As US-China Rivalry Intensifies in Asia, Can Countries Avoid Taking Sides?

Experts dissect the implications of the ongoing power struggles between Washington and Beijing for Asian economies as these nations navigate a precarious balance between potential risks and benefits.

Trapped in the undercurrents of competing maneuvers between China and the United States, Asia finds itself as mere driftwood being pummeled by conflicting waves.

As important tariff deadlines loom in July, and considering the ongoing trade disagreements between the globe’s top two economic powers, numerous nations in the area find themselves at a critical juncture. They must decide whether to yield to increasing U.S. demands for stricter oversight and regulation of supply chains—or maintain the ambiguous economic relationship that supports their strong connections with China.

Asian nations have integrated their supply chains, technologies, markets, and investments with Beijing, representing one-third of China's overall trade volume, amounting to $1.89 trillion last year. However, some of these countries might seek security guarantees from the United States due to the increasing Chinese presence in the area, according to analysts.

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China continues to be the leading trade partner for 18 nations in the area and has held the position of ASEAN’s primary trading partner for 15 successive years.

At the same time, economic disparities and military superiority have frequently resulted in China leveraging its influence through market dominance. For numerous countries in the area, however, the United States symbolizes safety, variety, and strategic recalibration, thanks to its military deployment, financial commitments, and cutting-edge technology, according to experts.

This situation forces numerous Asian economies to tread carefully—gaining advantages from China's enormous marketplace while staying cautious about the dangers of becoming overly reliant.

For many parts of Asia, keeping connections with both sides while being sandwiched in between has turned into a strategy for survival.

As ongoing talks between U.S. President Donald Trump’s administration and Asian countries continue discreetly with uncertain outcomes, “it’s premature to discuss ‘sides’ in Asia since Asia cannot risk being isolated from either China or the United States,” stated Vivek Kelkar, an independent analyst hailing from India.

Asia is striving to maintain a delicate equilibrium while conveying to Washington that Asia possesses alternative options.
Vivek Kelkar, independent analyst

Certain regional figures like Malaysia’s Anwar Ibrahim have expressed verbal support for China due to geographical and economic constraints that prevent alternative stances. However, these leaders might also recognize that in the absence of U.S. influence, they could become susceptible to Chinese dominance in both economic and political spheres, according to Kelkar.

Kelkar noted that both China and the U.S. have demonstrated their readiness to leverage power through the manipulation of supply chains and trade. However, there were no indications suggesting that Asia would capitulate as President Trump anticipates. He explained that Asia aims to strike a delicate equilibrium while conveying to Washington that they possess viable options.

For example, Malaysia's lead negotiator, Mastura Ahmad Mustapha, informed the local media outlet The Star that even though her nation’s discussions about tariffs with the U.S. were ongoing, these talks constituted just one aspect of Malaysia’s comprehensive approach aimed at mitigating possible effects on exporters.

In a report released on Thursday, she stated that it was difficult to determine if an agreement between both parties would be reached beforehand. 90-day pause on tariffs was raised in July, and the Malaysian government started implementing precautionary steps like expanding markets and initiating economic reforms.

In April, Trump introduced a blanket 10 percent tariff on all imported goods starting from April 5th, aiming to tackle America’s trade imbalances.

His government similarly declared increased "retaliatory" duties on products imported from certain nations starting April 9, with rates such as 25% for South Korea, 24% for Japan, 36% for Thailand, 46% for Vietnam, and 49% for Cambodia.

Nevertheless, a postponement was provided subsequently that month for all nations excluding China, pushing back the enforcement of increased duties till July 9, thus providing administrations an opportunity to engage in talks with Washington aimed at securing potential exclusions or modifications.

As reported by Reuters, the Trump administration sought competing proposals from several trading partners by the previous Wednesday regarding various critical aspects. These included potential tariffs and quotas for buying American-made industrial goods and farm produce, along with strategies to address obstacles not related to taxes.

The United States was anticipated to assess the proposals within days and provide "a potential agreement range" which might involve a mutual tariff rate before a self-set deadline in approximately five weeks, as stated in a draft communication to negotiation participants viewed by Reuters.

American negotiators are expected to concentrate their efforts on significant regional economies that have considerable trade surpluses, like Japan, South Korea, or Vietnam.
Stephen Olson from the ISEAS-Yusof Ishak Institute

Even though White House officials have repeatedly assured that several deals were nearly finalized, only one has actually come through, and that is the deal with Britain.

China and the U.S. have also committed to reducing the majority of their recently imposed tariffs for a duration of 90 days, set to end on August 12, with the aim of conducting further negotiations during this time. Trump along with President Xi Jinping intend to pursue these discussions. talked over the phone on Thursday to ease tensions.

Kelkar stated, “Trump desires increased investments flowing into the United States,” whereas for Asia, the focus lies on attracting more investment within the region itself... “No one is ‘bending over backward’ for him at this point. Throughout Asia, there’s an increasing realization that Trump tends to make inflammatory remarks and requires constant flattery to boost his ego.”

And currently, China might appear as a relatively more stable ally and a more willing source of investments, he mentioned, pointing out that with the new developments, economic alliance It aims to collaborate with nations throughout Southeast Asia and the Middle East, which only reinforces this viewpoint.

Stephen Olson, a visiting senior fellow at the ISEAS-Yusof Ishak Institute in Singapore and a previous trade negotiator, stated: "Given the short timeframe available, U.S. negotiators will probably concentrate their efforts on major regional economies that maintain significant trade surpluses like Japan, South Korea, or Vietnam." He added this is because Washington lacks the resources for individual negotiations.

