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Some of US President Donald Trump’s early orders, including enacting a 10% tariff on goods from China and pausing foreign aid, will significantly impact Asia. These impacts will reshape trade and economic ties, geopolitical dynamics, and the humanitarian landscape.
- Prospects for a US-China trade deal remain low, and in the coming months, mutually punitive trade measures that will affect US partners in Northeast Asia will gradually escalate.
- As US tariffs widen in scope, Southeast Asian export-dependent economies will likely suffer from the effects of a broader trade war involving retaliatory tariffs by countries targeted by the US.
- India-US ties will continue to deepen under Trump, with growing collaboration expected in the defence, technology and energy sectors. Despite this, India will continue strengthening ties with other like-minded strategic partners.
North Asian geopolitical dynamics
North Asian geopolitical dynamics under the second Trump administration will continue to be defined by US-China strategic competition. The probability of Beijing and Washington reaching a long-lasting deal on trade is low. The most likely scenario remains a gradual escalation in mutually punitive trade measures over the coming months. This will have adverse flow-on effects for Japan, South Korea and Taiwan, for whom mainland China will remain a key consumer market and manufacturing hub for exporters. Any US tariff or trade measures levied on those like-minded partners, beyond the immediate economic effects, may also undermine their willingness to align with Washington on trade and technology restrictions targeting China, which will negatively impact the commercial interests of domestic firms.
Despite these trade and economic uncertainties under Trump, strategic necessity will see Tokyo and Taipei remain broadly in the US camp against Beijing. South Korea is less predictable, given its current domestic political instability, which, in the coming months, could see a change in government to the more Beijing-leaning Democratic Party. Paradoxically, this may shift geopolitical dynamics on the Korean Peninsula, at least in the short-term, should Trump rekindle efforts to engage Pyongyang diplomatically. Such a move would be viewed favourably by Seoul under a Democratic Party-led government, while exacerbating concerns from Beijing, particularly considering its relations with Pyongyang are likely to remain cool following the North’s diplomatic shift to Russia.
South-East Asian export
South-East Asian countries have been some of the primary beneficiaries of the US-China trade war since 2017, as companies seeking to circumvent US tariffs on China have relocated production facilities from China to these jurisdictions, which are perceived as friendly to the US. Vietnam, Malaysia, and Thailand have attracted significant investments from multinationals as they are considered geopolitically safer locations to export goods to the US.
In the coming year, Indonesia will also try to fill the supply gap. The Indonesian government and companies seeking to be local partners will likely entice companies from the US or other countries with Chinese production plants to move their factories to Indonesia to avoid the high tariffs on their US-bound products. Indonesian homegrown producers will seek to supply the US with replacements for the China-made products that, with the tariffs, will now become less attractive. This will likely improve Indonesia-US trade relations, which have stagnated in the past decade.
At the same time, the tariffs on China will cause more Chinese products to flood Indonesia, which is already one of the largest markets for Chinese products in Asia. With the trade imbalance, Indonesia will become more economically dependent on China, the most significant player in Indonesia’s downstream mining, EV, and electronics sectors— a scenario that does not benefit the US position in Asia.
Measure for measure
With Trump announcing on 13 February that his team would draw up plans for reciprocal tariffs on every country that charges duties on US imports, Southeast Asian economies are bracing themselves. The countries that impose the highest tariffs on US imports are Thailand (4.8%), the Philippines (3.9%), and Vietnam (3.3%). Vietnam is doubly vulnerable because it has the third-largest trade surplus with the US after Mexico and Canada.
The Philippines’ small manufacturing and export sectors constitute the weakest threat to American mercantilism among major Southeast Asian markets. Despite playing a frontline role in containing US-China tensions in the region as a US security partner, Manila feels it has been shortchanged on “friendshoring” pledges from the US and Japan. A nagging fear is that the Philippines could become a bargaining chip in a grand US-China settlement. With no leverage and no alternative, Manila is stuck waiting and watching.
Despite the potential for short-term gain, Southeast Asia will likely suffer weakened demand for exports and, consequently, slower economic growth as more tariffs kick in. Southeast Asian economies highly depend on exports to the US, China, and the EU. They would likely suffer from the effects of a broader trade war. Weaker global trade would undermine demand for Southeast Asian exports, which account for about 60% of regional GDP.
De-risking, down under
Under the second Trump administration, Businesses in Australia and the US will likely continue to see commercial opportunities tied to government policies aimed at de-risking from China. These will materialise most prominently in the energy and natural resource sectors, but also in dual-use and defence-related industries, partly driven by collaboration under partnerships such as AUKUS. However, increased trade tensions between Washington and Beijing will negatively affect the Australian economy, given China’s status as the country’s largest trading partner (by a wide margin).
More broadly, concerns over US foreign policy unilateralism and trade protectionism under Trump will not change America’s status as Australia’s most important ally. At the same time, they will drive Canberra to strengthen political, economic and security ties with like-minded regional partners (though without triggering a shift towards Beijing)
US aid in Myanmar
One of Trump’s first executive orders on 20 January was a freeze of foreign assistance provided through the US Agency for International Development (USAID). This suspension of funding will be deeply felt in Myanmar, even if the effects will be largely underreported because they are almost impossible to verify. Trump, however, singled out USAID-funded “diversity scholarships in Burma” in a press conference.
US diversity, equity and inclusion discourse expanded alongside the fallout of the Myanmar coup in 2024, helping many exiled pro-democracy figures gain academic and political asylum abroad. Under Biden, these scholarships became a key US support mechanism for the shadow National Unity Government (NUG).
Also affected, perhaps irreversibly, are the humanitarian programmes that keep millions of internally displaced people alive, and those that the NUG has repurposed as assistance for ethnic armed groups in the war against the junta coalition. The NUG must redirect parts of its defence budget to sustain these programmes.
Make India great again
India-US ties will continue to deepen under Trump. Following Prime Minister Narendra Modi's visit to the White House on 13 February, the Indian government has signalled that the US is its most important external partner. In the coming years, India will seek to broaden collaboration with the US government on defence, technology and energy while continuing to court US companies by projecting itself as a viable manufacturing and investment hub.
However, the US’ threats of reciprocal tariffs and desire to balance bilateral trade – its trade deficit with India comes to over USD 45bn – are likely to remain irritants, even though they will not unravel the strategic partnership carefully cultivated in recent years. India has already reduced general tariffs to pre-emptively avoid criticism from Trump. While further reductions may not be viable for India, New Delhi will seek to increase gas and defence imports from the US to improve the trade balance.
A Trump presidency for India means lower levels of scrutiny on human rights and democracy records, as well as less criticism around its foreign policy choices, such as its neutral stance on the Russia-Ukraine war. Nevertheless, there are concerns in New Delhi about Trump’s unpredictable and transactional nature and questions about whether there will be expectations for India to align more with American interests. Despite the strategic importance of the US, India will remain wary of putting all its eggs in the American basket. Instead, it will continue to strengthen ties with other like-minded strategic partners.