Southeast Asia is Building Economic Buffers Against a More Volatile World

This issue of Asia Policy Brief by Shay Wester, Director of Asian Economic Affairs at Asia Society Policy Institute, examines the ways Southeast Asian economies have moved to diversify since the April 2025 tariff shock and what that pattern suggests about the region’s economic future.

While Washington remains focused on using tariffs and bilateral deals to reshape trade ties, Southeast Asian economies have been moving on a different track. Over the past year, they have accelerated efforts to find new markets, upgrade trade agreements, and build buffers against a more volatile global economy. ASPI’s trade team has followed activity spanning new and upgraded free trade agreements (FTAs), digital pacts, supply chain initiatives, and energy and critical minerals partnerships.

This is not just a story of ad hoc national efforts: ASEAN is moving forward with a free trade upgrade with China (ACFTA 3.0), a Digital Economic Framework Agreement (DEFA), and the launch of FTA upgrade talks with Korea. DEFA is especially important because it aims to create a common regional framework for digital trade and data governance. Bilateral efforts are moving alongside these ASEAN-level initatives. Indonesia has made deals with the EU and Canada, Malaysia has signed an FTA with South Korea, and Thailand is pushing for new agreements with the EU and other partners. These are not a scattershot of unrelated deals, but a region-wide attempt to reduce concentration risk.

Trade patterns have shifted along with economic diplomacy. ASEAN’s manufactured exports grew nearly 14 percent in 2025—more than half of which came from markets beyond the United States and China. Vietnam and Cambodia expanded their roles in final assembly of consumer electronics and apparel, while Malaysia and Singapore strengthened their positions in AI-and-semiconductor-linked supply chains.