For a decade, Washington urged the world’s manufacturers to move their factories out of China and into friendly Southeast Asian states—only to attack the very countries and companies that answered the call.
Usually, U.S. economic statecraft is designed to help American companies succeed abroad. President Donald Trump’s punitive trade program is having the reverse effect. Broad-based import taxes have jolted manufacturers across ASEAN (the Association of Southeast Asian Nations), including American ones.
Rather than checking China, trade policy is alienating regional partners, harming supply-chain diversification, and eroding America’s influence over the bloc’s trade decisions. The U.S. is engaged in what Evan Feigenbaum, a veteran diplomat and former Republican, terms a “reverse pivot.” Bogged down in foreign crises elsewhere, Washington now projects hesitation and retreat in Asia rather than dynamic leadership.
In the months after President Trump’s April 2025 announcement of “Liberation Day” tariffs, some of ASEAN’s non-tariff barriers fell. A few countries used the exogenous threat to bring about needed reforms. Deals were done, including Boeing sales and–at least prospective–LNG contracts. It appeared that coercion worked, at least in the short term. In February the Supreme Court struck down much of the initial tariff regime and the administration pivoted to workarounds: 150-day emergency measures under Section 122 of the Trade Act of 1974, and expansive Section 301 investigations into forced labor, intellectual property violations, and “excess capacity.”
America’s labor, intellectual property, and excess-capacity concerns are really about China, not Southeast Asia. The administration substituted an improvised China policy for a coherent Southeast Asia policy—a strategic blunder. By treating regional partners as collateral damage to show that China isn’t singled out, Washington is undercutting its most reliable partners and allies.
Nowhere is the absurdity of this approach more evident than in the supply chains themselves. For nearly a decade, multinational corporations have redirected capital and manufacturing from China into Vietnam, Malaysia, India, and the Philippines. The goal of these “China plus one” strategies was to insulate critical industries from geopolitical risk and move them into friendly states.
Washington’s tariff regime now undercuts this strategy. Southeast Asian export hubs suffer far more than the United States when Chinese firms attempt illicit transshipment, while subsidized Chinese overcapacity squeezes local producers. The broader reality, though, is not widespread evasion but deep and legitimate supply-chain integration. By imposing blanket punitive duties, Washington is tightening the vise on the very partners helping achieve that diversification.
As Deborah Elms, head of trade policy at the Hinrich Foundation, has observed, Washington created the incentive structure for alternate supply routes and is now penalizing regional partners for using them.
These tariffs aren’t even achieving Trump’s stated goals. Higher costs and a shortage of skilled domestic labor mean production lines won’t magically shift to U.S. shores. Bilateral trade deficits with Southeast Asian economies remain largely unchanged; regional exporters, U.S. importers, and consumers are simply absorbing higher costs.
ASEAN nations have long been masters of dynamic hedging—exemplified by Vietnam’s “bamboo diplomacy”—balancing China against the United States. None of them want to be dominated by Beijing, making Washington their natural partner. Yet as U.S. policy grows increasingly erratic and punitive, it inadvertently pushes them to hedge elsewhere.
As Canadian Prime Minister Mark Carney warned at the World Economic Forum in Davos in January, the weaponization of economic tools forces middle powers to organize: “If we are not at the table, we are on the menu.”
Coercive tactics failed with Canada, and they will fail in Asia. Recently, politically appointed U.S. ambassador to Singapore Anjani Sinha told local and international business leaders that he received orders from the President to “bring home the money,” so they needed to double their U.S. investments. The demand went over like a lead balloon. Capital flows are not surging into the United States; they are pivoting further into Asia.
This friction runs counter to decades of bipartisan precedent. Since the 1985 Plaza Accord, which catalyzed an era of industrial integration in Southeast Asia, American leaders have recognized that regional partners thrive under predictable, rules-based frameworks rather than blunt coercion. Today’s transactional posture risks creating a durable trust deficit that will penalize American enterprise for a generation.
Since America pulled out of the Trans-Pacific Partnership in favor of country-by-country negotiations, its absence at the table has been filled by others. ASEAN is now building institutional networks that bypass Washington altogether. Member states are working with accords like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
American companies have not forgotten the benefits of clear rules of the road in a multilateral context. They have worked closely with ASEAN negotiators toward the ASEAN Digital Economy Framework Agreement (DEFA). Spanning 11 nations, nearly 700 million consumers, and an estimated $2 trillion digital marketplace, DEFA would establish comprehensive standards for cross-border data governance, cybersecurity, digital identity, and artificial intelligence.
As Washington retreats behind tariffs and procedural disputes, Southeast Asia—with input from U.S. companies—is writing the regulatory architecture of the 21st-century digital economy.
Washington builds walls while ASEAN builds architecture.
Southeast Asia does not wish to decouple from the United States. Four ASEAN nations—Vietnam, Thailand, Malaysia, and Singapore—rank among America’s top 20 bilateral trading partners. Private enterprise, investment flows, and educational links remain extraordinarily resilient.
But in statecraft, trust is the ultimate currency. U.S. influence in the Indo-Pacific was never sustained through sheer market size or coercive leverage alone; it thrived because Washington offered an institutional vision grounded in mutual benefit and reliable rules. If Washington continues to treat its Asian partners as transactional pawns in a zero-sum struggle with Beijing, it will discover they have other trading partners. America risks economic isolation and strategic diminishment in the century of the Pacific Rim.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
The post How Trump’s trade policy is handing Asia to Beijing appeared first on Fortune.
