U.S. President Donald Trump has concluded his visit to Beijing for a high-stakes summit with Chinese President Xi Jinping. On the agenda were trade, Taiwan, the Iran War, and AI — but what did the two leaders actually discuss and agree on? ASPI experts unpack summit outcomes in this issue of Asia ASAP.

Where are the Trade Deliverables?

by Wendy Cutler

Thus far, the economic deliverables coming out of the Trump-Xi meeting are way below expectations. Beijing announced the resumption of export permits to U.S. beef producers, a long overdue move. Trump told the press that Xi had committed to purchase 200 airplanes, but Beijing has yet to confirm. The business concerns of Citibank, one of the company CEOs accompanying Trump, were apparently addressed as well.

But what we were led to expect and haven’t seen thus far is not only Chinese confirmation of the U.S. jet purchases, but other Chinese mega-purchases as well, particularly in the agricultural and energy sectors. USTR Greer has indicated that we will see more on purchases, particulary agriculture, beyond soybeans where China has already made a multi-year commitment. Also absent was the announcement of the establishment of a Board of Trade to deal with trade matters and flows in non-sensitive sectors. It’s possible that the two sides are still hammering out the details of the functions and responsibilities of this group, along with the leads in both governments. One area this group is focusing is on lowering tariffs for a basket of goods in the $30 billion range, but that also was not officially shared. A new Board of Investment was also not agreed upon, which would discuss possible new Chinese investments in the United States in non-strategic sectors.

Finally, while both sides welcomed stabilization in the relationship, they did not announce an extension of the trade truce which locks in for one year lower tariff rates, Chinese shipments of critical minerals and magnets, among other things. This truce expires in five months, leaving more time to deal with the nature and duration of any extension.

All of these possible deliverables may still be in the works, so we may see further announcements in the coming days. If further economic outcome announcements are not forthcoming, it’s fair to conclude that this summit meeting was heavy on atmospherics but light on substance, putting more pressure on the two leaders in their upcoming engagements this year to produce meaningful and concerete deliverables.

Xi Delivers Warnings on Taiwan and Stops Short of Committing to Help With Iran

by Lyle Morris

Going into the summit, one of the biggest questions was what President Trump and Xi would say about Taiwan and Iran. Based on Trump’s interview with American media aboard Air Force One on his way home, we found out what each leader said, and more importantly, didn’t say, in regards to these two issues.

On Taiwan, Trump revealed an extended, “detailed” discussion with Xi. Xi reportedly voiced China’s concerns about Taiwanese “independence,” U.S. arms sales, and whether the U.S. would militarily intervene in a conflict over Taiwan. On the latter, Trump said that Xi asked him directly whether the U.S. would “defend Taiwan.” On all three points, Trump said he “listened to what Xi said” but did not say one way or another what the U.S. would do. On arms sales, Trump simply said “I’ll be making a determination on that,” adding “I have to speak with the person running Taiwan,” suggesting Taiwanese president William Lai. On defending Taiwan, Trump said “I’m not going to say that…there’s only one person who knows about that: me.” Trump also expressed optimism that both leaders want peace across the Strait, saying “I don’t think there’s a conflict. I think we’ll be fine. He doesn’t want to see a war:” On one hand, it should reassure both Taipei and Washington that Trump did not alter long-standing U.S. policy on Taiwan. On the other, Trump’s suggestion that he would talk to Taiwan’s president about U.S. arms sales would certainly upset Beijing, and by not offering unambiguous support for Taiwan, Trump’s comments might have added fuel to the fire for leaders in Taiwan who question whether the United States would come to the aid of Taiwan in a conflict with China.

On Iran, what was most interesting, and quite frankly, surprising, was what Trump said Xi told him about China’s position on the conflict. Trump said Xi “feels very strongly that they (Iran) can’t have a nuclear weapon. He said that very strongly. And he wants them to open up the Strait.” This is noteworthy because neither Xi nor any Chinese leader has publicly stated opposition to Iran having a nuclear weapon, choosing instead to call for a ceasefire and de-escalation of hostilities. If Xi indeed voiced such opposition directly, this would represent a new Chinese stance on Iran and should greatly please Trump in his efforts to pressure Tehran to abandon its nuclear weapons program. It is also no surprise that Xi expressed a desire to open up the Strait of Hormuz. But it appears Trump did not obtain any firm commitments from Beijing to actively contribute to a military campaign to keep the Strait open for shipping, for example. Notably, Trump said he did not directly ask Xi to intervene in Iran, saying “I don’t need favors.” So it appears Trump expressed an openness to working with China to put collective pressure on Iran to come to the negotiating table without eliciting any firm commitment from Xi.

In totality, what emerges on Iran and Taiwan is the opening of a longer-term discussion between Trump and Xi on two hot-button issues in the U.S.-China relationship. While Trump did not secure any tangible commitments from Beijing on either issue, he also did not cause undue harm to U.S. interests by unwittingly changing long-standing U.S. policy on Taiwan, for example, which was a concern going into the summit.

A “Constructive Relationship of Strategic Stability”

by Lizzi C. Lee

China’s goal for the Trump-Xi summit is straightforward: get U.S.-China relations back onto steadier ground. Beijing wants to turn volatility, escalation, and policy whiplash into something closer to a managed operating system. Its new phrase, “a constructive China-U.S. relationship of strategic stability,” signals that China wants Washington to treat the relationship as a great-power compact — something more durable than a running inventory of disputes over tariffs, fentanyl, export controls, rare earths, overcapacity, and Taiwan.

AI is a good illustration of both the promise and the complications of this framework. A reported U.S.-China “AI best practices protocol,” alongside possible expanded chip access such as H200, would certainly not end the technology rivalry once and for all. But it does suggest that even in one of the most contentious areas of U.S.-China competition, both sides may be looking for narrow lanes where risk can be managed.

For Beijing, an AI safety protocol serves its own strategic interests. Mythos has sharpened Chinese concerns^[1] that frontier agentic AI is moving from abstract risk to real cyber threat. The anxiety is primarily that advanced U.S. models could be weaponized in cyber operations, especially when Chinese firms are excluded from access. So for China, AI safety is not just symbolic language. There is real urgency on containing escalation risks in a domain where technical competition could quickly become a security crisis.

Chip access, however, cuts both ways for Beijing. Chinese firms want Nvidia hardware because it can relieve near-term compute constraints. But China’s security establishment worries that renewed purchases could deepen dependence on U.S. technology — one reason earlier U.S. approval did not quickly translate into deliveries inside China. Beijing may welcome the leverage and short-term relief while slow-walking implementation to protect its longer-term push for indigenous alternatives.

That tension captures the heart of China’s AI strategy after the summit. Beijing wants enough access to keep its firms competitive today, enough safeguards to reduce crisis risk, and enough distance from U.S. technology to preserve its long-term self-reliance agenda. These remain frameworks for now. I will be watching whether both sides can build follow-up mechanisms, test cases, and implementation channels that can survive the election cycles.

For Beijing, the direction is clear: stabilize the U.S. relationship where possible, compartmentalize conflict where necessary, and buy time for China’s economy, firms, and technology ecosystem to operate on less hostile terrain.

^[1] Chinese media described the model as showing “unprecedented cyberattack capabilities,” while Chinese experts have warned that AI-enabled attacks could target telecoms, internet infrastructure, supply chains, and older operational technology systems.

Asia’s Cautious Relief

by Shay Wester and Robert Snedden

Official reactions from Asian countries to the Trump-Xi summit have so far been sparse and measured. The early regional response is cautious relief, not reassurance. Asia welcomes stabilization in U.S.-China relations. For Asian governments, a steadier U.S.-China relationship matters because instability can quickly spill into regional security and economic interests. South Korean President Lee Jae Myung captured this before the meeting, saying stable Sino-U.S. ties would support regional stability and global prosperity. Former Australian Prime Minister Scott Morrison wrote after the summit that the meeting “did not reset the world,” but afforded “stability in a sea of uncertainty.”

Still, Asian capitals will judge the summit less by atmospherics than by follow-through. In a nod to an important U.S. ally, President Trump called Prime Minister Sanae Takaichi from Air Force One after leaving China. According to Takaichi, the leaders discussed economic and security issues, suggesting Tokyo seeks a clearer understanding not only on Taiwan and military deterrence, but also on technology controls, supply chains, critical inputs, and industrial competition.

Southeast Asian countries have immediate and practical concerns. Singapore Prime Minister Lawrence Wong’s recent warnings on the Strait of Hormuz capture concern that disruptions to sea lanes, energy flows, and critical supplies are direct economic risks. Governments will assess whether U.S.-China engagement helps keep trade routes open and supply chains functioning, while watching whether potential U.S. tariff relief for China erodes investment advantages that have helped draw firms toward their countries.

