Xi Jinping on tour: China’s president swings through Southeast Asia amid a trade war with the US

Key Concepts

• China's diplomatic strategy in Southeast Asia
• US-China trade war and its impact on ASEAN countries
• China's economic partnership with Vietnam, Malaysia, and Cambodia
• South China Sea disputes
• ASEAN's neutrality and balancing act between US and China
• China's messaging of opposing unilateralism and protectionism
• Potential for decoupling from China
• Non-tariff measures in the US-China conflict

China's Diplomatic Offensive in Southeast Asia

• Main Goal: To present China as a reliable partner amidst trade tensions with the US.
• Context: US tariffs have significantly impacted China and its trading partners. China faces 145% duties on goods sent to the US, Vietnam 46%, Cambodia 49%, and Malaysia 24%.
• Key Countries: Vietnam, Malaysia, and Cambodia, chosen for their geopolitical importance and strong economic ties with China. China is ASEAN's largest trading partner with $800 billion in trade. China is the biggest trading partner for Vietnam, Malaysia, and Cambodia individually.
• Timing: The visit occurs after the escalation of the US-China trade war and a rare meeting where President Xi emphasized enhancing mutual understanding and trust with neighbors.
• China's Message: President Xi warned against protectionism, stating that a trade war would have no winners. He called on China and Vietnam to "jointly oppose unilateral bullying" and maintain the stability of the global free trading system.
• Practical Deals: China aims to offer practical deals, such as the 45 agreements signed with Vietnam in areas like connectivity, AI, and agricultural trade.
• Global South Narrative: China is positioning itself as a key influential force in the global south, contrasting itself with the US.

South China Sea Disputes and ASEAN's Balancing Act

• Unresolved Disputes: Territorial claims in the South China Sea remain a point of contention between China and some ASEAN members.
• Limited Discussion: The disputes were not prominently featured in discussions or joint statements during President Xi's visit. China and Vietnam agreed to "properly manage and resolve their differences on maritime issues."
• Balancing Act: Despite the need for cooperation due to US tariffs, ASEAN countries are unlikely to fully pivot to China.
• Joint Statement Nuance: The joint statement by China and Vietnam vowed to jointly oppose "hegemonism and power politics" and "all forms of unilateralism," seemingly targeting the US. However, there was resistance from Hanoi to use harsh language against the Trump administration.
• Compromised Language: The joint statement reflects a compromise, consistent with previous bilateral statements.
• Economic Dependence on US: The US is ASEAN's second-largest trading partner and a major export market for Vietnam (30% of total exports) and Cambodia (40% of export value).
• Decoupling Pressure: Southeast Asian countries face pressure to decouple from China, which is economically and politically challenging.

Potential Downsides and US Response

• Charm Offensive: President Xi's visit aims to win friends and position China as a stable partner.
• US Targeting China: The US has paused tariffs on most trading partners except China, indicating a targeted approach.
• Optics for Cambodia: The American Chamber of Commerce in Cambodia suggested that President Xi's visit might not be well-received by the US, as Cambodia seeks tariff relief.
• Trump's Reaction: President Trump suggested that President Xi's trip to Vietnam was intended to "screw the US."
• Rivalry Intensification: The visit could potentially intensify the rivalry between China and the US.
• Derek Scissors' Perspective: All of President Trump's political eggs are in the China basket. If he gives up on China without a win, he has nothing but disruption to show. The US is less dependent on China than China is on the US.

Trade War Dynamics and Future Outlook

• "Fight to the End" Rhetoric: Chinese officials have used the term "fight to the end," signaling a change in tactics.
• Tariffs as a "Joke": China views the high tariffs as a "joke" because trade is already disrupted.
• Non-Tariff Measures: Attention is shifting to non-tariff measures, such as financial market battles and export controls on critical minerals.
• Open Door for Talks: China has left the door open for talks with the US, but insists on equality and mutual respect.
• Economic Pain: Both sides will suffer economically, and the ability to withstand the pain may drive them to the negotiating table.
• Trump's Stance: President Trump claims he has a great relationship with President Xi and that a deal will be reached.
• Unpredictability: The situation remains unpredictable for businesses and consumers.
• Continued Outreach: China is expected to continue its outreach to trading partners and promote its role in the global south.
• Potential Future Visits: President Xi may visit Moscow in May and EU leaders are planning a summit in Beijing in July.

Synthesis/Conclusion

China's diplomatic tour of Southeast Asia is a strategic move to counter the impact of the US-China trade war and position itself as a reliable partner in the region. While China seeks to strengthen economic ties and promote a narrative of opposing unilateralism, ASEAN countries face the challenge of balancing their relationships with both the US and China. The situation remains complex and unpredictable, with potential for further escalation and a shift towards non-tariff measures. The ability of both sides to withstand economic pain will likely determine the future course of negotiations and the overall impact on global trade.