Australia’s next big bet lies East, not West
Australia’s next big bet lies East, not West
James Curran

Australia’s next big bet lies East, not West

It is in Asia where Australia’s bread is buttered. And Canberra needs a strategy on the security impact that is a gathering tide from the economic impact of Trump’s tariffs on our interests there.

While much Australian commentary over coming weeks will fetishise the upcoming meeting between Prime Minister Anthony Albanese and US President Donald Trump in Washington, the frontline battle for national economic security looms closer to home in Asia.

The meeting in Washington will be important as much for its happening as anything else. But all the signs coming out of the American capital suggest it won’t disturb the pattern or culture of Australian dependence so deeply embedded in military interoperability with US forces or the AUKUS arrangements. Albanese’s smile for the cameras will compete for glow with the gold-plated kitsch now studding the most famous room in America.

It is in Asia where Australia’s bread is buttered. And Canberra needs a strategy on the security impact that is a gathering tide from the economic impact of Trump’s tariffs on our interests there.

In Southeast Asia, a potent example of what agency would mean for countries that are not great powers has been taking shape. This has a longer-term strategic importance for Australia because it shows how that region is conceptualising the navigation of US power in an era of US economic coercion.

The question is how Australia can position its interests strategically as this process evolves.

The process is evolving quickly. Mari Pangestu, a former Indonesian trade minister and expert co-chair of the ASEAN Geoeconomics Taskforce, and Julia Tijaja, from the Institute of Southeast Asian Studies, wrote this weekend that “as advanced economies falter, China’s growth slows and the US retreats from the helm of global governance, developing regions have the chance to step up”.

As a first step, ASEAN intends to ramp up the implementation of the Regional Comprehensive Economic Partnership, which it initiated in 2011 and concluded in 2020. RCEP entered into force in 2022, and while it comprises the world’s largest trading bloc, the process of both promoting it and effective implementation has not been smooth. There is the perception too, though wrong-headed, that it is China-led.

Trump’s so-called  “Liberation Day” tariffs, which hit Southeast Asian economies particularly hard, gave a new fillip to RCEP as a means of both expanding and diversifying supply chains and offsetting the effect of the president’s sweeping tariff regime.

ASEAN leaders and analysts worry that the  Trump tariff contagion might spread, and that countries will sign onto damaging US demands, thus undermining the multilateral trading regime and ASEAN-style open regionalism even further.

That concern drives a new urgency in an organisation traditionally known for its snail-paced movement. Shortly after Liberation Day, the ASEAN economic ministers agreed to form the ASEAN Geoeconomics Taskforce to make recommendations on ASEAN’s response. There was recognition that “this time it’s different”, requiring a “departure from business-as-usual approaches and a clear, strategic response to the circumstances the region is facing now”.

For that, read ASEAN faces the biggest threat to its economic security, if not its existence, since its foundation.

Modelling by the Australian National University’s East Asian Bureau of Economic Research and the Centre for Strategic and International Studies in Jakarta shows the direct effect of Trump’s Liberation Day tariffs would “reduce Southeast Asia’s GDP by 2.3% and cut employment by 5.9%”. The escalation of Trump’s global tariff war, where countries “imitate the application of tariffs against each other”, and tariffs rise to 15%, would lead the GDP of Southeast Asian economies to fall by 11.1% and reduce employment by 25%. This would pose a direct threat to political stability in the region.

The scenario of retaliation and increasing protection is the one to be avoided. It drove the stance taken by ASEAN for each country to negotiate bilaterally with the US in a positive manner, while it reaffirmed commitment to the WTO and the rules-based multilateral trading system.

Pangestu and Tijaja call these recent moves, subsequently spearheaded by Malaysian Prime Minister Anwar Ibrahim, “an opportunity for ASEAN to lead in realising the RCEP vision … to defend and reform the system to make it fairer and more inclusive”, given RCEP members’ different levels of development. They add, “it is too valuable a vision and framework to be turned into another pawn on the geopolitical chessboard”.

But that’s where the game gets rough and tough.

Washington asking ASEAN countries to sign an agreement on reciprocal tariffs may be the price of Trump’s appearance in Kuala Lumpur. The deals struck on 8 August that would lower Liberation Day tariffs on ASEAN countries (but not to pre-Liberation Day levels) are subject to a raft of conditions that, for example, would freeze out Chinese inputs from ASEAN exports to the American market with a huge impact on ASEAN trade with the US and discrimination against China. Sign-on would put the ASEAN play on its global trade interests at risk. A photo opportunity at signing the agreement with Trump would make ASEAN, as Martin Wolf put it recently, look like a “US vassal”.

Australia has skin in this game. The RCEP leaders meeting, that ASEAN has called, provides an opportunity for Australia to define its strategic economic interests in Southeast Asia with ASEAN’s East Asian partners.

The bottom line is that RCEP has far greater significance for Australia and its prosperity in Asia than regional security arrangements like the Quadrilateral Security Dialogue. The Quad’s troubled history shows that, at various stages, three of its four members — Australia under Kevin Rudd, India under Narendra Modi, and the US under Trump — have more or less walked away from the grouping, progressively undermining the grandiose hopes laid out for it. Only Japan has been consistent in its support.

Given that Australia enjoys a huge trade surplus with China and a trade deficit with the US, Australia at first glance has nothing to gain from conciliating the president and appeasing his global trade and tariff war. So Canberra can do so free of any inhibitions about its longstanding security relationship with the US. The US, after all, now comprises only 13% of global trade.

ASEAN leaders cite past crises where it has stepped up, not least the Asian Financial Crisis and COVID. But these are dramatically different circumstances. In ASEAN’s conception, the task today is not to restore the old order, but to build arrangements that keep rules-based governance alive and rejuvenate it in a multipolar world. That won’t be easy, but for ASEAN it is a moment pivotal to its continuing relevance. And for Australia, that’s a top security priority.

 

Republished from Australian Financial Review, 6 October 2025

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

James Curran