An era of uncertainty

We’re in an era of deep and disorienting flux. Globalization, which has, for a long time, been the engine of economic success for the Association of Southeast Asian Nations (ASEAN), is no longer everyone's friend. Geopolitical stress has mounted. Together, these trends have resulted in tariffs, sanctions, export restrictions, investment controls, and technological bifurcation becoming tools of economic coercion.

Armed conflict in the Middle East, Africa, and Europe; US tariff policies; sharpening technological competition; and the race for critical minerals — are all playing their part in destabilizing business as usual.

For a region like Southeast Asia, whose success has long hinged on trade openness and external investment, this is a moment of reckoning.

Soon after President Trump’s Liberation Day tariffs, the US administration announced a 90-day pause to allow states time to negotiate. After a series of hastily arranged meetings and talks, a fresh set of tariffs — around 19% for most countries, barring Laos and Myanmar¹ — was announced on August 1. US policies initially prompted a rare near-rebuke from ASEAN, an organization usually loath to do so; but as events continued to unfold, it was clear each country was happy to take what it got, and there was little unity.

“Across the world, tools once used to generate growth are now wielded to pressure, isolate, and contain. Tariffs, export restrictions, and investment barriers have now become the sharpened instruments of geopolitical rivalry.” - Malaysian Prime Minister Anwar Ibrahim, Kuala Lumpur, July 2025

The US tariff changes mark a radical shift in the role of tariffs in global trade and geoeconomics, especially as we enter what geopolitical strategist Tina Fordham refers to as a “geopolitical risk supercycle,”² which follows a period of geopolitical stability that allowed companies to grow beyond borders as financial markets became more deeply integrated. We are in a period in which countries are increasingly using tools such as tariffs, sanctions, cyberattacks, regulations, and investment controls to project power beyond borders.

For ASEAN, collective action could provide greater leverage with the US, but with countries receiving different tariff treatments, members have preferred to negotiate on their own.³

The tariffs reveal the limitations of ASEAN’s scope for collective action, especially in the absence of formal mechanisms. Will ASEAN be able to hold its own as a bloc, or will it fragment under pressure? What is clear is that negotiating as a bloc requires a more assertive ASEAN with a shared sense of purpose to collectively argue its case.

Walking a geopolitical tightrope

Perhaps the greatest challenge facing ASEAN — both as a region and for its individual member economies — is how it navigates the great power rivalry between the US and China.

The US remains one of ASEAN’s largest investors,⁴ as well as a key security ally to several economies including the Philippines, Thailand, Vietnam, and Singapore. Meanwhile, China is becoming an increasingly important economic partner of ASEAN — it is not only the region’s largest trading partner, but a major (and growing) source of tourism and foreign direct investment (FDI).⁵

As ties between the US and China continue to fracture, there’s a real chance of a sustained decoupling between the two economies. It is likely that supply chains will continue to bifurcate, with ASEAN having to carefully balance its significant trade relationship with China against its need for US-sourced FDI and security architecture.

Supply chain relocation from China to Southeast Asia has benefited the region in myriad ways, from boosting Indonesian commodity exports to electronics in Vietnam and chip-packaging in Malaysia. The upgrade to the ASEAN-China Free Trade Agreement (ACFTA) promises to further economic relations between the two, but this has gone together with increasing Chinese assertiveness in the South China Sea.

With the US, on the other hand, economic relations have become transactional, as demonstrated by Trump’s tariffs. For ASEAN leaders, it is not hard to imagine a future in which the US makes its security provisions in the region conditional on economic favours too.

Reconciling this is a big challenge for ASEAN. Pragmatic non-alignment has worked thus far, but how much longer can this balancing act continue?

Responding to a changing landscape

In the immediate aftermath of President Trump’s tariff announcement, ASEAN economic ministers reacted with restraint, issuing a statement that ruled out retaliation in favor of “constructive engagement” and “cooperative solutions.”⁶ This welcome posture should not be mistaken as the bloc’s only approach — when faced with adversity, ASEAN’s first instinct is diversification, not alignment.

Expect ASEAN to widen its circle of economic partners while preserving strategic equidistance between Washington and Beijing, a posture that safeguards both sovereignty and growth.

