Impact of Trump 2.0 on US Economic Policy and ASEAN’s Future
Context:
The tenure of Trump 2.0 can compel ASEAN Economies towards deeper ties with China , despite the heightened vulnerabilities . Looking at USA’s history of flipping on trade policies with change in power there is a need to analyse the likely impact of Trump 2.0 on wider ASEAN geopolitics.
Likely Impact of Trump 2.0 on US Economic Policy:
Donald Trump’s potential return as the US President could significantly reshape global trade policies. Known for his “America First” stance, his administration is expected to:
- Heightened Tariffs on China: Anticipated increases in tariffs, potentially reaching 60%, emphasising economic protectionism.
- Focus on Bilateral Agreements: Continued disregard for multilateral frameworks, favoring direct negotiations over regional or global economic alliances.
- Reduced Regional Engagement: Minimal interest in frameworks like the Indo-Pacific Economic Framework (IPEF), as seen during his previous term.
These shifts could further strain US-China relations and redefine trade dynamics with key partners, including ASEAN economies.
Containment of China Policy – From Obama to Trump to Biden:
- Obama Era: The “Pivot to Asia” strategy and the Trans-Pacific Partnership (TPP) sought to economically contain China by setting high trade standards.
- Trump Era: Withdrawing from the TPP in 2017 marked a shift to bilateralism, prioritising domestic economic interests over regional strategies.
The Purpose of the TPP
The TPP, representing 40% of global GDP, aimed to:
- Economic Integration: Set high trade standards for intellectual property, labor, and environmental safeguards.
- Strategic Influence: Curb China’s economic dominance by fostering US-led regional economic alliances.
Despite its strategic potential, the US withdrawal undermined its impact, leaving a vacuum in regional leadership.
Impact of Trump’s Policy Shift on the Broader ASEAN Region
Trump’s policies, especially the TPP withdrawal, had several implications for ASEAN:
- Economic Uncertainty: ASEAN nations lost access to a high-standard trade framework.
- Increased Dependence on China: The absence of a robust US-led alternative accelerated ASEAN’s economic integration with China.
- Supply Chain Risks: The “China+1” strategy, aimed at diversifying supply chains, increased ASEAN’s exposure to US-China tensions.
Japan’s Revival of TPP via CPTPP
Following the US withdrawal, Japan spearheaded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2017:
- Key Features: Retained high TPP standards while excluding the US.
- Expansion: Attracted interest from the UK and other nations.
- Limitations: Despite its significance, the CPTPP lacks the strategic heft that US participation would have provided.
- Biden Era: The launch of the IPEF in 2022 emphasised governance, supply chain resilience, and clean energy but lacked the market access provisions needed for robust regional integration.
Potential Impact of Trump 2.0 Policies on ASEAN:
A return to Trump-era trade policies could create significant challenges for ASEAN:
- Tariff Risks: Higher US tariffs might target ASEAN exports with Chinese linkages.
US Policies Violating Trade Commitments Over the Years:
US trade policy has demonstrated inconsistency, driven by shifting priorities:
- Obama Administration: Advocated multilateralism through agreements like the TPP.
- Trump Administration: Withdrew from TPP and undermined multilateral trade norms.
- Biden Administration: Launched the IPEF, which, despite its focus on governance and clean energy, lacks robust market access provisions.
This unpredictability has created uncertainty among US trade partners.
- Economic Vulnerability: ASEAN faces dual exposure to stricter US policies and deeper ties with China.
- Reduced US Support: A weakened IPEF or US withdrawal could limit ASEAN’s diversification options.
- Increased Chinese Role in ASEAN’s Economic Landscape: China’s growing engagement with ASEAN has shaped the region’s economic trajectory:
- Supply Chains: Relocation of Chinese firms to ASEAN strengthens regional integration.Infrastructure Development: The Belt and Road Initiative addresses infrastructure gaps, though progress has been uneven.
- Green Energy: China remains a key financier of ASEAN’s climate projects.
- Threats to ASEAN: Reduced US Support and Japan’s Constraints : ASEAN’s geopolitical balancing act faces key hurdles
- Declining US Engagement: Lower US institutional backing forces ASEAN to depend more on China.
Japan’s Limited Role: While Japan leads the CPTPP, its influence and economic ties in the region remain limited compared to China’s.
