Asia Will Find Its Own Way

An old saying has Mexico’s predicament as being ​“so far from God, so close to the United States”. For the countries of Asia, especially East and North-East Asia, a similar saying can apply, substituting China for the US, and something ecumenical for God, given the variety of religions in the region. That geographical proximity to China also dictates attitudes to the United States. Presidents, even ones as disruptive as Donald Trump, come and go but that geographical reality remains.

That geography, along with the variety of political systems seen across the region from liberal to illiberal democracies, from communist states to other forms of one-party rule, means that the prevailing Asian approach to relations with other states, but especially today’s two superpowers of the United States and China, has been governed by common interests, not by common values.

As a result, countries such as the 10 members of the Association of South-East Asian Nations, but also Japan and South Korea, are far less concerned than Europeans are about the known values (or lack of them) of the Trump administration. Unless their interests come to diverge from America’s, few countries in the region currently believe that Trump 2.0 will represent a major change from their point of view. America will be a difficult interlocutor under Trump, on this view, but to Asians it always is.

A veteran Singaporean investment manager commented to this author recently that South-East Asia commonly feels that it is trapped between two bullies. While the Chinese bully is nearby and thus ever-present and ever threatening, the American bully is far away and easily distractable by other concerns. But bullies they both are, and this is not a new perception and not one that felt materially different during the first Trump administration in 2017–21 from other American administrations over many decades.

South-East Asians therefore know full well that Trump will be a bully. That is his modus operandi, whether he is addressing allies, partners or enemies. But they also know that he and the foreign and defence policy mavens around him spoke constantly during the election campaign of the need for America to focus its resources far more on Asia and on the competition with China, leaving the Europeans to take more responsibility for security on their own continent. Consequently, South- East Asians feel confident that, at least as the second Trump administration takes office, their interests and America’s are likely to be aligned.

America will be difficult under Trump but to Asians it always is

It is not that all of them want America to confront China. The Philippines does, for it feels assaulted and bullied by Chinese naval vessels on a daily basis in the South China Sea and wants the US to fulfil the two countries’ Mutual Defense Treaty of 1951 by helping the Philippines push back against violent Chinese attempts to seize waters and reefs that it has claims to under the UN Convention on the Law of the Sea. Japan, too, feels under a rising threat from the combination of China, Russia and North Korea, a threat that has goaded it into raising its own defence spending sharply in the hope that this contribution to the deterrence of those common enemies will make America more appreciative of Japan’s value to its own security strategy.

By contrast the other littoral states around the South China Sea, Indonesia, Malaysia, Vietnam, Brunei and Singapore sit at least notionally on the fence, feeling that their interests require a careful balancing of relations between China and the United States. India, distanced from the South China Sea by thousands of miles and the Indian Ocean but sharing a long-disputed land border with China, also prefers the fence while calling it ​“multi- alignment”, seeking friendships strictly to serve India’s own interests while still welcoming American assistance in intelligence so that it knows what its giant neighbour is up to.

Nonetheless, the rise of China’s military and economic power means that all have long been keen for the United States to act as a balance in the region, remaining involved especially in defence and security in order to prevent the South China or East China Seas from becoming ​“a Chinese lake” or the world’s busiest sea lanes to come under Chinese control.

When Japan’s longest-serving prime minister (2006−07 and 2012–20), the late Shinzo Abe, framed his country’s objective in 2016 as being to ensure ​“a Free and Open Indo-Pacific”, often subsequently abbreviated as FOIP, everyone in ASEAN knew that what he really meant was the avoidance of Chinese dominance of this vital maritime area, a goal they were happy to buy into as long as it did not overtly mention China.

India had acknowledged the value of FOIP implicitly even before the term was invented when it supported Abe’s 2007 initiative to form the ​“Quad” – the Quadrilateral Security Dialogue connecting Japan, Australia, the United States and India – and then its revival after 2017. Even Trump adopted the FOIP idea when he made his first trip to the region as president in 2017 for a summit in Vietnam of APEC, the Asia-Pacific Economic Cooperation Forum.

Whether or not it uses the FOIP mantra – though it probably will – the second Trump administration

stands no chance of fulfilling the worst fear of East or South-East Asia, namely of losing interest in the region, pulling military forces out, or selling the region out to China. Competition with China, and the need to build up America’s defence capability sufficiently to ensure superiority compared with the People’s Liberation Army, form too central a place in Trump’s foreign policy

statements and thinking for that to be conceivable, even for a man as capricious and unpredictable as Trump.