Led by Malaysia as the chair, ASEAN has been busy working on strengthening its ties with partners elsewhere in the world, from Canada and the European Union to the Gulf Arab states and China. Within the Asia-Pacific, longstanding allies like Australia, New Zealand, Japan, and South Korea are obvious points of focus, but with the United Nations framework weakening, ASEAN members are also exploring other international forums such as BRICS, whose founding members are Brazil, Russia, India, China, and South Africa.⁷

ASEAN could expand on free trade plans such as the ASEAN Digital Economy Framework Agreement (DEFA)⁸. The region could also enhance its zero-tariff environment by reducing non-tariff barriers (NTB) to boost intra-regional trade, as urged by Singapore Prime Minister Lawrence Wong.⁹ Trade in ASEAN remains hindered by persistent NTBs, such as divergent standards and complex customs processes that are deeply embedded in domestic regulations,¹⁰ but changing these require a collective response from ASEAN.

"If [we’re] together, we can push back and uphold a rules-based trading system, [and] that would enable us to strengthen multilateralism and make our overall economic foundations a lot more robust and resilient.” – Prime Minister of Singapore Lawrence Wong¹¹

While this outward-looking approach is strategically sound, it must be underpinned by stronger internal cohesion and collective resolve, otherwise ASEAN risks stretching its consensus model and weakening its collective voice on sensitive regional issues.¹²

ASEAN’s collective response: Reality vs potential

ASEAN economies have struggled to put up a united negotiating stance on tariffs. Its member states have chosen to negotiate directly with the US. A whole-of-region approach is unlikely because ASEAN does not have a mechanism for it. However, there are some levers it can pull, such as leveraging regional integration mechanisms like the ASEAN Free Trade Area (AFTA)¹³, strengthening the Regional Comprehensive Economic Partnership (RCEP), and harmonizing regulations and standards to increase investment inflows.

The biggest challenge facing the bloc is its need for consensus. All member states must agree on key decisions, a policy that has left many issues on the backburner. However, success is possible and we saw an example of this when diplomatic efforts by Malaysia after an eruption of violence between Cambodia and Thailand in July 2025 resulted in an immediate and unconditional ceasefire.¹⁴

In the current geoeconomic landscape, the search for consensus can be a weakness that will hobble ASEAN’s ability to respond to developments. It is something ASEAN has to work around. But there is little likelihood that the grouping will deviate from its guiding principles, irrespective of the global landscape.

Future scenarios for ASEAN

In this section, we look at two scenarios that might play out in response to the geopolitical and trade headwinds ASEAN faces.

Scenario 1: ASEAN strengthens internal political cohesion and collective trade policy

Scenario 2: Individual member states deepen bilateral ties to protect their strategic interests

ASEAN doubles down on intra-regional integration, and moves from declarations to action. From an economic perspective, this could include the creation of a regional digital single market, or a sustainable finance taxonomy that draws capital from around the world into the renewable energy sector.

In this scenario, the RCEP potentially becomes the backbone of supply chain integration between East Asia and ASEAN, evolving into a high-quality trade deal that moves beyond tariff reduction to provide ASEAN economies more negotiating clout with trading partners.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can fortify ASEAN’s future by giving it greater market access and economic integration. There’s already proof this can happen, as CPTPP has increased Vietnam’s FDI inflows from US$9.5 billion to US$11.5 billion within three years.¹⁵

Outside of the economy, ASEAN members will acknowledge changed geopolitical realities and adopt a collective stance when it comes to political affairs, such as the territorial disputes in the South China Sea and the civil war in Myanmar.

In short, this scenario will see ASEAN members integrate more deeply to strengthen their clout and bargaining power. ASEAN was never designed to be like the EU, but it can become a lot more than a trade grouping.

ASEAN remains a bloc in name, but members drift, pulled apart by geoeconomic forces and circumstances. Unable to agree on a collective stance on issues and a collective bargaining position, ASEAN member states start negotiating bilaterally with others.

