Singapore’s Defense Minister Sounds Alarm as Trade Wars and Tech Rivalries Reshape Southeast Asia’s Future
“If the United States steps back, who will protect the global commons?” This stark question, posed by Singapore’s Defense Minister Dr. Ng Eng Hen at the 2025 BMW Foundation Herbert Quandt Roundtable, captures the existential uncertainty gripping Southeast Asia. As U.S. tariff policies escalate and China consolidates control over critical green technologies, ASEAN nations—many of which gained independence less than six decades ago—confront a destabilizing reality. The region’s $4 trillion economy, home to 700 million people, now balances precariously between competing visions of global order. With the U.S. pivoting from post-war guarantor to what Dr. Ng termed a “landlord seeking rent,” ASEAN’s ability to chart an independent path hinges on navigating a trilemma of geopolitical recession, energy insecurity, and fractured technological leadership.
Key Developments: The Ripple Effects of Tariff Escalation
The Biden administration’s 2025 Omnidirectional Trade Act, extending Trump-era protectionist measures, has intensified pressure on ASEAN’s export-dependent economies. Dr. Ng highlighted historical precedents: the 2018–2019 U.S.-China trade war reduced bilateral commerce by 10%, while Europe’s 2023 tariffs slashed its trade deficit with China from €396 billion to €292 billion. However, this “victory” came at a steep cost—EU GDP growth plummeted from 3.5% to 0.4%, illustrating the collateral damage of decoupling.
In Southeast Asia, the latest U.S. tariffs targeting Chinese electric vehicles (EVs) and solar panels have forced rapid supply chain realignments. Chinese EV battery giants BYD and CATL, which collectively control 58% of global production, are now rerouting exports through Thailand and Vietnam to circumvent duties. Meanwhile, semiconductor leaders TSMC and Samsung Electronics report a 12% decline in chip shipments to ASEAN hubs like Malaysia and Singapore, as U.S. sanctions disrupt shipments of advanced components destined for Chinese tech firms.
Political Impacts: From Security Partnerships to Economic Leverage
Dr. Ng characterized the U.S. strategic shift as a transformation from “liberator to disruptor,” prioritizing geopolitical primacy over multilateral cooperation. This realignment has triggered cascading consequences:
The Philippines’ recent expansion of its defense pact with Washington, granting the U.S. access to nine military bases, prompted Beijing to restrict nickel exports—a critical input for Tesla and Panasonic’s EV battery plants in Batangas and Johor. Vietnam, caught between U.S. demands to exclude Huawei from its 5G infrastructure and Chinese pressure to maintain technological ties, saw foreign direct investment drop 8% in early 2025 as multinationals delayed expansion plans.
Singapore’s state-owned Temasek Holdings exemplifies the region’s hedging strategy, redirecting 30% of its portfolio to Indonesian rare earth mining ventures. This $7 billion pivot aims to reduce reliance on China’s China Northern Rare Earth Group, which currently supplies 90% of ASEAN’s rare earth metals for wind turbines and EVs.
Economic Impacts: Green Tech Dominance and Energy Dilemmas
China’s tightening grip on green technology looms large over ASEAN’s energy transition. With 80% of global solar manufacturing capacity concentrated in Chinese firms like LONGi Green Energy and JinkoSolar, Southeast Asian nations face inflated costs for renewable projects. SunPower, a U.S.-based solar developer, recently abandoned a $1.2 billion Philippine solar farm after Chinese suppliers raised module prices by 22%. European energy giant Siemens Energy faces similar margin pressures, having lost three major ASEAN grid contracts to state-backed Chinese competitors.
The EV sector reveals both vulnerabilities and opportunities. As China produces over half the world’s electric vehicles, European automakers Volkswagen and Renault struggle to localize supply chains under U.S. “friend-shoring” rules. Volkswagen’s new Indonesian battery plant, initially budgeted at $2.5 billion, now requires $3.1 billion due to tariffs on Chinese machinery. Conversely, Thailand’s PTT Group secured a $2 billion Chinese loan to build Southeast Asia’s largest lithium refinery in Chonburi, leveraging Beijing’s Belt and Road pivot toward critical minerals.
Ride-hailing leader Grab Holdings underscores the region’s adaptive strategies, partnering with China’s Geely to deploy 10,000 Chinese-made EVs across Malaysia and Indonesia by 2026—a move that sidesteps U.S. tariff barriers but deepens reliance on Beijing’s tech ecosystem.
Outlook: The Fragmented Future of Global Systems
Dr. Ng’s closing challenge—Who can steward the global commons?—hangs over two divergent scenarios reshaping ASEAN’s trajectory.
First, the BRICS bloc, buoyed by China and India’s growing coordination, is actively courting ASEAN nations into a reformed trade architecture. Leaked proposals reveal plans to replace 35% of regional energy trades with yuan-rupee settlements, bypassing dollar-based systems. Indonesia’s state miner PT Aneka Tambang recently tested this framework, selling $500 million worth of nickel to India’s Tata Steel in rupees—a transaction that halved currency conversion costs but drew warnings from U.S. Treasury officials.
Second, technological decoupling threatens to fracture ASEAN’s digital economy. The U.S.-led “Chip 4” alliance, which restricts semiconductor sales to Chinese firms, has placed Malaysia and Vietnam in a bind. Both nations rely on SMIC and Yangtze Memory Technologies for 40% of their chip assembly inputs. Failure to comply with U.S. export controls could cost them $12 billion in annual tech investments, according to the ASEAN Secretariat.
Risks and Opportunities: ASEAN’s Precarious Balancing Act
The region’s internal cohesion faces unprecedented strain. Malaysia and Vietnam, for instance, are diverging on supply chain strategies: while Kuala Lumpur courts Chinese battery investments, Hanoi accelerates partnerships with South Korea’s LG Energy Solution to align with U.S. incentives. Such splits could reignite intra-ASEAN trade disputes, particularly over rules of origin for EV components.
Europe’s carbon border adjustment mechanism (CBAM) adds another layer of complexity. ASEAN exporters reliant on Chinese coal-powered manufacturing, such as Thailand’s PTT Global Chemical, face €850 million in annual CBAM fees starting in 2026—a cost that could erase profit margins for petrochemical exports.
Yet opportunities emerge from the chaos. Singapore’s Temasek and Indonesia’s sovereign wealth fund INA are pooling $15 billion to finance critical mineral startups, aiming to reduce dependence on foreign tech giants. Jakarta’s ban on raw nickel exports, enforced through PT Vale Indonesia, has already attracted $18 billion in Chinese battery investments—though the EU’s ongoing WTO challenge against the policy threatens to upend this strategy.
What’s Next?
Malaysia’s July 2025 decision on joining the U.S.-led Minerals Security Partnership will serve as a bellwether for ASEAN’s alignment. Meanwhile, the October BRICS summit in Russia is expected to unveil a digital trade platform tailored for Southeast Asia, offering SWIFT alternatives for cross-border transactions.
Regional Spotlight: Indonesia’s Nickel Gambit
Jakarta’s aggressive resource nationalism, epitomized by its raw nickel export ban, has transformed Sulawesi into a global battery hub. Chinese firms like CATL and GEM Co. have committed $14 billion to local processing plants, creating 45,000 jobs. However, the EU’s WTO case alleging market distortion—set for a 2026 ruling—could force Indonesia to choose between Chinese capital and Western market access.
