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Every country in Asia has some concern about what the Trump administration will bring, whether to themselves or to the world in general. The most common denominator is clearly tariffs, given Trump’s threats and the fact that almost every country has a large trade surplus with the US, headed regionally by China, Japan, Vietnam, Korea, and India.
But given that Trump sees himself as a dealmaker, simple approaches such as across-the-board tariffs despite his threats are improbable. What would be up for bargaining would be trade access vis-à-vis some other item of Trump’s agenda, or his personal whim. Thus India, Bangladesh, and Vietnam might expect to get off lightly for strategic reasons.
Disruptions of the whole global trading system via arbitrary measures are of course a major danger to the general world economy. But in the short term, any significant unilateral reduction in the US deficit would be a reason for domestic stimulus. At present, almost every country in East Asia runs a large current account surplus. Indonesia has a small deficit but can well support a bigger one given its continuing infrastructure needs and low level of inflation. As it is countries have been piling up dollars for lack of anything else and some driving the dollar to decades highs against the yen, euro, Philippine peso, and others despite the fact that the US current account deficit is over 4 percent of GDP, its government deficit at 6 percent, with both likely to increase given Trump’s already-stated plans for another tax cut, while the stock market is at historically extreme valuations.
The other side of the coin has been weak Asian currencies persuading many central banks – Japan being the exception – to be wary of interest rate cuts and most stock markets – India being the main exception – have been dull at best.
Even without Trump, the imbalances have been getting to the point where fortunes are reversed, possibly dramatically even if Trump’s tax cuts keep US interest rates up. Trump may also seek to alleviate the trade deficit by engineering the decline of the dollar but that is difficult to achieve, and a very large movement would be needed to make a significant trade impact. However, a combination of an overdue US recession and lower interest rates would quickly push the dollar off its perch, a development that should be welcomed in most of Asia.
On the strategic front, Trump may want to appease Russia over Ukraine in an attempt to reduce Putin’s dependence on China but how far he can go with alienating Europe which China prefers not to antagonize is open to question. Russia anyway seems stuck with the aging Putin’s obsession with the (partial) loss of the Tsarist/Soviet empire. His need for troops from nuclear North Korea was a reminder of the unresolved issues not only of the Korean peninsula but also of the Russian Far East, much acquired by force from Manchu China in the 19th century. India might welcome a greater Russian presence as an antidote to China but Moscow has scant naval resources to deploy while it pursues Ukraine.
In Central Asia, Chinese influence continues to grow at Russian expense, though Turkey also has appeal for ethnic and economic reasons, and any regime change in Iran, should it finally occur, would probably see a rapid expansion of its regional role and acceptance of its limited ability to confront US-backed Israeli colonialism in Palestine through proxies in Yemen and Lebanon.
In eastern Asia, the situation has recently been complicated by the removal of the South Korean President and the likelihood that his eventual successor will be less closely aligned with the US and Japan while Japan worries about US commitments and trade threats. The Biden administration successfully launched a new tripartite security partnership involving Japan and South Korea to strengthen the western position in the Eastern Pacific. South Korean President Yoon Suk Yeol and then Japanese Premier Fumio Kishida, who negotiated the agreement, are now gone, as is Biden. Given Trump’s stated affection for Kim Jong-un, and his overtures to Xi Jinping, the fate of that agreement is anyone’s guess.
Here, and to an even greater extent in maritime southeast Asia, much will depend on China’s own positions. Backing off from its aggressive pursuit of dubious historical claims in the South China Sea would give less reason for states to welcome (albeit silently) the importance that the US has been attaching to these waters. The Philippines has scant choice, but China may well test US resolve to protect the Philippines early in Trump’s term.
Malaysia has cozied up to Beijing and keeps secret the many violations of its sovereignty and EEZ. Vietnam has been pacified for now by not being aggressive in its waters. So eyes will be on Indonesia’s Prabowo. He has been rushing around the world to tell everyone how important Indonesia is. He aims to be active in a variety of international groupings with disparate members. A strategy has yet to be seen in all this but ASEAN does not seem to be a focus so far as he looks for a bigger stage. At home, there will be a focus on how far he gets in dismantling reform-era developments such as regional elections, which have already begun, and taking lenient attitudes to big-ticket corruption.
As for ASEAN, with Malaysia in the chair and Prime Minister Anwar Ibrahim as prime minister, even more platitudes and empty promises can be expected than usual.
The year 2025 is relatively short on elections. The Philippines has mid-term congressional polls but Marcos, in a growing confrontation with the forces of former President Rodrigo Duterte and his daughter Sara, the vice president, still has till 2027. The country is less dependent on exports (or China) than any other so economically it may be a safe place to be for now – if not from a strategic perspective.
Singapore will have one sometime before November, a test for the new prime minister Lawrence Wong. Will he get given the benefit of the doubt and more time to prove himself? Or will discontent, perhaps over wealth gaps and elites living in grand housing impact voter sentiment, or feeling that he remains in the shadow of Senior Minister Lee Hsien Loong? Some opposition parties have come together but still are more a protest vote than offering a clear agenda.
It remains to be seen when Bangladesh gets to vote or how the revival of politics will develop in the aftermath of the years of de facto one-party rule under Sheikh Hasina. Malaysia’s politics will likely remain a messy stability with Anwar’s survival propped up by leniency for various influential politicians tainted by involvement in 1MDB or other scams. In Thailand, with Thaksin Shinawatra at the controls through his daughter Paetongtorn as prime minister working to make the economy a family affair after nearly two years of military-caused stagnation and corruption, there are hopes for growth tempered by some of the world’s highest consumer debt.
This time last year one could look forward to a year of major elections – India, Indonesia, the US, etc. Now all face a year of uncertainties despite their relative electoral serenity.
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