Stress levels have escalated significantly, particularly among nations confronting substantial tariffs. However, as Olsen pointed out, "besides engaging sincerely in negotiations and expecting similar conduct from the Trump administration, there isn’t much more these countries can undertake." He further noted that following the establishment of tariff rates, nations will remain preoccupied with how they fare compared to rival economies.

The United States is expected to employ retaliatory tariffs as a means of pressure to encourage nations to distance themselves from China, similar to what has been observed with previous actions. US-UK trade deal , which encompassed economic-security initiatives designed to push China out of crucial supply chains, he further noted.

Given their unique internal political and economic agendas, the key Asian nations are not likely to readily capitulate to Trump's requests; instead, they are secretly assessing their individual interests.

Japan, South Korea, the Philippines, and Taiwan depend on the U.S.'s military protection, which might provide Trump with leverage during negotiations. However, these countries also aim to safeguard their respective industrial sectors.

According to Taiwan's Vice-Premier, Cheng Li-Chun, the country has conducted two rounds of tariff talks with the United States, addressing trade barriers as well as "economic security" issues. The nation's leadership was involved in these discussions. said on May 20 Discussions with the U.S. were proceeding "without issues." Taiwan, a key exporter of technology hardware, could be subject to a 32 percent tariff rate if its talks with Washington fail to result in an agreement by July.

At the same time, South Korea’s chip and tech alliances are crucial for the United States, with Seoul wielding the Samsung trump card. Meanwhile, Japan aims to protect its automotive and auto-parts industries from significant US tariff hikes, as noted by 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.

US Commerce Secretary Howard Lutnick stated on Monday that the United States and India were nearing completion of a trade agreement. Goods from India encountered an extra 26 percent tariff imposed by the U.S.

Nations like Japan, South Korea, Vietnam, and India are potential rivals to China in various international markets. Additionally, China’s ability to set lower prices and increase its market share has adversely affected businesses throughout much of Asia.

Southeast Asian economies are particularly being impacted, as Chinese companies have utilized the region as a transit hub for exporting goods to the U.S., effectively bypassing tariffs and sanctions. This trend has become even more pronounced recently amid heightened trade tensions between China and the United States.

The primary concern is that China poses significant security risks to numerous countries in its vicinity.
Nick Marro, an economist at The Economist Intelligence Unit

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 noted that individual nations have relatively little negotiating leverage when dealing with the United States on their own. As these countries fear falling behind their rivals and thus losing competitive edge in the marketplace, she suggested that “they might likely opt for making compromises to ensure U.S. tariffs remain low as the deadline looms.”

"China appears to be employing a stick-and-carrot approach," stated Nick Marro, chief economist for Asia at the EIU market research firm.

It has cautioned other nations against aligning too closely with the U.S. in manners that could compromise Chinese interests. However, concurrently, China is bolstering economic and strategic partnerships with nearby countries, he noted, highlighting broad assumptions that Beijing may soon end its roughly ten-year informal embargo. K-pop performances in mainland China.

The primary concern is that China poses significant security risks for numerous nearby countries, while concurrently experiencing an economic slowdown. This situation implies that despite ongoing trade connections remaining crucial... Chinese imports have dramatically decreased," stated Marro. "This pressure affects all Asian markets. Consequently, no administration wishes to align with either side."

Jack Nguyen, the CEO of professional services company InCorp based in Ho Chi Minh City, verified that Vietnamese companies are experiencing pressure "from multiple directions," since Vietnam is implementing stricter measures against "[transshipment activities]," including increased inspections and additional documentation requirements.

In 2024, Vietnam’s economy maintained strong ties with both the United States and China. The U.S., becoming Vietnam's top export destination, saw shipments worth $119.6 billion, which constitutes roughly 30 percent of Vietnam’s GDP. Concurrently, China remains Vietnam's biggest trading counterpart; their bilateral trade surged to an all-time high of $205.2 billion as reported by Vietnamese customs records.

"Vietnam anticipates U.S. tariffs in the high single digits rather than the 46 percent initially suggested on April 2 following their discussions with the United States. The country’s factory investors might handle this level of duty effortlessly," Nguyen stated.

The second round of US-Vietnam tariff discussions took place from May 19-22 in Washington D.C. During this time, Vietnam’s Minister of Industry and Trade, Nguyen Hong Dien, had meetings with U.S. Trade Representative Jamie Greer.

And this week, Reuters reported the United States presented a comprehensive set of stringent demands to Vietnam during their tariff talks, which included calls for the nation to reduce its dependence on importing industrial products from China.

Marro from the EIU mentioned that since the negotiations have progressed slower than what the US anticipated, the 90-day suspension might be prolonged.

To mitigate the potential negative impact on the U.S. economy and avoid further disturbances in American financial markets, we expect the country to favor extending current policies," Marro stated. "However, the significant concern is that President Trump may view such an extension as a sign of vulnerability... There’s a possibility that tariffs could reinstate themselves in July.

Overall, Asia will likely be the area to monitor closely as tariffs and negotiations unfold, since developments here might establish the groundwork for U.S. policies globally.

In 2024, Asia was responsible for almost 60 percent of worldwide economic expansion, with China playing the most significant role.

The intricate nature of the bilateral trade talks between the United States and major economic powers like China, India, Japan, and South Korea might necessitate greater flexibility from the U.S. regarding the negotiation schedule, particularly when significant headway is being achieved and a favorable agreement appears probable, according to Rajiv Biswas, CEO of Asia-Pacific Economics.

"For instance, Japan might have valid reasons to request an extension of its US reciprocal tariff deadline because of the upcoming elections for its Upper House parliament," he stated, noting that any intentional and fruitless delays could result in more severe repercussions.

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The article initially appeared on the South ChinaMorning Post (www.scmp.com), which is the premier source for news coverage of China andAsia.

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