Regional leaders will also watch for signs of a “G2” dynamic emerging, with Washington and Beijing managing regional issues bilaterally while others absorb the consequences. For now, they are likely to welcome stabilization, avoid choosing sides, and hedge against the possibility that today’s tactical pause becomes tomorrow’s renewed volatility.

Editors Note: We are sending this week’s issue of Asia Policy Brief a day early to preview the upcoming high-stakes summit between U.S. President Donald Trump and Chinese President Xi Jinping. Wendy Cutler, Senior Vice President of the Asia Society Policy Institute (ASPI), and Danny Russel, Distinguished Fellow at ASPI, explain what’s on the agenda and what to expect. Keep an eye on your inbox: An issue of Asia ASAP will drop later this week with our experts’ rapid reactions to the summit.

State of Affairs: Trump Goes to China

Presidents Trump and Xi are scheduled to meet Thursday and Friday in Beijing for their first face to face meeting since October’s summit in Busan. The leaders were originally set to convene in early April, but the U.S.-Israel-Iran conflict prompted Trump to delay his visit to China. President Trump hoped to arrive in Beijing inflated by victory in the Middle East, but the the conflict has instead exposed American vulnerabilities and reinforced Beijing’s concerns about energy security and maritime chokepoints. The war in the Middle East is now expected to be an important point of discussion, as will U.S. support of Taiwan, which Beijing is likely to push President Trump to dial back on.

Trade, investment, and related economic issues are also expected to be high on the agenda. After tit-for-tat tariff escalation in 2025, both leaders reached a trade truce when they met last October, bringing some welcome stabilization to the relationship. Largely due to high tariffs imposed by the U.S., its trade deficit with China fell by almost 32 percent last year, and further declines are expected this year. Nevertheless, tensions surrounding trade in strategic products, supply chain vulnerabilities, non-market economy policies and practices, excess manufacturing capacity, and broader economic security concerns continue, with both sides courting third counties to join their camp.

Why It Matters: Stabilization, Not Resolution

Both leaders seek stabilization, not resolution of the underlying strategic rivalry. Advanced technology, export controls, rare earths and critical minerals, AI risk management, strategic security, fentanyl precursor chemicals, and law enforcement cooperation are all candidates for discussion, but little groundwork has been laid on most of these matters for real results.

Trump comes to Beijing as a demandeur needing calm on his Pacific flank while heavily engaged in the Gulf. He may seek China’s diplomatic help with Teheran, particularly in opening the Strait of Hormuz, and limits on support flowing to Iran’s economy and military. Beijing, meanwhile, wants to protect shipping and energy imports, avoid further economic damage from higher energy prices and weakened export demand, and avoid direct confrontation with Washington.

We can also expect exchanges on North Korea, the South China Sea, and Chinese pressure on Japan, but few concrete outcomes. Taiwan is non-negotiable issue for Beijing, and Xi is likely to encourage Trump to continue delaying approval for a $14 billion arms sale package to Taiwan. Xi will try to reinforce Trump’s resistance to advice from China hawks in Washington and persuade him that Beijing’s outreach to Taiwan’s opposition shows “peaceful reunification” remains possible.

Beyond extending the nominal truce, likely outcomes are mostly pledges and process: resumed military communications, fentanyl measures, Gulf security consultations, working groups, promises to expand flights and people-to-people exchanges, and plans for additional summit meetings this year.

With respect to economic deliverables, expectations remain modest. We may see announcements by China to buy more American goods, including agriculture and aircraft, a relatively easy lift for Beijing. Prioritizing stabilization in the bilateral relationship, both sides may confirm and extend the October trade truce for another year or so. An announcement to establish a Board of Trade to “optimize” trade in non-sensitive sectors is on the docket, with the United States seeing this a venue to rebalance and more effectively manage trade. Finally, we may also see the establishment of a Board of Investment, but this concept seems to be more controversial in the U.S. and less developed.

Notably absent will be a push by Washington for much-needed structural reforms in China. Past efforts to spur such reforms have largely failed, leading the Administration to be more pragmatic and transactional and leaving to a later date seeking Chinese agreement to roll back its state-led policies and practices and increase domestic consumption, a laudable but fraught effort.

What to Watch

• Trade: Of particular interest will be whether Beijing gains any traction on seeking further relaxation of U.S. export controls on advanced technologies, reduction in tariffs, or any assurances on outcomes from the two recently-launched U.S. Section 301 investigations on industrial excess capacity and forced labor. With the impressive group of American CEOs joining President Trump in Beijing, we may see some preliminary announcements of commercial deals, but given the last-minute invitations to join the summit, time may be insufficient to get these deals over the finish line. The mandate of the Board of Trade will be worth close scrutiny, particularly whether Beijing buys into a “managed trade” and “rebalancing“ approach, and which specific products would fall under its jurisdiction.

• Taiwan: Trump’s language on Taiwan will be closely scrutinized during and after the visit. Given his tendency to echo leaders he admires, Beijing may hope he repeats Chinese formulations about “opposing Taiwan independence,” supporting “peaceful reunification,” or warning against “provocative actions” by Taiwan’s leader. Even subtle rhetorical shifts would advance China’s effort to demoralize and isolate Taiwan. Watch also for movement—in either direction—on the pending Taiwan arms package that Beijing strongly opposes.

• Tehran: Another key question is how Beijing balances appearing helpful to Trump on Iran while maintaining its public opposition to military strikes and violations of sovereignty. Will China claim credit for encouraging Iranian flexibility in negotiations? Will it raise concerns and asks regarding economic fallout of the conflict? Watch carefully for signs that Trump offers practical accommodations in return, including privileged treatment for Hormuz transit, flexibility on Iranian oil purchases, or reduced scrutiny of Chinese shipping. Trump may claim Xi made firm commitments to curb dual-use exports to Iran, but whether Beijing corroborates that will matter.

• Messaging and Future Meetings: As always, differences between the two sides’ readouts may prove more revealing than the official statements themselves. There may be further word on President Xi’s reciprocal visit to Washington this fall and/or participation in the APEC and G20 meetings, scheduled for Shenzhen and Florida, later this year. Following the visit, Trump’s comments or social media posts on North Korea or Japan may also offer clues about Xi’s private messaging, particularly if Trump begins echoing Chinese narratives about Japanese “remilitarization” or the need for talks with Pyongyang on Kim Jong Un’s terms.

Stay Up to Date with ASPI

• Watch Kevin Rudd and Ian Bremmer discuss the U.S.-China relationship and wider geopolitical moment at Dr. Rudd’s first public event since returning to the Asia Society as Global President and CEO.

• Watch Wendy Cutler in conversation with Stephen P. Vaughn, Ambassador Craig Allen, and Bob Davis about what lessons President Trump can take from the U.S.-Japan trade wars of the 1980s as he prepares to meet President Xi in Beijing.

• Join us on Thursday, May 21 for an online panel discussion with Kevin Rudd, Wendy Cutler, Danny Russel, Orville Schell, Jing Qian, and Lizzi C. Lee on the outcomes of the Trump-Xi summit.

• Register for a webinar to discuss what the Trump-Xi summit may reveal about the future of the Taiwan Strait on Tuesday, May 19, featuring Lyle Morris, David Sacks, Chung-min Tsai, and Yuqun Shao.

Editor’s Note: In today’s issue of Asia Policy Brief, 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.

State of Affairs: A Region Building Buffers

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.

ASEAN’s ties with China are part of the region’s diversification story, not separate from it. ACFTA 3.0 adds new chapters on digital economy, green economy, and supply-chain connectivity. ASEAN governments are not retreating from China, but rather are broadening links across multiple sectors.

Still, economies with concentrated trade relationships and weak buffers remain exposed to volatility and shocks. President Donald Trump’s “Liberation Day” tariffs brought the risks of relying too heavily on the U.S. market to the forefront, and uncertainty has remained elevated following the Supreme Court’s IEEPA ruling. The Iran conflict has compounded that pressure, exposing fresh vulnerabilities in energy, shipping, fertilizers, and critical industrial inputs. Together, these pressures help explain why diversification has shifted from a long-term aspiration to a more urgent policy priority.

Why It Matters: Southeast Asia Is Building Resilience in Three Ways

What matters is not simply that Southeast Asia is diversifying, it is how and what that says about where the region thinks the global economy is heading. The emerging pattern is not one of retreat from trade, nor of alignment with any single power. It is a broader effort to build resilience through more options, denser partnerships, and less concentration.

Three elements of Southeast Asia’s diversification strategy stand out. First, governments are writing new trade rules. Older agreements are being upgraded and new ones negotiated to cover digital rules, supply chains, critical minerals, investment, and green economy issues. For example, Indonesia has concluded Comprehensive Economic Partnership Agreements (CEPAs) with the EU, Canada, and Peru; reached a trade agreement with the Eurasian Economic Union; and continued pursuing Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) accession. Malaysia, Thailand, and the Philippines are pursuing similar tracks with the EU, while Singapore’s role in launching the Future of Investment and Trade (FIT) Partnership of small and mid-sized economies shows ASEAN members also testing new plurilateral formats.

