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The politics of trade in Asia have been caught in the undertow of US protectionism. Within a few months, threats of sweeping new tariffs have become almost routine, chilling investment and upending supply chain and trade relationships.
Many governments have pursued bilateral deals with Washington — sometimes offering major concessions in exchange for essentially nothing — just to relieve some of the massive uncertainty facing businesses and voters.
Because there is a lag between when tariffs are announced and when they are paid, the economic costs have barely begun to eventuate. And because of the gap between actual tariffs and threats, businesses face perpetually elevated uncertainty.
The US–China trade war has fundamentally shifted what was the world’s largest trading relationship, with China’s share of US imports having more than halved since 2017. Ongoing battles over technology, semiconductors and critical minerals will intensify this decoupling.
Rolling back the tariffs, when there is any US will to do so, will be slow and difficult. Some governments, especially in smaller, more exposed economies, have understandably felt compelled to grant concessions. So far, bilateral deals have offered little relief. And, as Japan has discovered, the path to a deal is fraught. Any compromise rests on unstable ground and is vulnerable to the US President’s whims.
Most critically, these bilateral deals are a flagrant breach of the most-favoured-nation principle and WTO rules. These rules matter because equal treatment is essential to a rules-based system in which trade delivers the greatest benefit to all countries, not just the big ones. Cutting side deals with Washington encourages its push towards a might-is-right world.
Part of the response to the US tariff push must be to deepen cooperation among economies that rely on rules over raw power in the conduct of international trade.
In this week’s lead article, Julia Tijaja sets out how things look from Southeast Asia. US tariffs threaten ASEAN economies directly, while diverted Chinese exports are adding to the hardship for producers in third markets. ASEAN has responded with a unified voice, but in terms of concrete action, there is much more that member states and their ‘plus three’ and ‘plus six’ partners can do.
The risk is that uncoordinated bilateral negotiations with Washington will splinter ASEAN’s economic integration and undermine existing commitments. The additional purchases of US goods demanded in these deals is not just costly for the buyer but causes spillovers to other trade partners.
Tijaja points to the opportunities from greater coordination, such as through sharing negotiating information and developing common principles for engagement with major economies, and on economic security issues, through institutionalising the ASEAN Geoeconomics Task Force that ASEAN leaders have instigated.
Existing ASEAN-led frameworks, especially the cooperation agenda in the Regional Comprehensive Economic Partnership (RCEP), can be used to strengthen resilience and reduce vulnerability to country-specific external shocks.
The dilemmas confronting Southeast Asia are shared across the wider region and beyond it. The pressure to choose between defending rules and cutting informal side deals with harsh concessions will intensify.
Initiatives in global trade reform, Tijaja argues, ‘could explore ways to improve trade and supply chain resilience in the face of great power rivalry, introduce rules around invoking security-related exemptions, uphold transparency and clarity of rules around subsidies and seek effective redress for unfair trade practices’.
In the short term, a strong step from within the region would be a summit among leaders of RCEP economies to set a clear strategic direction and help forge connections with partners elsewhere with interests in rules-based trade.
Europe, which has made huge concessions to Trump, shares those interests. Reducing Trump’s leverage by liberalising trade with other partners is a practical way forward and discourages further economic coercion. Coalitions must be built, not against the United States but in defence of the region’s multilateral interests.
The mega-regional agreements, RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), can work in tandem — not through merging, which would present impracticalities that outweigh the gains, but by highlighting areas of convergence where progress can be made.
High-level agreement and political will are critical. Summits may not solve problems immediately, but they signal shared interests and galvanise joint action. A leaders’ summit among RCEP economies can set directions and cooperation priorities, while the CPTPP’s tested rulebook and UK membership provide a ready template and an external bridge.
With high tariffs and great-power unpredictability here to stay for some time, the region’s best defence against a more zero-sum world is to double down on cooperation, rules and integration.
If Asia can keep its markets open and coordinate in defence of the rules-based order, it will not only be better placed to navigate the present turbulence, but also to usher in a new, revitalised trading system in the future.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Law, Policy and Governance, The Australian National University.