He might make a further attempt to seduce North Korea away from its alignment with Russia and China or might even delude himself that he can separate Russia from China through a sort of reverse Nixonian shock, but there is precious little chance that he will turn soft on China and therefore on America’s role in keeping the peace in the Indo-Pacific.

Nonetheless, all South-East Asian leaders will continue to show that they are firmly states in between, neither in one camp nor another. The congratulatory phone call made to Trump after his election victory by Prabowo Subianto, the newly inaugurated president of Indonesia, encapsulated this perfectly. President Subianto released on YouTube a video of the call, showing just how flattering and obsequious he was to the American president-elect. On President Subianto’s desk, in plain sight, was a copy of China Daily, the English-language voice of the Communist Party of China, just to make a point. And the call came immediately after President Subianto had returned home from a visit to Beijing to see President Xi Jinping.

Of trade and transactionalism

The region’s focus on common interests rather than values means that while many countries are bracing themselves for the two expected onslaughts from the Trump White House in 2025 – tariffs on their exports to America, and bullying demands on both economics and security – there is little fear that this will cause a rupture in alliances or force them to snuggle closer to China. It will be quite a buffetting, as it will for everyone. But in four years’ time, Asians believe their common interests will leave them in roughly the same place vis a vis America as they are today.

Trade tariffs will be especially challenging, at least if they come in their most extreme promised form. While most ASEAN countries’ biggest trading partner, both for imports and exports, is now China, the United States typically comes second. The same applies to Japan, South Korea and India. If Trump’s two key trade nominations – Howard Lutnick as Commerce Secretary and Jamieson Greer as US Trade Representative – achieve Senate confirmation, as is likely, then all those countries can expect their exports to America to be hit by at least a 10% tariff at some point in 2025 but possibly 20%.

Powerful lobbies among American businesses and within the Trump administration will try to persuade President Trump not to pursue this policy, arguing that import tariffs will simply raise input costs for companies manufacturing in America as well as inflating prices, given the global nature of modern supply chains. Those chains reach especially deeply into Asia. But while hoping for the best, wise Asian policymakers and businesses will be preparing for the worst. Those lobbies are important, but with no need to win another election, Trump personally does not need to listen to them. The Republican Party certainly does, with a view to the mid-term Congressional elections in just two years’ time, but how much influence the GOP can have over Trump 2.0 remains to be seen.

The big question is whether countries will retaliate by raising their own tariffs on imports from America. In Asia, Japan is thought likely to if the European Union does so but would probably not do so on its own. ASEAN countries too may well wait to see what happens rather than retaliating straight away.

Just one thing looks certain: that Trump will raise US import tariffs on goods from China by even more than the proposed standard 10% or 20% tariff, increasing tariffs on Chinese goods well above the already high 25% tariff he imposed in 2018 and which the Biden administration retained. This differential between tariffs on Chinese goods and other exports could operate to the advantage of some countries especially in low-cost South-East Asia and India, or at least to businesses operating there.

Following the 2018 tariffs, Chinese exports to the US fell but exports to the US from Vietnam rose, as goods were diverted through Vietnam for final assembly and Chinese companies were swift to build factories there to exploit the better terms of trade. America’s overall trade deficit was not reduced by those 2018 tariffs, as trade was diverted rather than blocked.

This time, the result is likely to be a mixture of diversion and reduction. Trade in goods with America will likely fall, but a higher share of it may be taken by countries such as Vietnam through which diversion takes place. China will undoubtedly retaliate against further US tariffs, both with tariffs of its own and by devaluing the Renminbi to reduce the price of its exports. If the US dollar rises sharply in response to the tariffs, this could compensate the most competitive producers for the price rises caused by tariffs, reducing the impact on trade.

A likely response will be further efforts among Asian countries to reduce barriers against trade between themselves, within the main rule-setting groups of the Comprehensive and Progressive Trans-Pacific Partnership (12 countries, now including the UK) and the Regional Comprehensive Economic Partnership (15 countries, including China but not India) in the hope of thereby supporting regional economic growth.

