BGA and BGA Advisor Dr. Prashanth Parameswaran wrote an update to clients on the election of Donald Trump.

Context 

  • A second term under U.S. President Donald Trump raises key questions about the future of U.S. Indo-Pacific strategy. Changes are likely to varying degrees in several areas including trade, climate, energy and alliance management. This is despite the bipartisan consensus that exists across the aisle on broad policy contours in realms like China and defense policy.
  • Trade policy will be among the early areas to watch for policy change under Trump. Trump has called for imposing a 10 to 20 percent tariff on all imports and a 60 percent tariff on Chinese imports. If implemented, these moves would deepen concerns about U.S. protectionism, even if the regional effects would be uneven. Research from the London School of Economics released in October suggests the greatest GDP contraction impact is likely to be on United States itself (-0.64%) and China (-0.68%), relative to less trade-dependent major economies like India (-0.03%) and Indonesia (-0.06%). Beyond tariffs, some Asian officials have also privately been seeking suggestions for how to manage greater scrutiny on trade deficits. Regional economies that feature in recent U.S. government data on top deficit sources have included China, Vietnam, Taiwan, Japan, South Korea, India and Malaysia. Trump has also threatened to undo U.S. efforts to conclude the Indo-Pacific Economic Framework (IPEF).

Significance 

  • The effect of cross-regional impacts and geopolitical risks on the U.S.-Indo-Pacific agenda will also be critical to watch. U.S. credibility risks taking a hit among Indo-Pacific allies and partners if Trump ends the war on terms seen as favorable to Russia, and an overly pro-Israel stance amid the Gaza war fallout could also worsen ties with some countries. A second Trump administration may also see greater swings in the U.S. posture towards Iran and North Korea that could impact U.S. Indo-Pacific partners. These cross-regional dynamics are already in play. For instance, Malaysia’s Prime Minister Anwar Ibrahim, who chairs the Association of Southeast Asian Nations (ASEAN) next year, urged Washington in his congratulatory social media post to Trump to “help end the devastating violence and loss of life in Palestine and Ukraine.” The Indian government noted that Prime Minister Narendra Modi’s call with Trump reinforced the importance of the “global” and “comprehensive” nature of the U.S.-India partnership, rooted in both the benefit of the people of both countries as well as global peace and stability.
  • The focus on a second Trump administration does not detract from lingering questions around the future of U.S. Indo-Pacific strategy. Biden’s Indo-Pacific strategy expanded the Trump “free and open” approach to a more comprehensive orientation partners desired that sought to build a “free, open, connected, prosperous, secure and resilient” region, even though this faced challenges in delivery as we saw with the demise of IPEF’s trade pillar. The chief challenge for the second Trump administration is keeping that broader focus while also deepening policies in areas like China and defense. That will require upping Washington’s game in areas like economics and diplomacy during a challenging time. On trade, one study released last September by the Peterson Institute of International Economies found that for all the talk of supply chain diversification, Indo-Pacific supply chains in fact increasingly concentrate around China, feeding into Beijing’s efforts to cultivate a geoeconomic sphere of influence at Washington’s expense. On diplomacy, the Lowy Institute, an Australian think tank, concluded earlier this year in a quantitative assessment that China was beating the United States in having the world’s most expansive diplomatic network. These metrics will be even more scrutinized if Trump’s second term sees recurrence of concerns like unfilled diplomatic posts and the lack of senior-level official attendance at multilateral fora such as ASEAN.

Implications 

  •  Policy changes in key sectors could have important implications for companies and other stakeholders. These will occur amid recalibrations in the U.S. approach to shifting supply chains and approaches to individual relationships with key Indo-Pacific countries which may see greater unpredictability and transactionalism. Geoeconomic and geopolitical risks also remain on the horizon, including cross-regional impacts from active conflicts in the Middle East and Europe.
  • Sectoral competition with China will likely heat up further in areas like technology. There is still uncertainty on how Trump first term dynamics will play out in the second term, including tensions between Trump’s personal beliefs and that of his advisors and bureaucratic infighting. But a second Trump administration will probably see a doubling down on the competitive aspects of China policy, along with more skepticism on areas of collaboration and greater scrutiny on allied and partner efforts. Moves like the broadening of inbound and outbound investment restrictions on China are likely, particularly in strategic areas such as artificial intelligence. Companies can also anticipate more pressure on foreign partners to implement export restrictions. As this China approach plays out, it will raise questions about the extent of evolving bipartisan consensus on China, which remains contested. For instance, October data released by the Chicago Council on Global Affairs shows Republicans support measures like tariff hikes and curbs on students by a nearly two-to-one margin relative to Democrats.

We will continue to keep you updated on developments as they occur. If you have any comments or questions, please contact BGA Advisor Dr. Prashanth Parameswaran at prashanth@bowergroupasia.com.

Best regards, 

BGA Team 

A small ginko leaf

Advisor

Prashanth is a recognized scholar, commentator and expert on geopolitical and geoeconomic developments across Asia. He has spent nearly two decades analyzing the region, with a focus on Asia’s politics and security, U.S. foreign policy and Southeast Asia.   Prashanth is concurrently a fellow at the Wilson Center, a senior columnist at The Diplomat magazine and an instructor for institutions including the U.S. State Department. He is the founder of the twice-weekly ASEAN Wonk newsletter, which offers research insights and analysis on the geopolitics and geoeconomics of Southeast Asia and the Indo-Pacific region.  Prashanth has held various roles across think ... Read More