Facing a flood of Chinese goods and Trump's tariffs, what can Asean do?

Asean will be dragged into the escalating US-China trade war and its members should respond collectively.

- Mari Pangestu and Shiro Armstrong

South-east Asia is about to be hit by a tsunami of cheap Chinese goods flooding its markets. These goods will be diverted to the region as they will be unable to enter the United States if President Donald Trump 2.0 follows through on his promise of imposing 60 per cent tariffs on all Chinese imports.

Compounding the challenge will be the US tariffs that South-east Asian goods will already have to face as part of Trump's blanket 10 to 20 per cent tariffs on all imports. The only certainty in an increasingly uncertain world is Trump's love of tariffs. Given this outlook, a collective response from Asean will be better than countries looking to do individual deals. The grouping should also look to leverage agreements like the Regional Comprehensive Economic Partnership (RCEP).

The region finds itself in a difficult position. One of its giant trading partners could dump goods on it, threatening local businesses that can't compete. There have already been rumblings about this in the past, but matters could come to a head if the threat of US tariffs opens the floodgates to more cheap Chinese goods. That said, some South-east Asian companies have gained by re-exporting Chinese goods to the US. Such rebadged goods could now be targeted by US tariffs.

In other words, Asean finds itself squeezed in the trade and technology war between the US and China, which has escalated over the past half a decade and is now approaching crisis point. How did we get here and what can we do?

First, the matter of China's trade surplus. With its cheap goods flooding other markets, China's trade surplus has shot up and it hit a record US$990 billion (S$1.35 trillion) or almost US$1 trillion, the country announced on Jan 13. Based on US numbers, the trade surplus of China with the US is currently at US$270 billion, down from $382 billion in 2022, but still significant. The US wants to retaliate with tariffs, not only on Chinese goods but on all imports.