Can Emerging Economies Win the New Trade War? A Case Study of South East Asia
- Raisa Nathanie
- 1 day ago
- 4 min read
The ongoing tensions between the United States and China have changed the global trade in ways that go far beyond tariffs. What started as a trade war has now become a bigger competition involving technology, supply chains,and political influence. And the effects are no longer limited to these two countries : they are spreading across the global economy, especially in developing countries like Southeast Asia. This raises an important question: can emerging economies actually benefit from this situation, or are they just adjusting to the changes driven by bigger economies?
At first, Southeast Asia seems to be benefiting greatly because alot of countries in the region are receiving an increase in foreign investment, exports are growing, and multinational companies are paying more attention to them. As a way to reduce dependence on China, firms are using a “China plus one” strategy which is keeping some production in China while expanding into other
countries. Indonesia is one of the most interesting cases, though its path is different from the others. Instead of focusing mainly on manufacturing exports, Indonesia is gaining importance in resource-based industries .One of its biggest advantages is its large nickel reserves, which is essential for electric
vehicle batteries. Because of this, Global companies are investing in Indonesia to secure future supply chains.
Indonesia also has a strong advantage at its large domestic market. Unlike countries that depend heavily on exports, Indonesia can attract investment both as a place to produce goods and as a place to sell them. This makes its growth model more balanced. However, Indonesia still faces a bunch of challenges such as infrastructure gaps, regulatory complex, and inconsistent policies,
which would possibly slow down investment and limit how much it benefits from the global shifts.Meanwhile, Vietnam represents a more export-driven story. It has become one of the main alternatives to China in global manufacturing. In 2023, Vietnam attracted around $39 billion in
foreign direct investment (FDI), and its trade volume reached about 184% of its GDP, showing how strongly it is connected to global trade. Its growth is supported by low labour costs, strong trade agreements , and a rapid expanding manufacturing sector.
As a result, many multinational companies have moved parts of their production to Vietnam. But, this also means Vietnam is highly dependent on global demand. Its economy relies heavily on exports and foreign-invested firms, which makes it more vulnerable to external shocks. Beyond Indonesia and Vietnam, other Southeast Asian countries are also benefiting but in other
ways. Countries like Thailand and Malaysia focuses more on specialized manufacturing sectors, especially electronics, while the Philippines benefits more from the service industry. This shows that Southeast Asia is not a single “winner”, it shows that each country is responding differently based on its own strengths.
First, many of these benefits still heavily depend on the demand from the United States and China. Even if production moves to Southeast Asia, the region still has to rely on these major economies to buy its goods. This means any slowdown in global demand can quickly affect the growth.Second, companies can not fully leave China. China still has better infrastructure, skilled
workers, and strong industrial networks. Because of this, most firms are only diversifying, not completely relocating. So Southeast Asia is gaining, but it is not replacing China. Another important risk to keep in mind is overdependence on foreign investment. While FDI does help economic growth, it can also create vulnerability. If global conditions change, investments can
quickly decrease which shows that relying too much on external capital is risky.There is also a geopolitical challenge. Southeast Asian countries must balance their relationships with both the United States and China. This is not easy as political tensions can influence trade, investment, and economic stability.
So, is this a long-term opportunity or just a temporary shift? The answer is somewhere in between.The competition between the United States and China is likely to continue, so companies will keep diversifying their supply chains. This means Southeast Asia can continue tobenefit. However, it is not likely that companies will fully leave China, because it is still very efficient and cost-effective.In the end, whether emerging economies can truly “win” depends on
what they do next. Attracting investment is not enough.Countries need to improve their infrastructure, develop worker skills, and create clear & consistent policies . And most importantly, they need to move up the value chain instead of relying only on raw materials or
low-cost production.
In conclusion, Southeast Asia is not exactly winning the new trade war, but it is gaining important opportunities from it. Indonesia shows potential through its resource advantage and large domestic market, while Vietnam shows success in export-driven manufacturing. However, these opportunities also come with risks. The real challenge is turning short-term gains into long-term, sustainable growth , rather than staying dependent on global powers.
References
Basu, S., & Ray, R. (2022). China-plus-one: Expanding global value chains.
World Bank. (2020). Global Value Chains Data Portal.
OECD. (2025). OECD Economic Survey: Vietnam.
UNCTAD. (2024). World Investment Report.
International Energy Agency. (2022). Global Supply Chains of EV Batteries.
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