Second, many economies are working to expand markets and suppliers while preserving access to the United States as a major export market and investment partner. Vietnam is a case in point. The U.S. remains its largest export market, but Hanoi is also reducing the risk of future disruption by broadening options almost everywhere else: an FTA with the European Free Trade Association and deeper ties with the EU, Mercosur negotiations, industrial cooperation with India, stronger supply-chain links with China, and major energy agreements with Russia. Other economies are positioning themselves in different ways: Malaysia and Singapore through higher-value roles in semiconductor and AI supply chains, Thailand through a mix of assembly and more advanced manufacturing, and Indonesia through a more commodities driven path.

Third, governments are building resilience in the sectors most likely to become chokepoints. An increasing amount of the activity now underway does not fall in the category of classic trade deals. It includes cooperation on energy, critical minerals, logistics, digital infrastructure, and industrial inputs. The Philippines-Indonesia nickel corridor is one example, as is Indonesia-Japan and Philippines-Canada critical minerals cooperation. Other efforts range from integration of semiconductor supply chains to digital agreements and regional infrastructure coordination.

Together these approaches suggest something more durable than a short-term reaction to tariff hikes. Southeast Asia is not choosing between Washington and Beijing. It is trying to avoid having to choose at all through wider rule-setting partnerships, broader market and supplier options, and practical investments in critical sectors.

What to Watch

• Whether Southeast Asia’s recent wave of deals and upgrades actually takes hold. Asian Development Bank analysis finds that the number of agreements negotiated matters less than whether they are deep enough, coherent enough, and implemented well enough to reduce uncertainty in practice. Amid the surge of recently concluded agreements, pending negotiations, and regional upgrades, the critical question is how quickly new rules translate into predictable market access, working customs procedures, aligned standards, and compliance systems that businesses can actually navigate.

• Can the 2026 deal pipeline deliver? Southeast Asian governments are planning an unusually ambitious year for trade deals. The Philippines hopes to conclude EU talks by mid-year and to finalize FTAs with Chile and Canada this year. Thailand is targeting parallel conclusions with South Korea, Canada, and EFTA. Malaysia’s EU track is moving toward its next round in June. Not all of these timelines will be met, but those that do will shape how durable the momentum turns out to be.

• Whether the region’s diversification push becomes more collective. The Regional Comprehensive Economic Partnership (RCEP) general review scheduled for 2027 will be a test for whether the 15 members use it to deepen rules on digital trade, supply chains, services, and other areas. So will the trajectory of CPTPP in terms of accession bids by Indonesia and the Philippines, updates in certain chapters, and whether cooperation between CPTPP and ASEAN moves from rhetoric to concrete outcomes.

• Will the broader resilience agenda take hold beyond trade deals. Some of the most consequential moves underway are not classic market-access agreements, but cooperation on critical minerals, energy security, logistics, and supply chains. The question is whether these arrangements become practical tools that strengthen resilience or become scattered initiatives without follow-through. If they mature, they could give Southeast Asia a denser set of buffers against future shocks.

Dive Deeper with ASPI

• Register for a May 12 webinar with Wendy Cutler, Craig Allen, Stephen P. Vaughn, and Bob Davis about the lessons President Trump can take from the U.S.’ “managed trade” approach with Japan when creating a “board of trade” between the U.S. and China.

• Watch Wendy Cutler join Bloomberg TV’s “The China Show” to explain what the U.S.’ Asian allies can expect from the upcoming Trump-Xi summit in Beijing.

• Check out John Lee’s article about how Chinese investment, infrastructure, and technology are moving into Southeast Asia and how this is reshaping U.S. competition in the region.

Editor’s note: Following unsuccessful peace talks between the U.S. and Iran in Islamabad, Farwa Aamer, Director of South Asia Initiatives, and Emma Chanlett-Avery, Director of Political-Security Affairs, explain how the conflict in the Middle East has dragged Asia’s middle powers into the fray—and how they are reacting.

State of Affairs: Pakistan Pushes for Peace

As the U.S.-Israel-Iran conflict escalated over the past weeks, the fallout reverberated around the world, exposing vulnerabilities and further fragmenting traditional alliances. Great power politics continued unabated, with the war introducing new dynamics: the much-anticipated Xi-Trump summit was postponed and the agenda re-shaped; the disruption to energy supplies and oil price volatility became a boon to energy exporting Russia and reduced attention to Ukraine; and U.S. military assets streamed from the Indo-Pacific theater to the Middle East. For middle powers, these shifts are defining. The conflict underscores a deepening rupture in the global order, compelling these countries to navigate an environment marked by both heightened urgency and profound uncertainty.

Amid this turbulence, an unexpected actor emerged: Pakistan. Leveraging its relationships with both United States and Iran, as well as broader regional ties, Islamabad positioned itself as a pivotal intermediary. Its mediation efforts culminated in a two-week truce announced on April 7. Although the subsequent “Islamabad Talks” failed to produce a durable agreement, there is speculation that U.S. and Iranian teams could return to Pakistan for another round of talks as early as the end of this week. For now, the ceasefire remains intact, even as Israeli strikes on Lebanon and the U.S.’ blockade of the Strait of Hormuz continue to test its limits.

Why It Matters: Crisis, Realignment, and Diplomatic Openings

President Trump’s war of choice imposed devastating consequences for the global economy with deep ramifications for Asia, which remains heavily dependent on Gulf energy flows through the Strait of Hormuz. In response, regional governments have introduced emergency measures to stabilize supply and manage price volatility. While these steps may blunt immediate disruptions, they also reveal deeper structural vulnerabilities tied to energy dependence and geopolitical chokepoints. More broadly, the crisis underscores the need for middle powers to work in concert to mitigate the impacts of a war many label as illegal under international law.

For these countries, the conflict is a stress test of both strategic doctrine and economic resilience. As the global order splinters, the space for hedging is narrowing and the costs of ambiguity are rising. Existing institutions, such as the Group of Seven, the United Nations Security Council, and the International Energy Agency, provided rapid coordination, including strategic oil reserve releases by key economies. These efforts demonstrate both the continued relevance of institutional frameworks and their limitations under sustained geopolitical strain, highlighted by the failure of the Quad to coordinate a response and mounting pressure on BRICS as the group remains divided over Iran.

Another consequence that middle powers may confront is the need to turn to China and Russia, the alternative hegemons in the region. If governments decide to invest more heavily in renewable energy to lessen dependence on Middle East oil and gas, China dominates the green energy technology sector with wind, solar, and battery products. Russia offers its own significant oil and gas reserves for export. The Iran crisis could stymy middle power efforts to avoid reliance on China and Russia, at the expense of U.S. influence.

National responses illustrate both adaptation and constraint. Japan emerged as a first mover in the international reaction to the war. In addition to the decision to release strategic petroleum reserves, Prime Minister Sanae Takaichi was the first foreign leader to meet with President Trump after hostilities began in the Middle East. Despite President Trump’s calls for allies to provide military assistance in the conflict, Takaichi successfully rebuffed his demands. Given Japan’s image as generally malleable to Trump’s pressure, this refusal provided a model for other allies—particularly NATO—to similarly decline offering assistance.

Within the Indo-Pacific, India’s response highlights the constraints of multi-alignment. With significant stakes in its relationships with both Israel and Iran, and the added strain of chairing BRICS at a critical moment, New Delhi has adopted a cautious, neutral stance. While this approach has somewhat helped insulate domestic economic interests, it also emphasizes the difficulty of reconciling competing strategic commitments in an increasingly polarized environment.

Meanwhile, middle power diplomacy has accelerated markedly. In 2026, Japan and South Korea have held in-person leaders’ level summits with Canada, Indonesia, the Philippines, Italy, and France. Main agenda items were supply chain resilience for critical minerals, defense industrial cooperation, and—as the U.S.-Israel war on Iran began—coordinating on global energy market stabilization. In his meetings, French President Macron advanced the need for countries to distance themselves from major powers and forge another path ahead together. As Canadian Prime Minister Carney addressed Australia’s Parliament, he called on Canberra to forge new alliances, saying “Canada and Australia cannot compel like the great powers, but we can convene, set the agenda, shape the rules, and organize and build capacity through coalitions to deliver results at speed and global scale.” While European and Canadian leaders more explicitly promoted a coordinated middle power strategy, Indo-Pacific partners such as Japan and Australia have emphasized diversification rather than outright distancing from great powers.