ASEAN’s consensus culture ruptures and differences over regional and global issues are exposed. Countries like Vietnam and Thailand will likely lean towards the US, while Laos and Cambodia double down on their economic ties with China. Some, like Malaysia, may hedge their bets by speaking in parallel with the US and Gulf Cooperation Council countries.

In an extreme scenario, ASEAN could see two distinct production corridors form: a US-aligned electronics chain running from northern Vietnam through Thailand into Malaysia’s west coast, and a China-anchored heavy industry belt stretching from the Gulf of Tonkin down Malaysia’s east coast to Indonesia’s nickel smelters.

ASEAN members continue looking to placate the US and China in turns, and this results in overlapping standards and higher compliance costs, and slowing intra-ASEAN trade growth. This would also lead to a disintegration of whatever political cohesion ASEAN has built over the years, reducing its influence on regional and global forums at a time the stakes are highest.

Strategic recommendations for ASEAN

Increasing trade protectionism, coupled with growing economic uncertainties, greatly impacts the ASEAN growth trajectory. It is imperative that ASEAN takes a collective approach on two fronts: economic, and political and security.

Economic

Deepen intra-ASEAN integration and trade resilience

Raise the share of intra-ASEAN trade by eliminating the remaining sensitive-list tariffs and synchronize non-tariff measures, especially differing halal and food safety rules.
Fast-track the ASEAN DEFA so that by 2028 all members share a common cross-border payments QR standard and a single window for customs declarations. These frictions cost exporters an estimated US$4 billion a year.
Build a regional supply-chain stress-test facility (housed potentially at the ASEAN+3 Macroeconomic Research Office) to map chokepoints and prioritize dual sourcing for medical supplies and critical minerals.

Broaden strategic partnerships beyond the US and China

Diversify economic partnerships to minimize the impact of a potential US-China bifurcation in trade and supply chains. Natural choices for closer ties are Japan, Korea, the GCC, Australia, and India.

Strengthen multilateral agreements

Commit to avoid the weaponizing of trade policies in the name of national interest or citing security concerns. RCEP can offer a foundation to deepen the agreement with more integration in trade in services, investment, and economic and technical cooperation so the economies can upgrade.
The increasing involvement of ASEAN member states in BRICS should be seen as a strategic opportunity to strengthen their collective voice in global governance. ASEAN can benefit from parallel engagement of its members by utilizing these memberships to promote multipolarity, fairer financial institutions, and South-South cooperation.

Political

Establish credible joint-response mechanisms

Create a rapid response task force like ASEAN has for natural disasters: a small, staffed unit under the ASEAN Secretariat that is mandated to coordinate responses to any political events.¹⁶
Operationalize the “ASEAN minus X” decision rule for crisis statements so that proactive members are not vetoed by other members.¹⁷

Project measured assertiveness

Negotiate a legally binding South China Sea Code of Conduct with a 2026 deadline,¹⁸ coupled with a shared maritime domain-awareness network that fuses data from Indonesian, Philippine, and Singaporean centers.¹⁹
Establish a broadened mandate for the ASEAN Secretariat, such that it can fund a policy research arm comparable to the Directorate-General for Economic and Financial Affairs (EU’s DG-ECFIN), a department in the European Commission responsible for the EU’s economic and financial policies. This would give ASEAN an independent analytical voice rather than rely on external partners.

Stepping into the unknown

The world today is very different from the one in which ASEAN was established, but against all odds, the regional compact has stood the test of time and grown in strength. It has weathered the peak of the Cold War and thrived in a period of unfettered globalization and relative geopolitical stability from the fall of the Berlin Wall through to the pandemic.

But today’s geoeconomic headwinds require its leaders to show bold vision and act. ASEAN must better deal with its challenges. From trade to geopolitics, and security to economic resilience, ASEAN’s leaders have a job on their hands.

With or without Trump, the US position on tariffs looks like it’s here to stay. ASEAN economies must work their way around and adapt their export-driven models to new economic realities. Treat this as a wake-up call and an awakening that existing economic models must be tweaked or adapted.

For its people and for the sake of the world, ASEAN must emerge as an example of restraint, common sense, and support of multilateralism and the rules-based order, to be a rock of stability in an increasingly fragmented landscape.