By N Chandra Mohan
There are huge takeaways for India from US President Donald Trump’s visit to Asia, which saw leaders from the Association of Southeast Asian Nations (ASEAN), Japan, and South Korea fawn over him and conclude deals that may have undermined their leverage as a regional grouping. Trump, however, met his comeuppance dealing with President Xi Jinping and secured a fragile trade truce on terms that tacitly recognise the US and China as equals. There is an opportunity for India to engage more closely with ASEAN that has faced the full brunt of the tensions between these two great powers that have an outsized presence in the region. The US is the largest investor while China is the largest trading partner and their rivalry will only intensify.
Trump’s steep tariffs on ASIAN nations
For a region that struggles to maintain closer relations with both the US and China, Trump’s tariffs on ASEAN members—ranging from 10% to 49%—struck a body blow to America’s standing in the grouping. Although he stated the US is 100% with the region, his approach is largely transactional in slapping Malaysia, Thailand, and Cambodia with levies of 24%, 36%, and 49% respectively, and later negotiating them down to 19% after signing deals for critical minerals with Malaysia and brokering a peace deal between Thailand and Cambodia. There are deep-seated concerns over 40% tariffs on transshipped goods from China, 100% tariffs on branded pharmaceuticals, and prospective sector-specific levies on semiconductors.
ASEAN equally has concerns with China’s growing military power despite being closely integrated with supply chains from the mainland and recently upgrading its bilateral free trade agreement (FTA). There have been frequent disputes with member nations like the Philippines in the South China Sea. The grouping has not been able to counter China’s aggressive claims although there is a non-binding ASEAN-China code of conduct aimed at managing this festering conflict, a process that needs to be speeded up. In this regard, the exhortation by the US to these nations to stand firm and strengthen their maritime forces to counter the dragon’s “destabilising actions” in the South China Sea is a non-starter.
At a time when Southeast Asia feels that the US has turned its back on the region and has anxieties over China’s aggression in the South China Sea, there is a window open for India to offer stability in its partnership with this grouping. Although ASEAN leaders lavished praise on Trump and accepted his one-sided trade deals, they know the region is not his priority as he walked away from the Trans-Pacific Partnership in his first term as US President, which later morphed into the 12-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). India can also similarly ink bilateral deals but it’s better to deal with the grouping once the review of its ASEAN FTA is over by end-2025.
India must leverage the opportunities in the $4-trillion grouping as it is foundational to its Look East policy and pivot to the prosperous Indo-Pacific region. Stakeholders like India Inc can contribute by stepping up investments like the Aditya Birla Group did in the yesteryear. Unfortunately, at a time when the grouping is attracting record inflows of foreign direct investment (FDI) of $226 billion, those from India have receded to $3.3 billion in 2024 from $4.4 billion in 2010 when we inked the FTA in goods with ASEAN. India’s FDI in manufacturing is also negligible, at $262 million or 8% of the total FDI inflows in 2024, according to ASEAN’s data portal. The Tata Group has exited its manufacturing presence. The good news of late, however, is that our fintech start-ups are targeting countries in the region like Indonesia, Vietnam, Malaysia, Cambodia, and the Philippines as the next big frontier.
Experts say India deepen ASIAN ties
The ASEAN FTA can work better for India if it encourages domestic industry to set up permanent establishments in these economies to seize emerging opportunities to integrate with global value chains. Anil Wadhwa, former secretary (east) in the ministry of external affairs, has recently written that India is likely to propose greater cooperation with ASEAN members under its various production-linked incentive schemes in order to strengthen supply chains with the grouping. The most efficacious means, however, of integrating with supply chains in Southeast Asia is by engaging more closely with both China and the US that has 6,000-odd companies operating in the region.
Building on our relationship with Southeast Asia could be a basis for reconsidering joining the Regional Comprehensive Economic Partnership (RCEP), which is after all ASEAN-plus with China, Japan, South Korea, Australia, and New Zealand. A Beijing-based economist, Liqing Zhang, argues that India could export more to China by joining the RCEP. India is broadening its economic cooperation and trade agreement with Australia and negotiating a FTA with New Zealand. Besides these two nations, four ASEAN nations are part of the CPTPP which India could contemplate joining in the future. Looking east with greater confidence is warranted due to a heightened Sino-US rivalry despite an uneasy trade truce. There is an opportunity for India as America is interested in only bilateral deals while China asserts itself through force in the region.
The writer is an economics and business commentator based in New Delhi.
Views are personal