Taken together, these developments point to a deeper transformation in middle power diplomacy. Pakistan’s role in the crisis is illustrative not because it is anomalous, but because it reveals an emerging pathway for middle power influence. By positioning itself as a central intermediary while simultaneously coordinating with regional actors such as Saudi Arabia, Turkey, and Egypt, Pakistan operationalized networked agency. Its leverage did not derive from material dominance, but from its ability to connect, align, and mobilize a web of relationships that no single great power could fully replicate in that moment.

What to Watch

• The durability of the ceasefire—and the trajectory beyond the initial two-week horizon—will shape whether Asian and European governments move toward more assertive strategies to secure alternative energy supplies, either collectively or unilaterally. At stake is not only short-term market stability, but whether middle powers can translate crisis coordination into more durable mechanisms for managing energy security and geopolitical risk. In this sense, the conflict is a test of whether middle powers can coalesce into a functional bloc capable of stabilizing both markets and regional order. Critically, will these countries bypass antiquated global institutions that resist reform and instead shift toward more informal, national interest-driven coordination?

• The crisis may also accelerate the formation of new, more fluid security arrangements in response to gaps in U.S. security guarantees. The growing coordination among regional actors, particularly Saudi Arabia, Turkey, Egypt, and Pakistan, suggests the early contours of a more decentralized security architecture. It will be important to see how these countries institutionalize their cooperation for not only Middle Eastern stability but also the strategic options available to Asian middle powers navigating the region.

• Finally, observers should track whether the depth and breadth of the conflict drive countries toward other centers of power, particularly if the United States withdraws precipitously. Russia’s energy empire (already gaining from sanction waivers) could offer lifelines to starved economies, while China’s dominant renewable energy sector may provide building blocks for those governments rattled by their dangerous dependence on Middle East resources.

Dive Deeper With ASPI

• Read Farwa Aamer and Emma Chanlett-Avery’s report unpacking the broader state of middle power diplomacy amidst the fragmenting global order.

• Register for ASPI’s April 21 webinar assessing the forces driving hedging behavior, middle power partnerships worth watching, how effectively countries are exercising agency collectively, and what a more assertive middle power landscape means for the U.S.

• As the U.S. and China prepare for President Trump’s May visit to Beijing, check out Bryanna Entwistle’s op-ed arguing that anti-scam cooperation should be on the agenda.

On Monday morning, an 85-word Truth Social post from U.S. President Donald Trump—in which he threatened a “whole civilization will die tonight”—set off a global guessing game about what might happen when 8 p.m. EST arrived, his latest deadline for Iran to reopen the Strait of Hormuz. At 6:32 p.m. EST, Trump posted again, this time announcing a provisional two-week ceasefire among Iran, Israel, and the United States. The ceasefire marks the first pause in 39 days of fighting across the Middle East, which began with strikes that killed Iranian Supreme Leader Ayatollah Ali Khamenei. In the weeks that followed, Iran launched waves of missile strikes against Israel, targeted America's Gulf partners, and closed the Strait of Hormuz, triggering a global oil shortage.

Asian countries, which receive roughly 80 percent of oil passing through the Strait of Hormuz, were hit particularly hard by its closure and have watched the situation closely. Pakistan ultimately emerged as a key mediator between Washington and Tehran, brokering Monday’s agreement that paused U.S. attacks on Iran in exchange for opening the Strait. In this edition of Asia ASAP, Asia Society Policy Institute experts unpack how countries across Asia are responding to the ceasefire between Iran, the U.S., and Israel—and how they are preparing for what may come next.

Pakistan as a Peacemaker

By Farwa Aamer

As Pakistan stepped in as a key intermediary between the U.S. and Iran, its role reflected a pragmatic move shaped by both opportunity and strategic necessity. Islamabad occupies a rare, sweet spot: it maintains good ties with a broad range of regional actors directly impacted by the conflict, as well as both Washington and Tehran, giving it sufficient credibility as a go-between. Its improved relationship with the U.S. over the past year, alongside close engagement with President Trump, appears to have strengthened its access in Washington and added weight to its diplomatic outreach at a critical moment.

Crucially, Islamabad’s role is also underpinned by domestic and strategic imperatives. Escalating tensions threatened energy supply routes and fuel price stability, posing economic risks. At the same time, sectarian sensitivities at home, coupled with Pakistan’s security commitments to Saudi Arabia, raised the prospect of entanglement in a broader regional conflict, one that Islamabad has strong incentives to avoid. Facilitating de-escalation, therefore, aligned directly with its national interests, while also allowing it to reassure key partners and avoid difficult strategic trade-offs.

Pakistan’s mediation efforts signal a more deliberate foreign policy aimed at establishing itself as a regional and global actor that cannot be easily sidelined. This episode marks a clear shift from the periphery toward a more confident and assertive middle-power role. Nonetheless, the overall situation and the ceasefire remain fragile, and as Islamabad prepares to host U.S.–Iran talks this Friday, all eyes are on whether this opening can be transformed into a durable, structured diplomatic process capable of producing longer-term regional solutions.

China’s Calculus

By Lyle Morris

The ceasefire in Iran, reportedly partially facilitated by Beijing, represents an opportunity for Beijing to flex its diplomatic muscle. China’s proactive role comes on the heels of Iranian Foreign Minister Abbas Araghchi’s request for China to “mediate” the escalating conflict, citing China’s successful diplomatic role in brokering an Iranian rapprochement with Saudi Arabia a few years ago. However, going forward, China is unlikely to be the main peace-broker to the conflict, as the centers of gravity reside in Washington, Jerusalem, and Tehran.

While American strikes on Iran are undoubtedly a setback for Chinese interests in the region. China has assiduously cultivated close diplomatic, economic and military relations with Tehran since Ayatollah Ali Khamenei took power in 1989. Beijing is confident that its long-term commitment to Iran will ultimately pay off, especially if the Iranian regime reconstitutes under the Ayatollah’s son, Mojtaba Khamenei, who some believe has a positive view of China.

If I’m sitting in Beijing, I’m perfectly fine to sit back and let the U.S. get bogged down in another quagmire in the Middle East and continue to let Washington exhaust its resources, munitions and energy. All it’s doing is distracting U.S. attention away from the Indo-Pacific and China, which ultimately benefits Beijing.

Asia Caught in the Cross-Fire

By Emma Chanlett-Avery

Asian leaders welcomed the ceasefire, but continued operations to ease the economic shocks and spiking energy prices that have rocketed their economies since the start of the war. Several stressed that, even if the conflict is resolved, the economic impact could take many more weeks or months to stabilize. Many governments have instituted emergency measures, including subsidies, cash handouts, and other price support mechanisms to cushion the blow to consumers. Many lower-income countries channeled direct subsidies in cooking fuel and diesel to the most financially vulnerable, both to ease pain and, in some cases, suppress unrest. Several Southeast Asian countries—including Vietnam, Indonesia, and Malaysia—have mandated that employees work from home more often, while Thailand’s fishing industry has docked large portions of its fleet due to rising fuel costs.

Many Asian governments have rushed to secure alternative energy supplies from exporters like Oman, Russia, and Kazakhstan. Japan and South Korea released some of their strategic petroleum reserves in coordination with the International Energy Agency to help stabilize global markets. Hours after all sides agreed to a ceasefire, Japanese Prime Minister Sanae Takaichi held a phone call with Iranian president Masoud Pezeshkian to urge de-escalation and to negotiate passage through the Straits of Hormuz for Japanese ships. Nearly all of the countries in the region anticipate hardship in financing the subsidies and building public support for the ongoing shocks to their economies.

Dive Deeper with ASPI:

• Watch Farwa Aamer, Jane Mellsop, and Akshay Mathur examine how the U.S.-Israel’s airstrikes on Iran are reshaping economic outlooks, energy security, and foreign policy across South Asia.

• Listen to Danny Russel and Wendy Cutler unpack how China is thinking about the U.S.-Iran.-Israel War, especially as it prepares for Trump’s visit to Beijing.

• Read Farwa Aamer and Emma Chanlett-Avery’s analysis of how leading middle powers in Asia and beyond are redefining strategic autonomy, which partnerships warrant close attention, and how these evolving alignments are reshaping the global order.

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Editors note: As the U.S. and Israel’s war with Iran enters its fifth week, the conflict has expanded well beyond its initial frontlines. Iran is conducting missile and drone strikes on Jordan and Saudi Arabia—both U.S. allies—and targeting American military facilities across the Gulf, including those in Qatar, Kuwait, the UAE, and Bahrain. Schwarzman Fellow Faye Simanjuntak explains why data centers are the target of some of these strikes and how the Gulf’s booming AI industry might be forced to adapt.

