US ASEAN Policy Must Be Rooted in Economics, Not Just Defense

President Donald Trump’s second term has rocked the boat thus far when it comes to U.S. engagement with Southeast Asia. The April 2 “Liberation Day” reciprocal tariff announcements not only threw the world into an economic and diplomatic frenzy, but also reinforced the region’s worst fears about the United States: that it still lacks a consistent Southeast Asia policy and cares very little about the region as a whole.

While the United States’ military presence in Southeast Asia has generally been high-level and penetrating, its economic policies toward the region have historically oscillated. The binding constraint in U.S. economic engagement with the region has been a lack of U.S. government credibility that stems from several factors, including shifts within and between political parties, contrasting views on business and free trade, and growth in domestic nationalist and protectionist sentiments.

As a result, many Southeast Asian countries have started to view China as a more crucial economic partner and the U.S. as a more crucial defense partner.

In a region whose countries heavily prioritize economics and trade, it is crucial for the United States to formulate a comprehensive economic strategy while maintaining strong defense ties in order to build long-term credibility.

U.S. Secretary of State Marco Rubio emphasized earlier this year that the United States would pursue a “pragmatic” and “realistic” approach to the Association of Southeast Asian Nations (ASEAN) and continue to respect ASEAN centrality: the principle that the bloc will chart its own path forward without being coerced into choosing sides between great powers.

What should such an approach look like in practice?

ASEAN is home to nearly 700 million people. It has grown to form the fifth largest “single market” economy in the world with a combined gross domestic product (GDP) of $3.6 trillion, and is projected to become the world’s fourth-largest economy by 2030.

The data very clearly indicates ASEAN’s fast-growing economic importance to the United States. By early 2024, the U.S. overtook China as ASEAN’s largest export market, with 15 percent of ASEAN’s exports destined for the U.S. The United States ranks first in cumulative foreign direct investment (FDI) in ASEAN as well, totaling nearly $480 billion in 2023 – almost twice the amount of combined U.S. investments in China, Japan, South Korea, and Taiwan. ASEAN is also home to four of the United States’ top 20 two-way trade partners.

Yet U.S. government policies toward the bloc have often targeted countering China first, over actually catering toward Southeast Asia’s economic needs. This dampens the efficacy of these initiatives, especially as member states face key challenges from widening socioeconomic disparities to climate-induced vulnerabilities.

Efforts toward multilateral economic engagement between the U.S. and ASEAN have also not panned out. The Biden administration’s Indo-Pacific Economic Framework (IPEF) garnered a lukewarm response in Southeast Asia on account of the framework not being a free trade agreement. Trump’s announcement of his intent to walk away from IPEF further dampened the prospect of effective multilateral economic engagement.

However, opportunities for strengthening bilateral economic cooperation between ASEAN countries and the United States remain intact.

As Trump 2.0 pushes forth “America First” policies and reintroduces the economic and rhetorical unpredictability often seen during Trump 1.0, it must realize that limiting U.S. market access will continue to hamper ASEAN countries’ abilities to forge deeper economic relations with the U.S. and vice versa.

To this end, leaders from ASEAN countries have not shied away from criticizing the United States’ recent actions, including this hard-hitting speech by Singaporean Prime Minister Lawrence Wong, on the global impact of the tariffs.

Yet notwithstanding the political and economic turbulence, ASEAN member states have demonstrated their resolve to bilaterally adapt to the Trump administration’s policies. Southeast Asian governments have distinguished themselves from Canada, China, and Europe through pragmatism centered around deal making, as opposed to retaliation.

The very first phone call to Trump after “Liberation Day” was made by Vietnamese leader To Lam, shortly after Vietnam cut duties on American liquefied natural gas and pledged to purchase Boeing and Lockheed Martin, as part of several pro-U.S. measures.

Indonesia, Cambodia, and the Philippines recently sent high-level delegations to Washington, preferring healthy long-term trade relations with the U.S. over short-term retaliation.

The above responses are perhaps the clearest indication that even when questions abound over America’s reliability and ability to act in good faith, Southeast Asian countries genuinely wish to maintain positive relationships with the United States amidst their delicate balancing act between the U.S. and China.

There undeniably remains great appetite for more U.S. economic engagement in the region, and Washington would be wise to prudently capitalize on this. The U.S. can undertake two key measures: first, increase the role of the U.S. government as a private sector enabler in the region; second, physically show up.

The United States should leverage what has been an inherently powerful and historical comparative advantage regarding its private sector investments and relationships with decisionmakers throughout Southeast Asia, since the end of World War II.

Despite this robust private sector presence, U.S. government policy has long wavered, creating a disconnect between what American businesses have built and how the government has followed up with action.

The U.S. government should hence play a greater role in Southeast Asia as a seamless facilitator, with its policies complementing the investments that American companies make.

It can do so through government institutions such as the International Development Finance Corporation, which has been instrumental in forging linkage networks between the U.S. government and American businesses to better finance private sector investment in developing nations, including many ASEAN countries.

One of the most effective ways for the U.S. to build government credibility with ASEAN would be to physically show up at the highest levels. There is no substitute for this; it is something that Southeast Asian countries place a premium on.

Starting with Trump himself, the United States must ensure consistent participation from its highest-ranking officials at marquee annual events such as the U.S.-ASEAN Summit and East Asia Summit. Trump only attended the former once (in 2017) and never participated in the latter.

In contrast, American representation to the U.S.-ASEAN Summit under the Biden administration was led by President Joe Biden (twice), Vice President Kamala Harris (once), and Secretary of State Antony Blinken (once). Not perfect, but certainly an improvement.

Biden also notably hosted the U.S.-ASEAN Special Summit in 2022, meeting with leaders of each ASEAN country and formally upgrading the U.S.-ASEAN relationship to a comprehensive strategic partnership just a few months later.

However the trajectory of U.S. foreign policy may develop over the next four years and beyond, ASEAN and Southeast Asia cannot be an afterthought. The Trump administration – and successive U.S. presidential administrations – must pursue win-win economic policies and meaningful diplomatic gestures in order to give Southeast Asia the attention and respect that it deserves.

Doing so will strengthen the United States’ image as a credible and reliable partner.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect those of the Asia Research Institute, National University of Singapore.