When Malaysia hosts the 2025 ASEAN summit on May 26 and 27 in Kuala Lumpur, the stakes could not be higher for the 10-member grouping of Southeast Asian nations. 

The summit will take place against a backdrop of previously agreed-upon rules being flouted on a whim and long-held assumptions no longer being taken for granted.  

The biggest disruption for ASEAN, as it is for the world, is the all-out trade war between its biggest trading partners, China and the US.

Over the past 50 years, ASEAN has benefited from a free, stable international environment.  

But all that changed on January 20, when the second Trump administration took charge. The once-familiar order has been scrambled to the extent that the very economic survival of ASEAN is threatened.  

Instead of managing the usual squabbles over how to maintain family unity, Malaysia, as the 2025 ASEAN Chair, has found itself in the middle of multiple crises stemming from fierce economic competition, geopolitical tensions, rising nationalism, protectionism, revisionism, and, most importantly, fallouts from the bitter Sino-American rivalry.  

Let us consider that last issue.

Global headwinds

China and the US are locked in a trade war that has no historical precedent.

With Beijing vowing to “fight to the end” in response to Trump slapping 145 percent tariffs on Chinese goods, ASEAN countries are being forced to choose sides.

And it presents a devil’s alternative  – China is ASEAN’s biggest trading partner, while the US is a key export market that is seeking to strike a deal at Beijing’s expense.  

But these Asian countries cannot choose one or the other because they need both.  Such is the impossible situation in which ASEAN countries find themselves.  

“We can’t choose, and we will never choose [between China and the US],” said Tengku Zafrul Aziz, Malaysia’s trade minister, ahead of Chinese President Xi Jinping’s first foreign trip to Vietnam, Malaysia, and Cambodia in April.

Despite Washington arm-twisting smaller nations to limit their dealings with Beijing, their economic ties are only getting stronger. The proposed upgrades to the free-trade agreement are expected to eliminate many tariffs between all ten members of the bloc and China.  

“We will bring more tariffs down to zero in many cases, and then expand to all the areas,” said ASEAN Secretary-General Kao Kim Hourn.  

Indeed, last month, China secured mutual pledges with Vietnam, Malaysia, and Cambodia to strengthen industrial and supply chain cooperation.  

Under the auspice of the Belt and Road connectivity projects, Beijing has already paid for and built railways in Vietnam, ports in Malaysia, and dams in Cambodia.

As more details emerge, this big-picture view comes into focus: ASEAN countries need China as the source of their imports, and they need the US as the market for their exports.  

In 2024, China earned a record $3.5 trillion from exports, and 16 percent of those went to Southeast Asia, its biggest market. In the same year, total trade between ASEAN and the US reached $477 billion.  

Given the large amount of money at stake, ASEAN can ill-afford to side with one to the exclusion of the other, lest one, or the other, or both partners cut off trade and investment altogether.

Whether and how Malaysia, as the ASEAN Chair, can manage to work out a solution that is truly capable of addressing this impossible situation will be the first significant test.  

As of this writing, ASEAN has decided not to retaliate against Trump’s tariffs.  It has instead chosen to emphasise its economic and political importance to the US.  This challenge will not be the last but only the most important test, unfortunately.

With US or against?

Each ASEAN country also has to deal with the unenviable task of individually choosing between China and the US. Take Malaysia, for example. China is its largest trading partner and a major source of foreign direct investment.  

Yet, Beijing claims more than 90 percent of the potentially energy-rich South China Sea, which includes Southeast Asia and stretches into the exclusive economic zones of Brunei, Indonesia, Malaysia, Vietnam, and the Philippines. 

These Chinese claims – undoubtedly – are a point of contention for ASEAN members.  

For Malaysia, Prime Minister Anwar vowed last September that it would not bow to Beijing’s demands to stop its oil and gas exploration because the activities are within Malaysia’s and other claimants’ waters.

When it comes to trade relations with Washington, over the past several years, American chip manufacturers have invested in Malaysia as Washington blocks the sale of advanced tech to Beijing.  

Last year, China imported $18 billion worth of chips from Malaysia.  These chips are used in Chinese-made electronics, such as iPhones, usually sent to the US.  

But Trump’s tariffs on Malaysia (24 percent) threaten to cut off the American market worth billions. How Malaysia squares this circle will be yet another important challenge.

There is more.

Cambodia has been hit with 49 percent tariff by Washington, albeit paused so far.  A close ally of China, Cambodia is one of the poorest ASEAN countries.  

It has remade itself into a trans-shipment hub for Chinese businesses who want to bypass American tariffs. Chinese businesses currently own or operate 90 percent of the clothes factories, which mainly export to the US.

Vietnam is facing 46 percent tariff from Washington.  In response, Vietnam has pledged to eliminate all tariffs on American imports, but Washington is not satisfied and wants Hanoi to stop serving as a conduit for Chinese-made exports to the US, which essentially helps Chinese businesses skirt Washington’s tariffs.

Now, we haven’t delved into the Myanmar conflict, which is the biggest challenge for ASEAN’s internal unity.  

How ASEAN handles the South China Sea dispute and the Myanmar crisis will shape the region’s future for years to come.

With so much at stake, the 2025 ASEAN Summit in Kuala Lumpur may prove to be a defining moment for the bloc.

Whether and how Malaysia can address these challenges – and others that are sure to emerge – remains to be seen.