with Beijing?
Asian countries have entwined their supply chains, technology, markets and investment with Beijing – accounting for one-third of China’s total trade volume, or US$1.89 trillion last year. Meanwhile, some of them may need security assurances from the US amid the growing Chinese influence in the region, analysts said.
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China remains the top trading partner for 18 countries across the region and has been the largest trading partner of the Association of Southeast Asian Nations (Asean) for 15 consecutive years.
Meanwhile, economic asymmetry and military advantage have often translated into Beijing’s leverage in market power while, for many in the region, Washington represents security, diversification and strategic rebalancing, with its military presence, investment and advanced technology, analysts said.
That leaves many Asian economies walking a tightrope – benefiting from China’s vast market while remaining wary of the risks of over-dependence.
For much of Asia, maintaining ties with both while caught in between has become a survival strategy.
As ongoing negotiations between the administration of US President Donald Trump and Asia unfold behind closed doors and prospects remain cloudy, “it’s too early to talk about ‘camps’ in Asia, as Asia can’t afford to do without either China or the US”, said Vivek Kelkar, an independent analyst based in India.
Some regional leaders, such as Malaysia’s Anwar Ibrahim, have been verbally supportive of China because their geography and economy do not allow them to be anything else, but they may also be aware that, without the US, they are vulnerable to Chinese domination across both economics and politics, Kelkar said.
Both China and the US have shown a willingness to exercise power by weaponising supply chains and trade, Kelkar added, but there was no sign yet that Asia would cave in quite the way Trump envisages. “Asia is trying to manage a careful balance while messaging Washington that Asia has alternatives,” he said.
For instance, Malaysia’s chief negotiator, Mastura Ahmad Mustafa, told domestic news outlet The Star that although her country’s tariff talks with the US were in progress, those negotiations were only one part of Malaysia’s broader strategy to cushion the potential impact on exporters.
In a report published on Thursday, she said that it was hard to know whether the two sides could reach a deal before a
90-day pause on tariffs
is lifted in July, and that the Malaysian government had “begun rolling out contingency measures” such as market diversification and economic reforms.
In April, Trump imposed a 10 per cent universal tariff on all imports effective April 5, in an effort to address America’s trade deficits.
His administration also announced higher “reciprocal” tariffs on goods from select countries from April 9 – including 25 per cent for South Korea, 24 per cent for Japan, 36 per cent for Thailand, 46 per cent for Vietnam, and 49 per cent for Cambodia.
However, a grace period was granted later that month for all countries except China, delaying the implementation of these higher tariffs until July 9 and giving governments time to negotiate possible exemptions or adjustments with Washington.
According to a Reuters report, the Trump administration wanted multiple trade partners to provide their best offers by last Wednesday in a number of key areas, including tariff and quota offers for the purchase of US industrial and agricultural products, and plans to remedy any non-tariff barriers.
The US was expected to evaluate the proposals within days and offer “a possible landing zone” that could include a reciprocal tariff rate ahead of a self-imposed deadline in just five weeks, according to a draft letter to negotiating partners seen by Reuters.
Despite repeated assurances from White House officials that multiple deals were close, only one has materialised – with Britain.
China and the US have also agreed to roll back most of their recent tariffs for 90 days – a period due to expire on August 12 – with the intent of negotiating further. Trump and President Xi Jinping
spoke by phone on Thursday
to ease tensions.
“Trump wants investment coming into the US,” Kelkar said. “Asia wants investment in Asia … No one is ‘kissing his a***’ as yet. Across Asia, there’s the growing recognition that Trump makes provocative statements and needs his ego massaged.”
And China, at the moment, “may well look like a somewhat more stable partner, and [a] more ready source of investment”, he added, noting that the new
economic alliance
it is trying to forge with countries across Southeast Asia and the Middle East only emphasises this perception.
Stephen Olson, a visiting senior fellow at the ISEAS-Yusof Ishak Institute in Singapore and a former trade negotiator, said: “In the limited time remaining, US negotiators are likely to focus on the larger regional economies with large trade surpluses, such as Japan, South Korea or Vietnam”, as Washington does not have the capacity to negotiate individually.
Anxiety levels are high, especially for those countries facing stiff tariffs, but “other than negotiating in good faith and hoping for the same from the Trump administration, there’s little else that countries can do”, Olsen said, adding that countries will be concerned about their relative positions, vis-a-vis their competitors, after tariff rates are set.
The US is likely to use reciprocal tariffs as leverage to push countries away from China, as seen in the
US-UK trade deal
, which included economic-security measures aimed at sidelining China from key supply chains, he added.
With distinct domestic political and economic priorities, Asia’s major economies are unlikely to simply yield to Trump’s demands – each is calculating its own interests behind the scenes.
The reliance of Japan and South Korea, as well as the Philippines and Taiwan, on the US’ security presence may give Trump a negotiating advantage, while they also want to protect their own industries.