State of Affairs: Iran’s Infrastructure War

On March 31, the Iranian Revolutionary Guard Corps (IRGC) warned that 18 U.S. companies operating in the Gulf will be considered “legitimate targets” for their suspected support of American intelligence operations, communications technology, and artificial intelligence (AI). The statement specifically listed hyperscalers Microsoft, Google, Apple, Meta, and Oracle, which have recently invested heavily in the Middle East’s AI industry.

There is ample precedent of targeting civilian infrastructure suspected to play a role in military operations during warfare, but the conflict in Iran has shed light on a new vulnerability: data center infrastructure. Earlier this month, an Amazon Web Services (AWS) data center in the UAE was struck by an Iranian drone. Two more data centers—one in the UAE and one in Bahrain—were damaged the same afternoon. The combined damage on three data centers caused outages in various services across the region, including in banking and enterprise software systems. A week later, a U.S.-Israeli missile strike hit the digital security center of Sepah Bank in Tehran, which was targeted due to alleged ties between the bank and the Iranian military.

Coupled with the IRGC’s threat to American tech companies, these attacks cement a pattern shift in modern warfare, where data centers become both critical infrastructure and military targets, exposing vulnerabilities that the booming data center industry has yet to consider.

Why it Matters: The Gulf’s “New Oil” Under Threat

As hyperscalers expand their footprint across the globe, they are looking to build data centers in stable political environments with reliable energy and friendly regulations. They are also looking for places where they can build data centers close to users, known as low-latency environments, enabling firms to run services that require near-instant communication.

The Gulf checks most of these boxes and has thus become an increasingly popular place for tech firms to invest in infrastructure. Microsoft has committed $15.2 billion in the UAE between 2023 and 2029. AWS has pledged more than $5.3 billion to build a new data center in Saudi Arabia, while Oracle has invested $1.5 billion to boost the country’s cloud capacity. In May 2025, the first international deployment of OpenAI’s $500 billion Stargate project was announced: a major, specialized AI data center in Abu Dhabi that is expected to go live this year. According to OpenAI, the deal was developed in “close coordination” with the U.S. government and President Donald Trump.

Just as oil has defined the region’s economic leverage, data is emerging as a new strategic resource in the Gulf. But Iran’s explicit targeting of data centers has spotlighted the risks and vulnerabilities that accompany concentrating data centers in a given region.

The Data Sovereignty Complication

One of the vulnerabilities that the conflict has exposed relates to data sovereignty. When Iranian missiles struck AWS data centers in March, clients were advised to move their data and applications to other regions and reroute traffic away from the affected sites—a standard disaster recovery playbook. But that playbook collides with laws adopted by the Gulf Cooperation Council (GCC) states to localize sensitive public sector data. These laws require such data to be stored within state borders, limiting where companies can shift operations during a crisis.

For Gulf states, data localization was a strategic play toward sovereignty, but the conflict in the Middle East has made it clear that tying data to a specific location can concentrate risk rather than reduce it. It is now apparent that there is a fundamental mismatch between how hyperscalers manage global resilience and how states assert data sovereignty.

Frontlines of the U.S.-China AI Race

As American companies have flocked to support the Middle East’s AI boom, so have Chinese firms. But Saudi Arabia and the UAE have fully bet on American AI partnerships, cutting ties with Huawei in exchange for approvals to purchase the equivalent of up to 35,000 Nvidia Blackwell chips. Per White House demands, a deal between Microsoft and the UAE’s top AI company, G42, mandated that G42 phase out Huawei hardware and divest from Bytedance. Meanwhile, Saudi Arabia’s Humain pledged not to purchase Huawei equipment. Both companies also agreed to strict security protocols to prevent the diversion of chips to China.

G42, Humain, and their GCC hosts iced out Chinese investment as part of a strategic bet on the value of U.S. technology, but partnering with American companies now seems to be a liability: G42 is the only non-American company named by the IRGC as a potential target for retaliatory strikes. As they watch Iran target data centers and other AI infrastructure, Saudi Arabia, the UAE, and other Gulf states may consider diversifying the countries serving their computing needs.

Move or Adapt?

Existing Gulf infrastructure is unlikely to be abandoned in the near future, but the current conflict in the Middle East may lead the next wave of investments from major tech companies to shift to regions where security concerns are more predictable. Poland and other countries in Central Europe are becoming destinations for operators looking to move beyond the Gulf while capturing some of the Gulf market, as they provide the legal certainty of the EU with the ability to serve users in both Europe and parts of the Middle East. If these regions can fulfill other factors—including water access, power availability, and regulatory flexibility—they will become increasingly attractive destinations for investment.

However, it’s important to note that these are not ideal alternatives to hyperscalers with GCC-based infrastructure. Having in-region infrastructure provides low-latency usage for customers, and Central Europe might not necessarily catch that same market, it will only work as a resilience fallback. For hyperscalers operating in the Gulf, the most urgent task is figuring out the resiliency strategy that will both maintain corporate security and ensure long-term market capture in the region.

What to Watch

• Hyperscalers have two potential paths forward. First, these companies might strengthen their presence in the region to offer additional regional coverage as fallbacks in the case of geopolitical instability. This would require specific disaster recovery capabilities and perhaps deepen regional risk. Or, hyperscalers might shift investments into other, less unpredictable regions. It’s likely that these companies will fall somewhere in between to hedge their bets.

• Tech companies aren’t the only American firms targeted by the IRGC. Tesla, Boeing, JP Morgan, and several other American companies were named by the IRGC as potential retaliatory targets should more of Iran’s senior commanders be killed. In a statement, the IRGC advised employees to evacuate and to expect the destruction of infrastructure starting at 8pm local time on April 1st. Whether Iran follows through on these threats, and how these companies respond, will be critical to watch in the coming days.

• Beyond data centers, energy infrastructure has emerged as a deliberate target on both sides of the conflict. Iranian missiles struck the Ras Laffan liquefied natural gas facility in Qatar on March 18 and 19, while Israel retaliated by hitting Iran’s South Pars gas field the following day. President Trump has since threatened to destroy crucial energy infrastructure in Iran if the Strait of Hormuz is not reopened. As the conflict progresses, it’s likely that other forms of infrastructure may be drawn into Iran’s targeting strategy, undersea cables among them.

Dive Deeper with ASPI

• Read Farwa Aamer’s paper “AI Ambitions in a Thirsty Region: Water, Data Centers, and South Asia’s Digital Future.”

• Listen to Wendy Cutler, Danny Russel, and Rorry Daniels discuss how Xi Jinping is thinking about the conflict in the Middle East as he prepares to meet President Trump in Beijing.

• Watch Asia Society Trustees Vali Nasr and Hamid Biglari unpack the implications of the conflict between the U.S., Israel, and Iran for the future of nuclear diplomacy, the use of AI in warfare, and the stability of the Middle East.

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From March 4-12, China convened its largest annual political gathering—the “Two Sessions”, or Lianghui—bringing together the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), China’s legislature.

On March 12, these two bodies adopted the 15th Five-Year Plan, which will serve as the blueprint for China’s economic and social development through 2030. While economic growth, technological self-sufficiency, and military strength usually dominate discussion during the Two Sessions, the 15th FYP includes important indicators on climate, energy, and the environment.

China’s climate policy is guided by its “dual carbon” goals to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. Beijing has also pledged to reduce its carbon intensity by more than 65% from 2005 levels by the end of the decade, its Nationally Determined Contribution (NDC) under the Paris Agreement. In the 15th FYP, clean energy technologies continued to receive support, adaptation gained elevated importance, and Beijing announced an ambition to double non-fossil fuel energy. However, the new 17% carbon intensity target for 2030 fell short of expectations and will leave China short of its NDC commitments. At the same time, concerns over domestic competition in the clean energy sector persist.

These developments reflect a broader shift in Beijing’s climate strategy: away from top-down targets and towards using industrial policy and clean energy investment as primary levers for cutting emissions.

Why It Matters: Looser Targets, Bigger Bets, and an Urgency to Adapt

The most anticipated climate metric released with the 15th FYP was Beijing’s new goal to reduce carbon intensity (CO2 emissions per unit of GDP) by 17% between 2026 and 2030. While this might sound like a persistent commitment to decarbonization, it represents a step back from the 2021 FYP’s 18% planned reduction. Over the past five years, Beijing fell significantly short of that target, achieving only a 12.4% reduction in carbon emissions, though officials claimed a 17.7% drop by revising how the figure is calculated. This lack of progress, combined with the 15th FYP’s even lower target, reflects China’s weakening commitement to one of its core Paris Agreement pledges due by 2030.

While the 15th FYP signals a shift toward capping China's total carbon emissions, it stops short of setting any binding targets. Without hard numbers, emissions could climb back up ahead of China's 2030 peak deadline, even after two years of flattening or modest declines. Instead of imposing the stringent, legally enforceable limits on coal and fossil fuels needed to cap emissions, China is choosing to prioritize immediate economic stability and energy security. The underlying strategy is clear: Beijing is betting that its rapidly expanding clean energy and cleantech industries will outpace fossil fuels over time.

