THE BIG TRADE QUESTIONS
First, on trade. How the US and China manage their economic ties will have profound implications for a region that relies on trade with both.
In Southeast Asia, countries such as Vietnam and Malaysia have become key manufacturing hubs, importing Chinese raw materials and inputs while assembling and exporting goods to the US. These economies have already been navigating pressure from both sides and are particularly exposed to shifts in policy.
If tensions re-escalate, they could face increased pressure from Washington to limit reliance on Chinese inputs in exports bound for the United States, or higher tariffs if Washington decides to widen and intensify the enforcement of “transshipment” rules. Beijing has made clear it would oppose such moves and retaliate against countries it sees as acting at its expense.
The squeeze would be different but no less consequential in Northeast Asia. Economies such as South Korea, Japan and Taiwan sit at the centre of high-tech supply chains and are already under pressure to align with US technological and export control regimes. A renewed trade confrontation would sharpen those demands, with Washington likely pushing for further restrictions on exports to China in strategically sensitive sectors like semiconductors.
A particularly sensitive question is whether any US-China trade truce extends beyond bilateral arrangements to include third parties. In recent months, Beijing has signalled a continued willingness to use its rare earth exports as leverage, including to exert pressure on Japan following their diplomatic spat over Taiwan.
The Trump administration has so far been reluctant to confront China on behalf of partners, raising concerns across the region. If Washington secures assurances for its own rare earth supply while leaving partners exposed, it would send a troubling signal about the reliability of US economic leadership – and risk further undermining US alliances and partnerships in Asia.