As the world’s top economies engage in a high-stakes game of trade tensions, ASEAN leaders are seeking diplomatic solutions to ensure their region remains relevant and prosperous.
Malaysia’s decision to invite representatives from China and Arab Gulf states to the ASEAN summit in May has sparked headlines beyond Southeast Asia. The move is seen as a response to Donald Trump‘s aggressive tariff policies, which have been affecting global trade.
According to ‘we are not choosing sides’ said by Malaysian Prime Minister Anwar Ibrahim, the presence of non-members at the summit is not intended to signal that ASEAN is ‘choosing sides’ between the US and other nations. Rather, it’s about ensuring ASEAN’s strategic relevance in a multipolar world.
Sam Baron, a researcher at the Yokosuka Council on Asia-Pacific Studies, believes that Anwar’s plan for a trade alliance between ASEAN, China, and the Gulf states may not sit well with Washington. ‘ASEAN nations, several Gulf states, and China all run significant trade surpluses with the US,’ he says.
A trade alliance is a formal agreement between two or more countries to reduce or eliminate tariffs and other trade barriers.
This allows member states to trade goods and services with each other under favorable conditions.
The most well-known trade alliances include the European Union (EU), the North American Free Trade Agreement (NAFTA), and the Association of Southeast Asian Nations (ASEAN).
Trade alliances can boost economic growth, increase exports, and create jobs by promoting free trade among member states.
The combined gross domestic product (GDP) of the Arab Gulf states stood at around $2.1 trillion in 2023, according to the International Monetary Fund (IMF). Saudi Arabia and the United Arab Emirates account for nearly three-quarters of the economic output of the bloc.
ASEAN is one of the world’s fastest-growing economic regions, with a combined population of approximately 690 million. In 2023, its 10 member states reached total GDP of nearly $3.8 trillion, with Indonesia alone contributing a third of that as the group’s most populous nation.
The Association of Southeast Asian Nations (ASEAN) is a regional economic organization comprising ten member states.
As of 2022, the combined GDP of ASEAN countries stands at over $3 trillion, making it the seventh-largest economy in the world.
The region's economic growth is driven by industries such as manufacturing, agriculture, and services.
Indonesia, Malaysia, and Thailand are among the largest contributors to ASEAN's GDP.
The region has also seen significant investment from China, Japan, and South Korea.
ASEAN countries have been benefiting from the US-China trade tensions over the past years, gaining global export market shares and attracting foreign investment. Foreign direct investment (FDI) in ASEAN countries from advanced economies within the OECD has now doubled compared to investments in China.
The United States and China have a long-standing trade relationship, with the US being one of China's largest trading partners.
However, in recent years, trade tensions between the two nations have escalated due to concerns over 'intellectual property theft' , industrial subsidies, and unfair trade practices.
According to the US Census Bureau, the US-China trade deficit reached $381 billion in 2020.
The Trump administration imposed tariffs on Chinese goods, leading to retaliatory measures from China.
The Biden administration has continued this policy, with a focus on promoting fair competition and addressing China's state-led economic model.
Sharon Seah, a senior fellow at the ASEAN Studies Center of Singapore‘s ISEAS-Yusof Ishak Institute, believes that closer cooperation between ASEAN and the Gulf states makes strategic sense. ‘Although ASEAN-GCC trade numbers are still relatively modest, there is much room for expansion,’ she says.
ASEAN countries Malaysia, Indonesia, and Singapore hold a key advantage in global trade as they border the Strait of Malacca, through which over a quarter of the world’s total trade volume passes. The Gulf states could bring substantial financial resources to the table, thanks to their huge oil and gas revenues.
A recent study by Allianz Trade suggests that some ASEAN countries are well-positioned to expand their role in global trade. Malaysia and Vietnam ranked second and third place in the analysis of what could become so-called next-generation trade hubs, exhibiting ‘high scores in efficiency and trade potential.