Rather than adopting aggressive emissions reduction goals, the 15th FYP introduces an action plan to “double non-fossil energy” over the next decade—though it fails to specify a baseline year for this. Depending on how it is interpreted, this new plan could far exceed China’s current commitment to achieve a 25% non-fossil energy share by 2030, but its success hinges on Beijing’s ability to scale up massive “clean energy bases” to integrate solar, wind, and hydropower throughout the country. China’s existing Paris Agreement target calls for 3,600 GW of combined solar and wind capacity by 2035, which would mean adding approximately 200GW of capacity each year. But with energy demand rising rapidly, staying on track with the broader energy transition may require an even more ambitious pace of around 300GW annually.

Climate change mitigation aside, the 15th FYP also contains increased emphasis on adaptation. The plan states that China will “persist in attaching equal importance to mitigation and adaptation,” while also calling for improvements to the national climate adaptation system, stronger risk assessments for vulnerable sectors and regions, and greater capacity to respond to extreme weather.

While adaptation has appeared in earlier Five-Year Plans, the 15th FYP marks a notable shift by explicitly placing adaptation on equal footing with mitigation and enshrines language from the National Climate Change Adaptation Strategy 2035, adopted in 2022. The plan’s focus on risk assessments, vulnerable sectors, and extreme weather preparedness suggests adaptation is increasingly being integrated into mainstream policy planning rather than treated as a narrow environmental issue. The inclusion of adaptation in the 15th FYP builds on earlier signals in China’s latest NDC, announced by President Xi Jinping via video at the United Nations Climate Summit last September, where he emphasized China’s ambition to “establish a climate adaptive society.”

What to Watch: Policy vs. Progress

• While the 15th FYP outlines the overall strategic direction for China’s climate and clean energy goals, real operational details will emerge from sectoral plans released by National Energy Administration and other ministries later in 2026 and into 2027. These documents will cover electricity, renewable energy, and the coal industry, and are expected to spell out how China implements its long-awaited shift from capping total energy consumption to a “dual control” system focused strictly on carbon emissions and intensity. In addition to explaining how emissions caps will be introduced, these next set of documents will outline concrete policy support technologies like smart microgrids and vehicle-to-grid technologies, which are crucial for managing the intermittency of wind and solar power. Perhaps most consequentially, the sectoral plans will also provide a more definitive answer on the fate of fossil fuels in the near-term and how long it will remain an anchor for China’s energy security.

• After a punishing 2025 marked by droughts, extreme heat, and floods, China can expect more significant human and economic losses from climate disasters in the year ahead. This reality makes the urgency of strengthening adaptation measures increasingly difficult to ignore, and it’s worth paying attention to see if further measures scale up existing efforts. China’s National Climate Change Adaptation Strategy 2035 outlined a comprehensive and proactive approach to building resilience amid enduring climate impacts in 2022. Now, how Beijing implements these ideas and integrates them into policy documents—particularly in protecting critical infrastructure, agriculture, and water resources—will signal whether adaptation has become a higher policy priority.

• While the headline figures are important, paying attention to how climate translates into other sectors like trade is equally significant. China retains global dominance across clean energy technologies, accounting for roughly 80% of global solar PV production and more than 70% of wind turbine and electric vehicle battery manufacturing. That said, the industry is not immune to shocks. The 15th FYP emphasizes the need to manage the downsides of hyper competition, including relentless price wars and over-investment in certain segments. It also de-emphasizes saturated clean tech sectors like solar and EVs while highlighting new, frontier ones like batteries and green fuels. Still, while tracking new sectors that China is investing in, the rest of the world should expect to see continued waves of cost-competitive Chinese solar panels, wind turbines, and electric vehicles.

Dive Deeper with ASPI:

• Watch ASPI’s Kate Logan chat with the Centre for Research on Energy and Clean Air about China’s 15th Five-Year Plan.

• Read our Center for China Analysis’ analysis of the Two Sessions, in which five experts cover political signals, personnel changes, defense posture, economic targets, five-year planning priorities, and climate commitments.

• Read Neil Thomas and Guoguang Wu’s recent report, The Evolving Politics of Climate Change in China.

State of Affairs: SCOTUS IEEPA Ruling Creates New Uncertainty

On February 20, 2026, the U.S. Supreme Court ruled 6-3 that the International Emergency Economic Powers Act (IEEPA) does not authorize the Trump administration to impose tariffs. It was a significant legal setback for one of the administration’s most flexible trade tools, but not a broader retreat from tariffs. Within hours, President Trump announced a 10% global tariff under Section 122 of the Trade Act of 1974 as a 150-day stopgap. Treasury Secretary Scott Bessent framed the move as a short-term bridge while the administration pursues new Section 232 and 301 actions to restore tariff levels to where they stood before the ruling.

Across Asia, the initial response has been cautious and pragmatic. Rather than treating the ruling as a turning point, governments are reassessing timing, preserving flexibility, and avoiding new commitments. India’s Commerce Minister Piyush Goyal called it “an evolving situation,” adding that India’s interim framework agreement with the U.S. includes a provision ensuring rebalancing should circumstances change. Malaysia’s Prime Minister Anwar Ibrahim said his government would not “make any hasty decisions.” Meanwhile, Thailand convened an urgent meeting to map out strategy for the Section 122 window, warning that “uncertainty is very high” and exporters need clarity.

For Asia’s export-dependent economies, the question is now what replaces IEEPA as the backbone of President Trump’s trade offensive.

Why It Matters: Asia’s Trade Deals Are Now in Limbo

Of all regions, Asian trading partners have arguably been the most proactive and responsive since President Trump announced his sweeping tariffs on “Liberation Day.” This kicked off a race to negotiate trade agreements with Washington, and, in recent months, ten Asian countries reached arrangements to reduce their exposure to IEEPA and other tariffs. These deals have taken different forms, including detailed Agreements on Reciprocal Trade (ARTs) signed by Indonesia, Malaysia, Cambodia, Taiwan, and Bangladesh; broader frameworks built around investment commitments with Japan and Korea; and preliminary frameworks with countries like Vietnam, Thailand, and India that have yet to finalize formal agreements with the U.S.

For trading partners that already reached deals, the immediate priority post-IEEPA is preserving gains rather than renegotiating. Much of that reflects the fact that their most important concessions were secured under Section 232, not IEEPA, and therefore remain intact. Tariff relief for Japan’s $58 billion and Korea’s $52 billion in automotive exports were not impacted, and neither was Taiwan’s Section 232 relief on auto parts and lumber, along with preferential treatment for semiconductor firms investing in U.S. production. As South Korean President Lee Jae Myung put it, “These are promises made between the U.S. president and me, so we will steadily move forward.”

Southeast Asian partners face more uncertainty. Malaysia and Cambodia’s ARTs offered only assurances their deals would be “considered” in future Section 232 actions, leaving them exposed. More than half of U.S.-bound exports from major ASEAN economies are in sectors already under Section 232 tariffs or active investigation. Countries are responding to this in a variety of ways. Cambodia has said it will move ahead with ratification of its trade agreement with the U.S, while Malaysia appears more cautious. Indonesia’s situation is more complicated: its ART included IEEPA-based carve-outs covering nearly 10% of its U.S. exports—concessions now in question.

For countries still negotiating—including India, Vietnam, Thailand and the Philippines—the ruling has created less incentive to move quickly and more reason to wait and see how future U.S. actions unfold. We have already seen India delay a planned delegation to Washington.

China remains Asia’s biggest wildcard. The ruling eliminated both China’s baseline reciprocal tariffs and fentanyl-related IEEPA tariffs, though Section 301 tariffs remain in place. This lowered the U.S. average weighted tariff on Chinese imports from 36.8% to 26.9%. China’s response was measured but pointed, calling on the U.S. to cancel all unilateral tariff measures. With President Trump expected to visit China in April, the administration may be reluctant to take trade actions that could complicate the summit.

What to Watch: New U.S. Tariff Impositions and Non-U.S. Trade Integration

• Can deals be finalized and implemented? The most immediate question is whether and on what terms trade arrangements move forward and enter into force. Finalization is only the first hurdle. Countries that signed ARTs have taken on extensive commitments touching on sensitive domestic concerns. Whether governments can deliver on these commitments—and how the administration responds if they fall short—will be critical in the months ahead.

• What new tariffs will hit Asia hardest? Section 122 expires July 24, and the administration has indicated it will use that window to put more durable measures in place under Sections 301 and 232. For Asian governments, the question is which sectors are most exposed. Semiconductors stand out as a major concern, but pharmaceuticals, critical minerals, and industrial machinery, and other sectors face active Section 232 investigations. Meanwhile, the Office of the U.S. Trade Representative has signaled that there may be broad-based Section 301 probes targeting issues like agricultural subsidies, digital taxation, and industrial overcapacity. Such an approach could sweep in multiple Asian economies at once.

