Amid the long shadow of tariff in Southeast Asia

2025-04-18 16:42:34

When Donald Trump is earnestly waiting for nations impacted by his " Reciprocal Tariff " to seek bilateral negotiation with him during the 90-day reprieve, President Xi Jinping's state visits to Vietnam, Malaysia and Cambodia is widely viewed as a strong endorsement for the robust China-ASEAN partnership.

 

In the case of Malaysia, Xi's reciprocal visit to that of Prime Minister Anwar Ibrahim and the Malaysian monarch is, in itself, a triumph for the escalating political trust between the two countries. Indeed, it has been an acid test for Malaysia to progress from the Comprehensive Strategic Partnership fostered under Najib administration in 2013 to that of the Community With a Shared Future under the Anwar-led coalition across the aisle in 2023.

 

From the perspective of Malaysian public, the principles of Community With A Shared Future may sound too profound to comprehend, nonetheless the kind deeds of China in dispatching medical supplies and vaccines for emergency use in Malaysia at the height of coronavirus outbreak remains deeply etched in the memories of the people. The emergency response mechanism calling for collectively addressing public health crisis in the region further marks the commitment of China to building the Health Silk Road in Southeast Asia. This paved the way for fostering the China-ASEAN Comprehensive Strategic Partnership in 2021 and subsequently the watershed partnership of Community With A Shared Future with Malaysia. Both emerge as a coveted triumph for China's neighbourhood diplomacy.

 

Against such an upbeat backdrop, Xi's words of reaffirming China's renewed pursuit of a " New Golden 50 Years " in Kuala Lumpur sent a strong note of endorsement not only to the host, but also across the entire region which was worst hit by Trump's punitive " Reciprocal Tariff ".

 

The uncertainties induced by Trump's helter-skelter tariff are well poised to throw the world into disarray. The hard won rules-based global trading system is at risk with his total disregards of the World Trade Organisation's  ( WTO ) regulatory role. Never has the global free trade been impacted by such a unilateral imposition of tariffs, country by country, under the guise of arresting trade deficit. This is tantamount to declaring a Trade War against the whole world.

 

It put economies of varying sizes to an unprecedented test. Of the ASEAN member states, the 3 least developed countries, namely Cambodia, Laos and Myanmar are slapped with extraordinarily high tariffs of 49%, 48% and 44 % respectively. Malaysia is not spared either. Having had fostered a robust trade relations with the US, Malaysia is among the first to be included in the derogatory " Dirty 15 " list by the US Administration, purportedly on the ground of having huge trade surpluses vis-a-vis Washington.

 

Driven by the US' geopolitical agenda of encircling and isolating China, ASEAN member states with the edge of geographical proximity to China can no longer leverage the " China + 1" strategy to circumvent the earlier US tariffs targeting China specifically. Supply chains that camouflage vast volumes of Chinese goods transshipped through Southeast Asia to duck the existing tariffs are now facing the headwinds of " Reciprocal Tariffs ". Plainly put,  the host countries are now being made to bear the convenient collateral damages, while China remains the prime target in the US tariff game.

 

ASEAN, the fourth-largest trading partner of the US, which has more than 13% of its exports entering the US market in 2024, apparently has to brace itself for a bad beating of its robust trade of over US$476.8 billion with the US. In addition, being the key source of investments in ASEAN, Washington looks set to have sufficient tools to armtwist the respective ASEAN member states into submission, particularly when they are expected to negotiate individually with the US on the tariff terms. This will leave the affected ASEAN member states deprived of the leverage of collective bargaining strength on the ticket of ASEAN.

 

Under such hostile circumstances, that ASEAN can ill-afford to go confrontational with retaliatory tariff is very much anticipated. ASEAN 's relative mild collective intent to seek a “frank and constructive dialogue” with Washington to address the trade-related concerns is understandably a reconciliatory response measured to not ruffle too many feathers in Washington.

 

In view of the prevailing unpredictability of the Trump administration characterised by his transactional norms, nobody could ever predict how the bilateral negotiation will prevail from here on. But one thing for sure, it will greatly enhance the vulnerability of the respective ASEAN member states to the habitual and consistent wedge-driving of the US in alienating China from its neighbours. Ultimately, the choice likely lies in which contending trade partner would the ASEAN member state benefit more from in their head-on geopolitical competition. Beijing or Washington ?

 

Obviously, the existing China-ASEAN partnership, through the operation of existing platforms like China-ASEAN Free Trade Area ( CAFTA ) and the Regional Comprehensive Economic Partnership ( RCEP ), has a competitive edge over its rival in terms of trade volume.

 

Ultimately, what truly makes the difference is likely China's soft power that assures its neighbours of predictability and stability in managing their relations and cooperation.  Staying true to the genuine needs and priorities of the emerging economies in ASEAN, no country could ever ignore the significance of neighbourly amity and multilateral cooperation in face of common challenges. More so, when basic survival is called into question. This goes beyond sheer economic dividends. What's more the only possible niceties the affected ASEAN member states can expect to get from the US is a compromised tariff rate which will still impact the marketability of their products. This will land ASEAN in a no-win position.

 

In this context, China's ideal of building a "Community With A Shared Future" is undoubtedly a strong appeal to the developing world. It embodies a coordinated emergency response system, rooted in multilateral cooperation, in times of crisis. No short term quid-pro-quo over the tariff turmoil could ever outweigh such an imperative in the ensuing tariff negotiation, if any.

 

As Xi indicated in a signed article published in the Malaysian media ahead of his arrival at Kuala Lumpur, the decision on building the China-Malaysia community with a shared future marked "a new milestone in the bilateral relations." Though his words referenced China's relations with Malaysia per se, the message provides ample food for thought across the region as the "new milestone" sets  a success model for others to emulate, alongside injecting new momentum into regional development and stability in Southeast Asia .

 

(Author: ONG Tee Keat, President,  Belt and Road Initiative Caucus for Asia Pacific  ( BRICAP ))

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