When elephants fight, Singapore’s President Lee Kuan Yew once remarked, the grass suffers. Such a proverb has become increasingly apt for understanding Southeast Asia’s place in the accelerating US-China contest, the defining feature of international relations today.

Southeast Asia remains geopolitically central to this contest. At the intersection of the Indian subcontinent, East Asia, and Australasia, the region straddles crucial international waterways, such as the Malacca Strait as well as the disputed South China Sea. Economically, the region represents the world’s fifth largest economy with 680 million people, comprised as it is by some of the fastest growing economies in the world.

Key to the rapid growth of Southeast Asia has been its heavy integration into the global supply chains linking China and the West. Southeast Asia benefitted in particular from the ‘China Plus Strategy’ adopted by multinationals during the first Trump presidency, which involved relocating their production facilities from China to Southeast Asia in order to reduce their exposure to the former and to avoid US tariffs. Many Chinese firms themselves would set up shop in the region to maintain access to the US market. Crucial to the economic models of many Southeast Asian countries has been a strict adherence to not aligning fully with either China or the West.

Southeast Asia’s exports to the US would consequently boom, allowing them to rake up significant trade surpluses in the process, but it is these surpluses that would make the region vulnerable to any trade disruptions initiated by a more protectionist-minded administration in Washington.

On 2 April (dubbed ‘Liberation Day’), President Trump announced a swathe of unprecedented tariffs. Alongside an across-the-board tariff of 10 per cent on all countries, Trump also announced double-digit ‘reciprocal’ tariffs on specific countries. Southeast Asia was among the hardest hit, with Cambodia and Vietnam receiving the highest rates at 49 and 46 per cent respectively. Other countries slapped with high rates included Thailand (36 per cent), Indonesia (32 per cent), and Malaysia (24 per cent). The impact of the tariffs is expected to vary between countries. Vietnam, whose exports to the US accounted for nearly 30 per cent of GDP in 2024, remains particularly vulnerable. Crucially, the tariffs are believed to have been calculated based on each country’s trade surplus with the US.

On 10 April, Trump announced a 90-day pause on his tariffs to allow for negotiations. During this time, the universal baseline tariff of 10 per cent will remain in place. So far, the affected economies of Southeast Asia have eschewed retaliation in favour of negotiations with Trump.

In the wake of the tariffs, Western commentators have warned about the detrimental impact these measures will have on American influence in Southeast Asia, suggesting that they will lead to countries gravitating towards China. Indeed, China has lost no opportunity in attempting to shore up its standing among the affected countries. Following ‘Liberation Day’, Chinese President Xi Jinping embarked on a week-long visit to Southeast Asia, his first overseas trip of 2025. Visiting Vietnam, Malaysia, and Cambodia, Xi expressed China’s solidarity, and sought to present Beijing as a more stable and reliable partner to countries in the region. Xi also sought to portray China as a champion of the open and rules-based multilateral trading order that Southeast Asia depends upon.

In Vietnam, Xi called for joint action to oppose ‘unilateral bullying’, while in Malaysia he affirmed China’s commitment in combating ‘unilateralism and protectionism’. Xi’s visit would also see numerous cooperation agreements signed between China and the three countries in areas including trade and investment, physical and digital connectivity, customs procedures, and emerging industries, such as AI, the digital economy, and clean energy. Facing the prospect of being shut out of the US market, many in the region now seek to cushion the impact by furthering trade with China.

Nevertheless, while China may hope to entice Southeast Asia closer, its leaders remain wedded to balancing ties between both superpowers. Notwithstanding their current frustrations with US protectionism, many in Southeast Asia remain reliant on the US consumer market. Others will welcome a continued US security presence in the region in order to balance that of China, particularly in the South China Sea, currently disputed between China and several Southeast Asian claimant states.

Closer economic ties with China also brings risks. China’s slowing economy, brought about by deeper structural issues, such as chronically low consumption, a depressed real-estate sector, and an over-dependence on debt-driven infrastructure projects, limits how much the Chinese can hope to import. Concerns have also been raised about China’s industrial overcapacity and whether Beijing will seek to offload its excess production to Southeast Asia in the face of Trump’s tariffs. Even prior to the announcement of the tariffs, Southeast Asian governments had been grappling with a flood of cheap Chinese imports which had been overwhelming local producers.

Ultimately, Southeast Asians find themselves operating in increasingly constrained global conditions. The long-standing refusal of Southeast Asian governments to pick sides between the US and China, key to their economic growth strategies as ‘neutral’ markets friendly to investors, will be put to the test in the coming weeks as they seek to negotiate concessionary agreements with the US to avoid tariffs. While Trump has justified his ‘reciprocal’ tariffs based on the trade surpluses enjoyed by many of America’s trading partners, there is seemingly a larger strategy at work. That is, the complete economic isolation of China through what the British journalist David Hutt dubs a ‘proxy trade war’.

In particular, US officials have directed their ire towards allegations of Chinese firms using Southeast Asia to transport goods to the US in order to avoid US tariffs and trade restrictions. Transshipment can mean both pure tariffs evasion through the rerouting of Chinese goods via regional ports as well as the heavy usage of Chinese parts and components within local manufacturing and assembly. Commenting on Vietnam, for instance, US trade adviser Peter Navarro argued that as much as one third of Vietnamese exports to the US were ‘disguised Chinese goods’, describing the country as ‘essentially a colony of communist China’.

Evidently, the Trump administration hopes to plug the holes left behind from the president’s first trade war with China by imposing tariffs on nearly every country, with the ultimate aim of preventing Chinese goods from entering the US market by being transshipped through ‘neutral’ markets such as Southeast Asia. As argued by Hutt, the US tariffs on Southeast Asia can be thought of as ‘third-party sanctions against the Chinese economy’. Additional tariffs announced recently on solar power imports from Malaysia, Thailand, Vietnam and Cambodia (predominantly made in Chinese-owned factories) can be seen as further attempts by US officials to prevent the entry of Chinese goods into the US.

As recently reported by the Wall Street Journal, the Trump administration plans to use ongoing tariff negotiations to pressure US trading partners to ‘isolate’ China’s economy in return for reductions in tariffs. Among the demands allegedly being considered by the US are disallowing China to ship goods through their territories, preventing Chinese firms from locating in their territories to avoid US tariffs, and not absorbing cheap industrial goods from China into their economies.

In response, Beijing has warned countries against striking a broader economic deal with the US at China’s expense. Ominously, Beijing stated that ‘China will never accept it and will resolutely take reciprocal countermeasures’.

Southeast Asia faces an unenviable choice. As the trade war intensifies, its countries may encounter increasing pressure to align with either Washington or Beijing, putting the region’s neutrality at risk. Avoiding this will require canny leadership and strategic flexibility. Yet Southeast Asians have agency. Indeed, the regions’ success up to now can be attributed to smart and proactive diplomacy on the part of its leaders, who were able to maximise benefits from both powers. Diplomatic skills like these will no doubt be called upon in the years ahead.