• What will the April Trump-Xi summit deliver? A comprehensive trade deal between the U.S. and China is unlikely, but Asian partners will be watching for signals about where the bilateral relationship is headed whether through tariff adjustments, investment, Chinese purchases of U.S. goods, or export control arrangements. Any terms that bring China’s tariff rates closer to those offered to other Asian partners could undercut the competitive advantages those countries have worked to secure.

• Will Asian economies accelerate diversification? The IEEPA saga has reinforced what many Asian policymakers already believed: dependence on the U.S. market carries structural vulnerability. The response is already visible. Since late 2024, 13 trade agreements involving Asian economies have been signed or entered into force, the majority with partners outside the region. Indonesia reached deals with the EU and Canada and, along with the Philippines, moved to join the CPTPP. Malaysia signed an FTA with South Korea and Thailand is targeting new agreements with South Korea, the EU, and Canada this year. CPTPP members have also launched trade and investment dialogues with both the EU and ASEAN. India, too, has been expanding its trade options, concluding FTAs with the UK, Oman, and New Zealand in 2025 and signing a landmark EU trade deal in January of 2026. If Trump’s new tariff regime proves as aggressive as threatened, 2026 could see meaningful acceleration in non-U.S. trade integration.

Dive Deeper with ASPI

• Read Wendy Cutler’s op-ed for Nikkei Asia “Trump and Xi Must Deliver More Than Optics at April Trade Summit.”

• Check out Jane Mellsop’s analysis for how like-minded countries across Asia can preserve and enhance the rules-based trading system through plurilateral arrangements.

• Read Shay Wester’s op-ed for the Straits Times, “Court Rebuke Won’t End Tariffs Threat. Trump Has Fallbacks”, published prior to the IEEPA ruling.

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Editor’s Note: From February 16-20, leaders from around the world will convene in New Delhi to discuss AI innovation and adoption at the 2026 AI Impact Summit. It is the biggest international gathering on AI yet: the Indian government is expecting 250,000 visitors, including 20 national leaders and 45-ministerial-level delegations. Corporate leaders in attendance will include Bill Gates, Alphabet Inc’s Sundar Pichai, Anthropic’s Dario Amodei, and OpenAI’s Sam Altman. Faye Simanjuntak, Schwarzman Fellow at ASPI, explains what we can expect from the gathering.

State of Affairs: The World Heads to New Delhi

The 2026 AI Impact Summit is taking place as countries across the world are attempting to determine the best balance between establishing AI regulation and encouraging innovation. Currently, there are only two binding AI regulations that have taken effect globally. Of these, only one is from Asia: South’s Korea’s AI Basic Act, which was adopted in January of 2026. Most countries remain in consultation phases for their own AI regulations, with voluntary frameworks—or non-binding legislation, such as the AI Promotion Act in Japan—guiding AI adoption and development.

This year’s summit is the first to be held in the Global South, following the 2023 AI Safety Summit in Bletchley Park, 2024 AI Summit in Seoul, and 2025 AI Action Summit in Paris. Like previous summits, the gathering in New Delhi is not expected to result in a joint binding political agreement, though, at the end, the Indian government plans to release a declaration on goals for AI development in the form of a “Delhi Statement".

As the host country, India has structured the Summit around three thematic sutras: people, planet, and progress. Seven chakras will guide the focus of working groups: human capital, inclusion, safe and trusted AI, resilience, science, democratizing AI resources, and social good. These themes mark a clear evolution from those of earlier summits, focusing on development and deployment instead of model safety.

While safety concerns remain relevant, many countries in Asia are now focused on practical questions such as how AI can support digital public infrastructure (DPI), how governments can ensure local cultural representation in models, and how small businesses and firms can access compute without deepening dependency on foreign providers. The AI Impact Summit’s guiding sutras suggest that conversations in New Delhi will focus on questions like these about how AI will be applied rather than developed.

Why it Matters: Advancing Fair and Trusted AI Deployment

The Pursuit of Equitable AI Adoption

According to research from Microsoft, AI adoption across the Global North has grown almost twice as fast as in the Global South, even though the latter compromises most of the world’s population and workforce. The thematic focus and working groups of the AI Impact Summit reflect India’s endeavour to balance out AI norms with global geopolitical realities, prioritizing deployment, digital public infrastructure integration, and conditional access to models, as opposed to top-down approaches that disproportionately benefit wealthier countries. With these priorities, India promotes a model of strategic interdependence that tempers asymmetries in technological power.

The release of DeepSeek, an open-source model from China, in early 2025 is testament to how non-Western approaches to AI are starting to shape the narrative of AI adoption. Between affordability and flexible deployment, DeepSeek saw higher adoption rates throughout markets that are underserved by Western AI platforms.

DeepSeek’s release did sharpen perceptions that the race for AI leadership is largely between China and the U.S., but the AI Impact Summit’s framing signals a growing rejection of choosing between two superpower-led visions for AI. Similarly, many emerging economies are increasingly recognizing that owning the entire AI stack—part of the buzzy new goal of sovereign AI—is not feasible. Instead, they are pivoting toward strategic interdependence: selectively developing domestic capabilities while partnering internationally where it makes economic and technological sense. This shift will become evident at the AI Impact Summit, as policymakers seek out diversified partnerships, localized capacity-building, greater control over data, and shared standard-setting processes.

Developing Approaches to Trust & Safety

One of the barriers to equitable AI adoption is the limited clarity around what constitutes safety and trust in AI ecosystems. This challenge will be the focus of one of the sutra-guided working groups in New Delhi.

ASPI recently identified seven recurring factors that shape how governments across Asia define trust and safety in existing AI policy documents: trusted datasets, adequate infrastructure, skills and awareness, supply chain stability, ethical development, regulatory accountability, and institutional risk mitigation.

These seven factors may be viewed as risks, opportunities, or both by governments with differing levels of AI maturity and strategic ambition. For emerging AI economies, gaps in infrastructure, datasets, or skills represent immediate constraints, but also clear areas for targeted investment and international cooperation. For more advanced ecosystems, questions of regulatory accountability, supply chain security, and institutional risk mitigation are increasingly tied to competitiveness and national security.

At the AI Impact Summit and beyond, those focused on expanding AI trust and safety in Asia should consider ASPI’s following findings:

• Countries are already leveraging existing strengths—compute, talent, minerals, industry, or governance frameworks—to secure their position in the AI value chain. This creates both competition and interdependence, highlighting the need for interoperability and rapid, equitable AI adoption to avoid deepening digital divides.

• Asian countries need frameworks that both mitigate risks and enable innovation. Effective governance must align with international ethical standards, protect data and rights, and provide mechanisms for accountability.

• Trust is a central pillar of AI strategies across Asia. Governments consistently emphasize safe, human-centric, and trustworthy AI as prerequisites for adoption and long-term ecosystem development.

• AI is widely viewed as foundational to economic growth, but workforce and capacity gaps are slowing adoption in parts of Asia, increasing technological dependence and widening regional disparities.

• Governments are highly alert to AI-driven societal harms and cybersecurity threats. This has led to targeted legislation (e.g., election safeguards) and broader ethics-based regulatory frameworks.

What to Watch

• The AI Impact Summit will serve as a platform to see whether global AI governance will evolve towards a more development-centric framework that reflects the priorities not just of developing economies, but of the Global South as well. The leaders declaration released at the end of the Summit, the “Delhi Statement”, will reflect the conclusions of working groups as to how to achieve this.

• With a guest list of high-profile AI executives, and an increasing interest of expanding operations into APAC, it’ll be no surprise if compute deals emerge from the Summit. It will give India, in particular, the opportunity to pitch itself as a key growth market for AI. It has drawn over $50 billion in fresh investments from Amazon and Microsoft, and Prime Minister Modi will seek to capitalize on this momentum.

• AI cooperation is increasingly intertwined with geopolitics, and it is newsworthy that a Chinese delegation is set to attend the Summit, the latest sign of improving ties between Beijing and New Delhi. Watch for bilateral meetings between these two powers on the sidelines—as well as those between the U.S. and India—and whether they produce cooperation initiatives, joint statements, or frameworks on shared priorities.

Dive Deeper With ASPI

• Listen to or watch our recent episode of Asia Inside Out with Dr. Leslie Teo, Senior Director of AI Products at AI Singapore. He explains the importance of localized large language models and open-source data to equitable AI adoption across Southeast Asia.

• Read Faye Simanjuntak’s op-ed “Malaysia’s Gamble: Turning Data Centres Into Industrial Power”, in which she argues that there is a tension between Malaysia’s National AI Roadmap and the industrial reality taking shape.