It is already the case that many large countries in Asia, including India, Indonesia, Malaysia, Vietnam and the Philippines, are growing at annual rates of 7% or more, far faster than China, which is boosting intra-regional trade, so lowering barriers further would go with the grain. Nonetheless, past efforts, especially in the CPTPP which is a deeper trade agreement than the RCEP, have already made barriers in goods trade quite low, so further cuts cannot be transformational.

Trade tariffs will damage the Indo-Pacific’s economy, but perhaps by less than they will damage other regions and America’s closest neighbours. A huge unknown is whether tariffs should be considered as Trump’s most favoured economic policy, or whether they will principally be used as leverage for various transactions and negotiations.

Japan and South Korea are well used to that transactional approach from Trump’s first term, both about their respective financial contributions to pay even more to host American military bases on their soil, and about trade in steel and aluminium. Both expect more such bullying but know also that the vital role these two countries play as hosts to forward-deployed US military forces gives them a lot of protection and leverage in return. Neither country has a strong and stable political leadership, which could weaken them in such negotiations. Trump will certainly demand that both spend much more on defence, just as he will even more aggressively to Taiwan. Yet in the end, the alignment of Japan, South Korea and indeed Taiwan with American interests is too entrenched and complete for Trump and the China hawks that surround him to put at serious risk.

The same is not so true of Australia. Since the Obama administration, Australia has served as a base for rotations of US air and submarine forces, a practice strengthened under the AUKUS pact signed in 2021 between the US, Australia and the UK to supply Australia with a fleet of nuclear-propelled submarines in the 2030s and to facilitate other technological collaboration. The increased presence of US submarines operating from Australia has already begun to contribute to US deterrence against China’s expanding navy, and the addition in the 2030s of Australian subs stands to contribute further.

Asian countries are likely to reduce trade barriers between themselves

But the question will inevitably arise in the minds of Trump and his associates of whether Australia is paying a sufficiently high price for the privilege (as he will see it) of AUKUS and whether the US Navy may be sacrificing too much for it, given constraints on the production capacity of advanced submarines in America itself. While Japan, South Korea, Taiwan and the Philippines are expecting to be able to muddle their way through the transactional, bullying nature of Trump 2.0, Australia may find itself in a more awkward spot.

The endurance of deterrence

This raises the biggest question about Trump 2.0 for Asia as a region. This is whether America’s military stances, alliances and partnerships during the next four years will act as a stronger deterrent against Chinese aggression, especially against an attempted invasion or coercion of Taiwan. Or whether by the end of this administration the credibility of that deterrence might look weaker.

It is a question with two sides: will China become stronger and less risk-averse; will America build up its own military strength in the Indo-Pacific, maintain the alliances that reinforce that strength, and retain the credibility of its threats to intervene militarily that are fundamental to deterrence?

Seeking to answer this two-sided question as the end of 2024 approaches, we can reasonably speculate that China may become economically weaker but nevertheless improve its military capabilities, but there is little basis for judging what might happen to the appetite for risk held by President Xi Jinping and the PLA. Until now, President Xi and the PLA have been very happy to bully a weak country like the Philippines and to support real risk-takers such as Russia, but not to take big risks itself.

Whether that changes might depend on the answer to the other side of the question, and in particular on China’s judgement about President Trump’s appetite for risk.

There can be little doubt that the Trump administration will increase US defence spending and deploy more forces in the Indo-Pacific. It looks very likely that, bully though it is, it will be able to sustain a strong alliance with Japan and retain the access to logistical bases in the Philippines that has been developed under the Biden administration. It might weaken its alliance with Australia, but that is less critical to deterring military action in the Taiwan Strait.

Yet what will the man in the White House think and say about military action over Taiwan? President Joe Biden stated on four occasions during 2021 and 2022 that on his watch the US was committed to using military means to protect Taiwan from invasion: he wasn’t willing to ​“start World War Three” over Ukraine, he implied, but he was willing to do so over Taiwan. Such clarity caused great nervousness among his officials, but in China such statements will be likely to have been taken very seriously.

For the whole of Asia, the key question about Trump 2.0 will be whether he is willing to maintain this deterrent message or will prefer to return to the more ambiguous stance adopted by most previous presidents. Such ​“strategic ambiguity” has served America and Taiwan well for many decades. But in Trump’s case ambiguity can be taken to imply a wider range of potential outcomes and actions than was true for previous presidents. The China hawks around him will not want him to appear to cast doubt on America’s commitment to Taiwan. Clarity, however, is not a word generally associated with Donald J. Trump.