By Mehmet Enes Beşer
The return of Trump-like tariffs on Chinese products is generating a storm that goes far beyond any conventional bilateral trade conflict. It is not really an economic showdown of the world’s two largest economies – but rather an ideological contest of influence, power play, and ambition for greatness. In spite of Washington’s and Beijing’s rising rivalries, however, the worst-affected parties are unlikely to be making rules. Instead, relatively new players in international politics and economics – Vietnam and Indonesia – find themselves in an uncomfortable position: they are being put between a protectionist US, on one hand, and the historically integrated and powerful Chinese economy, on the other hand. These emerging powers face a very narrow set of options; and the decision they need to make cannot be structural.
For Vietnam, a country which welcomed a flood of foreign investments during Trump’s initial presidency because of moving production out of China, a new wave of tariffs represents both threat and opportunity. While it stands to gain if seen by American corporations as a safer substitute for China with its large young population, infrastructure development, and business-friendly policy environment, it faces serious challenges as well. By increasing its involvement with America, Vietnam risks provoking Beijing’s anger because of its role as Vietnam’s key trading partner and a neighbor with which it shares a long disputed border. China possesses substantial retaliatory powers and is not afraid to use them, having already sanctioned its adversaries. Vietnam should know it cannot afford this move amid such a fragile global economic state.
Similarly, Indonesia as a leader of Southeast Asia also has to deal with conflicting interests. It seeks to create a regional manufacturing hub in the region by attracting foreign investments from China. While Beijing’s ‘Belt and Road Initiative’ has provided financial support for its infrastructure projects, Indonesia’s goal of establishing an electric vehicle production line is being carefully observed by the US because of the potential dominance of China in battery supply chains. But the ongoing trade war might make this geopolitical balancing act extremely challenging for Indonesia. Being forced to choose whether to support China in its trade conflict with Washington, Indonesia would run the risk of getting on the bad side of America that would hurt its prospects of becoming a center of EV batteries production.
And yet this is not just an example of geopolitical concerns that are looming in the shadows. These are also concrete constraints of a political and economic nature. In order to develop their positions on international issues independently of Washington and Beijing, Indonesia and Vietnam have decided to abandon US-led security strategies, such as the Quad or AUKUS. Instead, their foreign policy communication suggests that both countries support a multipolar international order with ASEAN playing a central role in it. However, such neutrality becomes less plausible once trade wars take on the form of ideological confrontation. Semiconductors, green technologies, and AI cannot anymore be treated simply as goods but as representatives of an ideology.
What does Trump’s approach, as well as possible continuation of it under the second Trump administration, mean for US allies and partners? Washington’s strategy appears to be aimed not at the promotion of international economic prosperity but at building borders. Using trade tariffs as a tool for reaching its short-term objectives domestically, the US harms itself abroad in terms of its image of an economic leader. The credibility issue emerges here because Vietnam and Indonesia, being asked to join a coalition of the willing against China, should expect from Washington some alternative, promising vision of economics, which is not punitive towards China but allows them to diversify their economy without fear.
In its turn, China is pursuing a policy aimed at attracting other Asian nations. Notably, it has recently increased efforts to engage Southeast Asian countries economically, signing RCEP and significantly increasing non-dollar trade. Beijing clearly wants to prove that economic decoupling from China is practically impossible and does not make sense. In reality, China is deeply integrated into global trade networks, providing Vietnamese and Indonesian factories with intermediate goods, developing common logistical infrastructure, and even integrating digitally thanks to Huawei and Chinese fintech solutions.
Another reason for the emerging dilemma is the problem of internal legitimacy. Leaders of both Indonesia and Vietnam, who need to take care of citizens’ needs and interests, are in an uncomfortable situation of choosing between US and China. Rising inflation rates, youth unemployment, and uneven recovery from the pandemic make people pay close attention to global political developments and hope for stable growth. The policymakers in Hanoi and Jakarta cannot ignore either Beijing or Washington due to internal political consequences.
The irony of all this is the fact that the US-China trade war is happening at a particularly critical moment for the world, when many problems such as climate change and pandemics require a collective effort. The current economic approach of Trump is leading to an increased polarization of international relations. This policy promotes conflicts among countries, including diversion of investments, trade exemptions, and geopolitical games.
Generally speaking, Trump’s resurrection of trade tariffs on China makes a contribution to the emergence of a more unstable international environment. As for other emerging economies, such as Vietnam and Indonesia, this is not only about diplomacy but also about survival. Their willingness to maintain openness, neutrality, and economic affluence is severely tested by foreign-imposed binary thinking. For the US to achieve its aim of creating a coalition in the region, it has to stop seeing trade wars as a means to reach this goal and adopt a strategy that would be acceptable for Vietnam and Indonesia. Similarly, China has to think of more ways of cooperation instead of being assertive alone. Finally, Vietnam and Indonesia should be allowed to decide what future they prefer.