Southeast Asia faces growing economic pressure and strategic uncertainty as US–China competition and accommodation reshape the region
As the US imposed extensive tariffs on Southeast Asian countries—followed by a truce in US–China trade relations—Beijing has discreetly expanded its economic influence in the region while maintaining its assertive posture in the South China Sea. In Southeast Asia, these evolving dynamics have significantly challenged the region’s ability to navigate between the two great powers.
On 2 April, following US President Donald Trump’s ‘Liberation Day’ tariff announcement, several Southeast Asian countries were among the hardest hit. Over time, the region weathered the tariff shock through temporary buffers such as front-loading of shipments, delayed implementation of duties, and sector-specific exemptions.
However, not long after, the US and China reached a one-year trade truce and an agreement at the Busan summit in October 2025. As part of the agreement, the United States will postpone fees on Chinese ships arriving at United States ports. To offset this arrangement and maintain the truce with Beijing, Washington doubled down on enforcing the Rules Of Origin (ROO) for goods coming through Southeast Asian ports to ensure they were not acting as a ‘backdoor’ for Chinese goods.
On March 11, 2026, the US announced a trade investigation into alleged excess industrial capacity against 16 of its most important trade partners. This includes Indonesia, Malaysia, Thailand, and Vietnam. Vietnam and, to a lesser extent, Malaysia and Thailand, perceived as potential transhipment points for Chinese exports, are at risk of US penalisation. If the US imposes higher tariffs on these transhipped trade, it can significantly disrupt Southeast Asia’s regional supply chains, posing economic challenges for these countries.
Any future trade negotiations between the US and China are likely to affect the regional order in Southeast Asia. The US remains heavily dependent on China for rare earths and processed minerals, the backbone of its defence industry, giving Beijing structural leverage. A Washington that needs Beijing’s mineral cooperation is a Washington less willing to push back against Beijing’s regional ambitions.
Trump’s pursuit of détente with Xi may lead to a reduction in US commitments to Southeast Asia. It may leave the Philippines—the Association of Southeast Asian Nations (ASEAN) Chair for 2026—strategically exposed to China’s whims. The Philippines’ 2026 chairmanship coincides with the tenth anniversary of its legal victory at the Hague, which has now been overshadowed by the reality that ASEAN cannot deliver meaningful security outcomes in the South China Sea, especially when any improvement in US–China relations could narrow ASEAN’s strategic space.
A Washington that needs Beijing’s mineral cooperation is a Washington less willing to push back against Beijing’s regional ambitions.
The Thailand–Cambodia conflict in 2025 was a preview of how the US–China truce will look for ASEAN. Both Trump and Xi competed to act as mediators in the conflict on the sidelines of the ASEAN Foreign Ministers’ meeting. While China called for regional restraint and respect for the ASEAN process by deploying diplomatic observers to the talks, the US exerted pressure by threatening higher tariffs on the conflicting parties. The ceasefire agreement was eventually secured, described as being “co-organised” by the United States with China’s “active participation”. However, within less than a month, the conflict resumed, reflecting that mediation brokered primarily for economic coercion and domestic political interest—bolstering Trump’s popularity—does not guarantee long-lasting regional peace. While the ceasefire occurred on Malaysian soil, it underscored ASEAN’s role as a mere bystander, unable to defend its principle of ‘non-interference’.
While Washington imposed tariffs on Southeast Asian countries, China has placed Southeast Asia at the centre of its efforts to strengthen regional supply chains. At the 27th meeting of the ASEAN–China Joint Cooperation Committee held on 30 March, both sides agreed to enhance supply chain resilience, promote energy security, and advance AI and digitalisation.
The US–Israel war on Iran has further given China an upper hand in Southeast Asia relative to the US. While the US started the Iran war, China has condemned it. The war has led to rising oil prices and an energy crisis. Beijing, on the other hand, has positioned itself as a stabilising force, offering fuel, fertiliser, and supply chain continuity to energy-stressed Southeast Asian countries.
While Washington imposed tariffs on Southeast Asian countries, China has placed Southeast Asia at the centre of its efforts to strengthen regional supply chains.
Furthermore, with US military assets stretched across the Middle East, the US security guarantee in the Indo-Pacific remains doubtful. This was notable in early March, when the Pentagon moved Patriot missiles and THAAD interceptors from South Korea, an ally bordering a nuclear power, North Korea. The US’s visible shift away from the Indo-Pacific may create space for China to exert greater pressure on Southeast Asian countries. In March, Chinese vessels shadowed Filipino fishermen and deployed inflatable hull boats to chase them away. Satellite imagery shows that China is intensifying island-building activity at Antelope Reef in the Paracels, off the coast of Vietnam.
The US–China dynamics were also made clear in the annual State of Southeast Asia 2026 survey, which found that, for the first time, US leadership under President Trump was named the region’s top geopolitical concern, and a slim majority said they would side with China if forced to choose between the two powers.
Governments in the region have moved pragmatically to navigate the US–China dynamic. Countries like Indonesia, Malaysia, and Singapore are prioritising pragmatic engagement and strategic diversification. Based on their principles of non-alignment, they will deepen their cooperation with both the US and China.
The Philippines recalibrated with China in 2026. On 29 January, the two countries resumed dialogue as foreign affairs officials met to discuss bilateral relations ahead of regional talks on a code of conduct in the South China Sea. The Philippines Department of Foreign Affairs recently appointed its first spokesperson for maritime affairs to better shape the rhetoric towards China.
Vietnam is increasing its bargaining power. Vietnam’s decision to join Trump’s Board of Peace was to secure leverage in future dealings with the Trump administration. This move paid off, as soon after Secretary General To Lam’s meeting at the Board of Peace, Vietnam was removed from the strategic export control list, imposed on it since the Cold War.
The current conjuncture—marked by US trade pressure, a distracted US military, China’s assertiveness in the South China Sea, and the Iran war—has reshaped global security dynamics, leaving Southeast Asia exposed to risks that hedging alone can no longer absorb.
Individual countries in the region are already hedging adeptly. But individual hedging has limits. With the US and China bypassing ASEAN to broker a ceasefire in the regional conflict, as they did in the Thailand–Cambodia dispute, ASEAN’s institutional credibility erodes. China is escalating its island-building in the Paracels and harassing Filipino fishermen due to a lack of a unified ASEAN response. The Iran war has led to an energy crisis, disrupting economies across ASEAN.
Along with institutional integration, ASEAN countries should further deepen their engagement with middle powers such as India, Japan, and Australia, which share ASEAN’s interest in a multipolar, rule-based order.
Therefore, Southeast Asian countries must reinvest collectively in ASEAN’s institutional core. The Philippines’ 2026 ASEAN chairmanship theme—“Navigating Our Future Together”—calls for collective regional action to ensure ASEAN remains resilient amid evolving geopolitical pressures. A common ASEAN framework for economic security can be the first step towards it. Along with institutional integration, ASEAN countries should further deepen their engagement with middle powers such as India, Japan, and Australia, which share ASEAN’s interest in a multipolar, rule-based order.
The Trump–Xi summit scheduled for 14–15 May 2026 will be a key inflexion point in US–China relations. If it produces a formalised accommodation between Washington and Beijing, the strategic space available to Southeast Asian states could be further narrowed. But if it stalls, Southeast Asia will likely find more room to manoeuvre.
Prisie L. Patnayak is a PhD candidate at the Centre for Indo-Pacific Studies, SIS at Jawaharlal Nehru University.
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Prisie L. Patnayak, PhD student at the Centre for Indo-Pacific Studies, SIS, Jawaharlal Nehru University ...
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