The global economic landscape is shifting under our feet every day. By maximizing its geographic opportunities and forging influential alliances, Southeast Asia is emerging as a third essential player on the stage. Chinese President Xi Jinping has been in Vietnam, Malaysia, and Cambodia on a state visit. These trips to Moscow and beyond highlight Beijing’s efforts to deepen regional relationships and portray itself as a force for stability. What’s more, regional leaders are increasingly calling for even deeper economic integration and stronger trade cooperation. Read how they hope to adjust and thrive in the new reality created by U.S. trade policy.
Xi’s visit earlier this month aimed to bolster China’s role in Southeast Asia, a region that has seen significant economic benefits during previous U.S. administrations, particularly under President Trump. As a result, countless companies moved their manufacturing investments from China to Southeast Asia over that period. This transition was a critical lifeboat to economies across the region.
Anwar Ibrahim, the Malaysian prime minister and current rotating chair of ASEAN, made a point of how essential quality trade connections are. He argues that the key to success is economic integration among member states. He stated that “Southeast Asian countries, including Malaysia, have to negotiate with the U.S. to come up with some sort of a soft-landing spot.” This call for regional cooperation is emblematic of the need for Southeast Asian countries to respond to new global economic realities.
OCBC economist Lavanya Venkateswaran said that this shows how vital the “China+1” policy was. It continues to be a primary strategy for companies looking to diversify their supply chains over the coming months and years. She pointed out that the bank’s GDP projection for Vietnam in 2025 is 5.3%. That forecast of a 5.7% increase is much lower than the 6.5% consensus estimates being put forth by Goldman Sachs. This difference further emphasizes the somewhat pessimistic view in the face of unknowns in global trade.
The weaknesses of Southeast Asia in a sharpening global trade war are telling. Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, stressed the region’s sensitivity to external shocks. Any of these shocks would be dramatic, and together they could permanently alter its growth trajectory. As competition and confrontation increases between today’s great powers, regional leaders face tougher challenges balancing these realities and their economic priorities.
Ong Kian Ming, Malaysia’s former deputy minister of international trade and industry, has advocated for a “minus U.S. strategy.” In order to continue that strong regional growth, he believes this approach is necessary. He emphasized that while Southeast Asian nations should work towards mutual benefits with other countries, it is crucial not to alienate the U.S., stating, “At the same time, it doesn’t prevent us from working with other countries — not to screw the U.S., but to benefit ourselves.”
Equally remarkable is the growth of South-South trade. One expert pointed out, “One interesting indicator that we have from the last year is that South-South trade has already been growing faster than North-North trade.” This reversal marks a new emerging market-driven dynamism in international trade relations.
Chinese President Xi Jinping articulated a vision for cooperation during his recent visit, highlighting the importance of “upholding the common interests of developing countries.” His words strike a chord with regional leaders like Anwar Ibrahim. They are leading the charge to promote greater unity and cooperation between developing countries with a common agenda.