Taiwan and the US have held two rounds of tariff negotiations, covering trade barriers and “economic security”, according to the island’s vice-premier, Cheng Li-Chun. Taiwan’s leader
said on May 20
that talks with the US were going “smoothly”. Taiwan, a major tech hardware exporter, faces a 32 per cent tariff rate if its negotiations with Washington do not yield a deal by July.
Meanwhile, South Korea’s semiconductor and technology partnerships are vital for the US, and Seoul has the Samsung card to play, while Japan is looking to shield its automobile and auto-components sectors from steep US tariffs, said Kelkar from India.
“India is aware that a changing world is slowly pushing it under a US security umbrella,” he said, adding that New Delhi is also trying to strike a balance between the entwining supply chains with China and the risk that Beijing could weaponise them.
The US and India were close to finalising a trade deal, US Commerce Secretary Howard Lutnick said on Monday. Indian imports faced an additional 26 per cent US tariff.
Countries such as Japan, South Korea, Vietnam and India are also China’s latent competitors across global markets, while its power to price low and gain market share has also hurt firms across much of Asia.
Southeast Asian economies are especially finding themselves caught in the crossfire, as Chinese firms have used the region as a transshipment platform to export their products to the US to circumvent tariffs and sanctions. And the situation became more prominent in recent months during the China-US tariff escalation.
While Asean countries would benefit from increased economic activity and exports, a larger trade surplus with the US could also put them in the crosshairs of Trump’s tariff policy, given his view that the US trade deficit is a major problem, said Liu Wan-Hsin, a senior researcher at the Kiel Institute for the World Economy.
She added that countries’ negotiation power is rather limited when they individually deal with the US. And as they worry that they may achieve less than their competitors, which would weaken their market competitiveness, “they would probably be more willing to make concessions in order to keep the US tariff low with the deadline approaching”.
“China seems to be offering a carrot-and-stick strategy,” said Nick Marro, principal economist for Asia at the Economist Intelligence Unit (EIU) market research firm.
It has warned other countries against siding with the US in ways that could undermine Chinese interests, but at the same time, it is strengthening trade and strategic ties with its neighbours, he added, pointing to widespread expectations that Beijing might lift its nearly decade-long unofficial ban on
K-pop
performances in mainland China.
“The biggest issue is that China itself is a major security threat for many of its regional neighbours, and at the same time, the slowing Chinese economy means that although trade linkages remain important … Chinese import demand has essentially fallen off a cliff,” Marro said. “This is putting a squeeze on every single Asian market. No government really wants to take sides here.”
Jack Nguyen, the Ho Chi Minh City-based CEO of professional services firm InCorp, confirmed that Vietnamese firms “are being pulled from both sides”, as the country is “clamping down on [transshipments], inspections, more declarations and stuff”.
Vietnam’s economy is intricately tied to both the US and China. In 2024, exports to the US reached US$119.6 billion, making it Vietnam’s largest export market and accounting for nearly 30 per cent of its gross domestic product. Simultaneously, China is its largest trading partner, with the value of trade hitting a record US$205.2 billion last year, according to Vietnamese customs data.
“Vietnam is expecting US tariffs in the high teens, not 46 per cent as proposed on April 2, after its talks with the US. Vietnamese factory investors could absorb that amount without ado,” Nguyen said.
A second round of US-Vietnam tariff talks was held from May 19-22 in Washington. Vietnam’s minister of industry and trade, Nguyen Hong Dien, met with the US trade representative, Jamieson Greer.
And this week,
Reuters reported
that the US had sent a “long” list of “tough” requests to Vietnam in its tariff negotiations, including demands that could force the country to cut its reliance on Chinese industrial goods imports.
The EIU’s Marro said that, as negotiations have moved more slowly than the US expected, the 90-day pause could be extended.
“In a move to minimise the economic blowback onto the US economy, as well as another round of turmoil in US financial markets, we would anticipate the US being amenable to another extension,” Marro said. “The big risk rather is that Donald Trump might be seeing this extension as a point of weakness … Tariffs could snap back in July.
“On balance, Asia is going to be the region to watch when it comes to mapping out these tariff threats and negotiations, because what happens with Asia could set the stage for US policy for the rest of the world.”
In 2024, Asia accounted for nearly 60 per cent of global economic growth, with China contributing the lion’s share.
The complexity of the bilateral US trade negotiations with large economies such as China, India, Japan and Korea “may require some additional flexibility from the US on the negotiating timeline, where substantial progress is being made and a satisfactory deal seems likely”, said Rajiv Biswas, CEO of Asia-Pacific Economics.
“For example, Japan may have strong grounds for seeking an extension for its US reciprocal tariff deadline, due to [Japan’s] Upper House parliamentary elections” set for July, he said, adding that deliberate and ineffective prolongations would likely face harsher responses.
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