Malaysia and ASEAN’s leadership in response to rising protectionism and the threat to ASEAN and global prosperity and security has so far been a masterclass, punctuated by the convening of a Leaders’ Meeting for the Regional Comprehensive Economic Partnership (RCEP) on 27 October 2025.

But there are risks, like the  Agreement on Reciprocal Tariffs that US President Donald Trump has pressured Malaysia to sign, which will undermine co-operation and the most favoured nation treatment that is the fundamental basis for ASEAN and the rules-based economic order.

Trump’s 2 April 2025 “Liberation Day” tariffs disproportionately punish ASEAN members and cast a dark shadow on the global economy.

Very few countries could lead a coalition of the willing to hold the line on joining the wave of protectionist retaliation. That it was Malaysia chairing ASEAN was alphabetical luck. That ASEAN had the established relationships and institutions, alongside the clear recognition of the threat to its economic and political security, was not luck but a product of good strategy.

Many nations vowed retaliation against the “Liberation Day” tariffs, threatening contagion and further pressure on the global trading system. By contrast, leaders of ASEAN’s most important economies were quick to communicate a co-ordinated, non-retaliatory response to the tariffs, doubling down on openness with reforms. This was despite facing extensive political pressure to “protect” local industries against a flood of Chinese exports — diverted from the US market due to increased US protection.

Already, in February 2025 at the ASEAN Economic Ministers Retreat, a Track 1.5 Geoeconomic Taskforce was set up to monitor developments and co-ordinate collective responses to the deteriorating external economic environment. Indonesia and Malaysia co-chair the Taskforce that pushes for an ASEAN response that affirms the importance of an open rules-based multilateral trading system and avoids beggar-thy-neighbour policies.

On 10 April, ASEAN economic ministers met to denounce the so-called reciprocal tariffs and reaffirm their support for the rules-based multilateral trading system with the World Trade Organisation at its core.

ASEAN’s response also reflects awareness of the deep, negative entanglement of the economics and security spheres. At the  9 July ASEAN Foreign Ministers Meeting, Malaysian Prime Minister Anwar Ibrahim called for “even closer alignment between ASEAN’s foreign and economic policy” responses because “the challenges we face do not observe bureaucratic fiefdoms. Nor can our responses”. For the first time there is now explicit cross-pillar co-ordination in ASEAN between economics and political security.

Time and again, ASEAN’s institutions and political leadership has enabled it to take decisive action during crises. ASEAN’s decisive response, led by Malaysia and Indonesia in particular, is driven by the understanding of what is at stake – ASEAN’s development ambitions, prosperity and political security.

Modelling by the East Asian Bureau of Economic Research and the Centre for Strategic and International Studies  estimates "Liberation Day" tariffs would reduce Southeast Asia’s GDP by 2.3% and employment by 5.9%. An escalation of the trade war — where tariffs rise by 15% — would severely damage Southeast Asian economies, slashing GDP by 11.1% and reducing employment by 25%. This would be a massive political as well as economic hit to the region, whose development, prosperity and security has been built on integration into the global economy.

ASEAN staying open even as protectionism rises will provide ballast in the multilateral trading system and can anchor broader regional efforts that keep Northeast Asia open, most notably in RCEP. Given the grouping’s economic weight — comprising roughly 30% of global GDP — implementing RCEP’s full commitments would be a highly stabilising force.

The modelling suggests that if RCEP economies fully implement their commitments and resist retaliating, even as tariff contagion grips global trade, ASEAN economies would see GDP growth of 1.9% and employment growth of 2.1%. That’s a 13 percentage point difference in GDP — collapsing by 11.1% or growing 1.9% — between joining in global contagion or holding the line on protectionism and implementing RCEP to deepen regional integration.

RCEP allows ASEAN to  project and protect its multilateral interests through the agreement’s political platform. RCEP is a platform from which Southeast and East Asia can defend their trade interests and keep regional trade open and growing. This is why Malaysia and Indonesia have led the initiative to convene the first RCEP Leaders’ Meeting since the agreement came into force.

Beyond facilitating co-operation, ASEAN’s principles of strategic neutrality and multilateralism can also guide how to manage the deal-making with Trump under threat of punitive tariffs. Bilateral deals with the US offer relief from punitive tariffs but require concessions. The key is whether those concessions are consistent with multilateralism. Failure to stand by multilateralism risks exacerbating fragmentation through discriminatory concessions.

Trump has tied his participation in the East Asia Summit with the signing of an Agreement on Reciprocal Trade with Southeast Asian countries. Malaysia and Cambodia have signed on. Thailand has agreed to a framework deal. These deals fundamentally erode equal treatment, risk undoing all the progress made in ASEAN this year and set back regional co-operation. Explicit agreement to avoid beggar-thy-neighbour measures among ASEAN members and with other partners will reduce those risks.

ASEAN has the most to lose from the “Liberation Day” tariff regime. Keeping ASEAN economies open and committed to multilateralism can help anchor co-operative outcomes beyond Southeast Asia. The benefits of RCEP reforms will take time to be realised but they will immediately boost confidence and send an important signal where the region is pointed to the rest of the world.

Convening an RCEP leaders’ summit sends such a signal. There is an opportunity to plot a strategic direction for the region and affirm RCEP’s role as the platform for co-ordinating other efforts to protect the multilateral trading system.

Mega-regional agreements like RCEP also have interest in acting together with the European Union, but not by merging agreements — that would be impractical soon — but by creating consensus for eventual convergence and support for multilateral action that improves the rules.

That is important for a world that desperately needs a rules-based economic order to avoid descent into one of “might is right”.

Republished from East Asia Forum, 26 October 2025

The views expressed in this article may or may not reflect those of Pearls and Irritations.