As additional pressure mounts on global supply chains, ASEAN finds itself again caught in the crossfire. This week I have received a number of concerned messages from businessmen and bankers across Southeast Asia. There is a growing sense of unease, bordering on panic in one or two instances, over the proposed punitive US tariffs now explicitly targeting Indonesia, Thailand, Malaysia, Cambodia and others.

One banker in Bangkok described the mood as “worse than 2019, but with fewer off-ramps”. He was referring to the original escalation of the US-China trade war in 2019 when tariffs, counter-tariffs and trade uncertainty were at a peak.

A Southeast Asian businessman told me on a call this week that: “the rules keep shifting. If we’re just collateral damage again, we may as well stop pretending commercial diversification is possible … baring a last minute TACO event.” This really struck a nerve.

For several years, global firms and policymakers have promoted the idea of “China+1” diversifying supply chains into ASEAN to reduce reliance on China. Vietnam, Thailand, Indonesia and others were supposed to be the winners in this realignment. There is a growing realisation now that the whole playbook is being torn up.

And herein lies the unintended irony: in seeking to isolate China economically, these measures are actually driving its neighbours closer. The ASEAN-China Free Trade Area (ACFTA 3.0) agreement concluded in 2024 was heavily endorsed last week at a meeting in Kuala Lumpur between ASEAN foreign ministers and their Chinese counterpart Wang Yi. Malaysian Foreign Minister Mohamad Hasan stated that China is "one of ASEAN's most substantive and dynamic partnerships".

While geopolitical frictions in the South China Sea still remain unresolved, trade and commercial realignment is moving forward decisively. The question now is only how deep, how fast and in whose favour.

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