Stronger China-ASEAN partnership amid US trade war

By Yu Hong

As Malaysia hosts the 46th ASEAN Summit and related meetings in Kuala Lumpur, it has to be borne in mind that Southeast Asia is among the regions hit hardest by U.S. tariffs. On April 2, the U.S. government announced so-called "reciprocal tariffs" on the ground that it was trying to reduce the United States' huge trade deficit and counteract the alleged unfair trade practices of its trading partners.

As export-oriented economies, Southeast Asian countries are facing daunting challenges since they are highly dependent on the U.S. market for their merchandise exports. While the U.S. has agreed to a 90-day moratorium on "reciprocal tariffs" on most countries, there is mounting uncertainty about the future.

Southeast Asian countries urgently need to strengthen their economic integration and explore new foreign trade strategies, building new partnerships and consolidating the existing ones to diversify trade. This will enable them to hedge the potential impact of uncertainty and trade shock.

In the face of the escalating trade war between China and the United States, ASEAN countries have been taking prudent measures to balance their economic and trade relations with both powers. China is their largest trading partner, whilst the United States is a key export market. They have sent officials to the U.S. for trade negotiation while seeking to deepen their economic ties with China.

The U.S. seems to be interested in promoting "de-sinicization" of the supply chain of Southeast Asia, while China is strengthening the interconnection of its industrial and supply chains with the region through mechanisms such as the China-ASEAN Free Trade Area (CAFTA) and the Regional Comprehensive Economic Partnership.

In response to the impact of the "reciprocal tariffs," ASEAN and China have a strong will to strengthen bilateral economic and trade ties, and deepen cooperation to promote stability and economic growth in the Asia-Pacific region.

ASEAN Secretary-General Kao Kim Hourn gives an interview to Xinhua in Jakarta, Indonesia, March 25, 2025. [Photo/Xinhua]

During an interview this year, ASEAN Secretary-General Kao Kim Hourn, while advocating multilateralism to address common challenges, said the bloc is committed to deepening its comprehensive strategic partnership with China. In the face of the rise of global protectionism, he expressed ASEAN's resolve to uphold free trade and "to keep the global economic trading system open, free and rule-based."

The proportion of China-ASEAN trade in goods in ASEAN's total foreign trade rose from 11.6 percent in 2009 to nearly 20 percent in 2023, exceeding ASEAN's trade with other major trading partners. Since the China-ASEAN relationship was upgraded to a comprehensive strategic partnership in 2021, their bilateral trade has continued to increase. By 2024, they were each other's largest trading partners for five consecutive years.

In the first quarter of 2025, ASEAN continued to be China's largest trading partner, with total trade of 1.71 trillion yuan ($234.17 billion), a year-on-year increase of 7.1 percent. Its proportion of China's overall foreign trade increased to 16.6 percent.

Bilateral investment cooperation is also deepening. In 2023, China was the second largest source of foreign investment in ASEAN, with its direct investment reaching $25.12 billion, a 34.7 surge year on year. ASEAN is becoming the priority region for many Chinese enterprises going overseas. In addition, ASEAN is also an important source of foreign investment for China.

The combined population of China and the ASEAN countries is more than two billion, with a very sizable middle-income group. This will provide a huge market demand and strong impetus for regional economic growth.

Version 3.0 of CAFTA is expected to open up new space for industrial and supply chain cooperation between the two. Negotiations for that have been concluded, with the two sides agreeing to expand cooperation in emerging areas such as the digital economy, green economy, and supply chains. They have also agreed to strengthen mutual integration and connectivity in areas such as standards and rules, and jointly promote trade facilitation and inclusive development.

The conclusion of the CAFTA 3.0 negotiations demonstrates the political determination of both to uphold the rule-based multilateral trading system. The implementation of CAFTA 3.0 will give new impetus to regional integration and promote open and inclusive economic globalization.

Chinese President Xi Jinping visited three ASEAN countries, Vietnam, Malaysia and Cambodia, in April. China issued a joint statement with each country, confirming the need to strengthen economic and trade cooperation, and jointly build a stable industrial and supply chain. Looking ahead, ASEAN and China can explore strengthening mutually beneficial cooperation in emerging areas such as the digital economy, artificial intelligence, electric vehicles and clean energy.

China's growing economic influence in the region can provide market space for ASEAN countries in the face of global trade challenges. However, ASEAN countries are also concerned about the potential risk of Chinese goods pouring into the ASEAN market, which could have a negative impact on local industry and employment. To forge closer China-ASEAN integration, China should continue to further open up the domestic market, and reduce trade and non-trade barriers.

Yu Hong, a special commentator on current affairs for CGTN, is a senior research fellow of the East Asian Institute, National University of Singapore.