• Read Arun Polcumpally’s summary of an official pre-summit roundtable hosted by ASPI “Utilizing Digital Public Infrastructure (DPI) as Techno-Legal Solutions for AI Governance”

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Despite a politically charged atmosphere and scattered reports of violence and electoral irregularities, the polls were broadly regarded as peaceful and credible. The Chief Adviser of Bangladesh’s caretaker government, Muhammad Yunus, framed the outcome as the “advent of a new Bangladesh.”

The election itself was born out of upheaval. The student-led July Movement of 2024—driven by Gen Z activists demanding accountability, fair elections, and institutional reform—precipitated the collapse of Hasina’s government that August. The February 12 election thus served not only as a transfer of power, but as a referendum on whether street protests and youth mobilization could translate into lasting change at the ballot box. Asia Society Policy Institute experts unpack what the election results mean in our latest edition of Asia ASAP.

BNP Claims a Decisive Mandate

- By Rishi Gupta

Sheikh Hasina’s Awami League was barred from contesting in the 2026 elections after being banned by the Yunus government. Hasina herself remains in exile in India, facing charges of crimes against humanity over her alleged role in a violent and deadly crackdown on the July protests. Without the Awami League, the February 12 contest emerged as one between the Bangladesh National Party (BNP) and Jamaat-e-Islami (JeI). The two parties have been key allies in the past and even formed a coalition government in 2001.

BNP party leader Tarique Rahman is the son of Khaleda Zia, who served as the prime minister during the 1991-1996 and 2001-2006 BNP-led governments. After two decades of self-imposed exile from Bangladesh, Tarique returned to Dhaka in December of 2025. Just two months later, he is poised to assume the position of prime minister—a remarkable feat.

So what helped the BNP win?

First, the BNP succeeded in diverting Awami League voters by presenting itself as a moderate and liberal front when comparted to Jamaat-e-Islami’s more radical Islamist ideology. Jel subtly advocated the implementation of Islamic laws and for a limited role for women in the workforce and the party’s leadership. While the party has emerged as the main opposition, its vision for Bangladesh does not align with the country’s cultural syncretism and secularism, something Hasina was credited with protecting. For an aspiring youth who led a movement against Hasina regime and toppled it, the Jamaat-led government would have been another challenge, taking the country backwards.

Second, the youth activists that led the Gen Z movement were expected to step into leadership roles after toppling the Hasina government. Unfortunately, youth leadership—despite the emergence of figures like Nahid Islam during the July Movement—failed to consolidate into a credible political alternative to BNP. After a brief role as an advisor in the Yunus-led interim government, Islam and his colleagues founded the National Citizens Party (NCP) in February 2025. But with only a year before the election to build a grassroots base, the NCP struggled to operate on its own. Instead, it decided to join hands with Jel in a risky political gamble that ultimately failed: Many of the young voters that made up the NCP’s base remain wary of JeI’s regressive approach towards girls and women. While Nahid secured a seat in Dhaka-11, his party remains in the single digits after contesting just 30 of the 299 seats up for grabs in Parliament.

Therefore, what might have been an opportunity for the Jel to present a reformist face instead became a setback for the NCP, allowing BNP to attract youth voters instead. For youth, this election presented an opportunity to build a Nooton Bangladesh (new Bangladesh), but choices before them were still limited to BNP and JeI, with NCP still struggling to define a viable national role.

Another factor that led to BNP’s success at the polls was their ability to consolidate the Hindu minority vote, which constitutes approximately 10% of the national total. Minorities have a key role in Dhaka’s political calculus and have been a stronghold for the Awami League, as Hasina was seen as a strong advocate of Bangladesh’s secular structure. However, violence against minorities in Bangladesh has remained a challenge, and, in the absence of the Awami League, minorities were wary of Jamaat’s hardline approach, opting instead the BNP.

With results out and BNP set to lead the new government, party leader Tarique Rahman will have a huge mandate to deliver, including reforms to the July Charter, which was put to a vote during the election. Voters responded positively to the charter’s implementation, and it is set to be put through a parliamentary process under the BNP government, which may further work on it before giving it a final nod. The mandate will play a key role in shaping Bangladesh’s religious outlook—between secularism and radical Islam—and will be impactful in shaping regional engagement, especially with India.

“Bangladesh First” Foreign Policy?

— By Farwa Aamer

Bangladesh has concluded one of its most consequential elections in decades, following the student-led July 2024 uprising and a fragile interim phase. That a reform-minded electorate returned a party rooted in dynastic politics is notable. But the mandate reflects fatigue with the previous order and a clear refusal to allow the far right to consolidate ground.

Foreign policy will test the new government’s maturity. Relations with India hit a nadir after Sheikh Hasina’s ouster and her continued presence there. The BNP’s almost “Bangladesh First” like rhetoric suggests repatriation demands and tougher positioning on border issues may remain in play. Yet geography imposes limits. The two countries share a long, porous border, energy interdependence, critical water-sharing frameworks, and substantial trade ties that anchor Dhaka to New Delhi. A pragmatic reset is in the interest of both sides. India has already signaled willingness to work with a newly elected government, and a proactive outreach to a BNP-led administration is likely.

With Pakistan, ties have been quietly warming. Trade has resumed and discussions around potential JF-17 procurement point to expanding defense cooperation. Bangladesh may find space to maintain workable relations with both India and Pakistan, balancing rather than choosing.

China will remain central. It is Bangladesh’s largest trading partner and has investments across infrastructure, energy, and industrial projects, alongside agreements supporting drone manufacturing. China has also benefited from any perceived vacuum in Western engagement, consolidating its footprint across South Asia. If India-Bangladesh ties remain strained, Beijing’s leverage will only grow.

That dynamic draws in the United States. Recent tariff reductions to 19 percent and duty-free access for apparel using U.S.-produced cotton and man-made fiber provide tangible relief to Bangladesh’s garment sector. The U.S. objective is clear: sustain commercial interdependence while limiting Dhaka’s structural drift toward Beijing.

Looking ahead, the new government’s task will be to leverage relations with all major powers to Bangladesh’s strategic advantage, while avoiding overreliance on any single partner.

Dive Deeper with ASPI:

• Register for our upcoming webinar, “Bangladesh After the Vote: Democracy, Reform, and Foreign Policy Outlook”, which will be held from 9-10am EST on February 19. The panelists will include Dr. Fahmida Khatun, Dr. Sreeradha Datta, and Ambassador Shahed Akhter. Farwa Aamer will moderate.

• Read Bryanna Entwistle’s analysis of February 8 Thai elections, “Establishment Forces Prevail as Thailand’s Progressives Fall Short.”

• Read Hunter Marston’s coverage of the recent elections in Myanmar, “Military Elections Will Not Resolve Myanmar’s Deeper Problems”.

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Editor’s Introduction: Hi there. In today’s issue of Asia Policy Brief, ASPI’s Director of South Asia Initiatives Farwa Aamer assesses what lies ahead for upcoming elections in Asia, particularly in Thailand, Japan, Bangladesh, and Nepal. Can electoral politics deliver political legitimacy and rebuild public trust in leadership?

State of Affairs: Bangladesh, Thailand, Nepal, and Japan head to the Polls

With the start of 2026, another election season is unfolding across Asia. Following polls held in Myanmar last month, voters in Bangladesh, Thailand, and Japan are scheduled to go to the ballot box in February, with Nepal set to follow in March.

• Thailand’s February 8 election constitutes a significant test for Prime Minister Anutin Charnvirakul and his Bhumjaithai Party (BJT). The vote is closely tied to his efforts to preserve incumbency amid what appears to be a growing desire for political reform among the nation’s youth.

• In Japan, Prime Minister Sanae Takaichi, riding early momentum in office, is hoping the snap election will give both her leadership and the Liberal Democratic Party (LDP) a stronger mandate.

• Bangladesh’s February 12 polls will be the country’s first national election since the mass student uprising of 2024 that removed Sheikh Hasina from power.

• Finally, Nepal’s March election follows a Gen Z–led movement that toppled the previous leadership, driven by frustration over rising economic inequalities and a social media ban.

Together, these elections will be a measure of whether electoral politics can still deliver legitimacy, surmount deep structural barriers, and rebuild public trust in leadership.

Why It Matters: Instability and Demands for Change

Thailand

2025 was yet another tumultuous year in Thai politics, when Anutin Charnvirakul took office after his predecessor, Paetongtarn Shinawatra, was ousted over her handling of the border war with Cambodia. An unlikely coalition between Anutin’s conservative BJT and the progressive People’s Party (PP) cleared the way for Anutin’s victory, and BJT committed to calling a general election within four months and to initiating a process to amend the constitution. However, as the PP grew frustrated by what it perceived as Anutin’s limited willingness to follow through on these commitments, it threatened to bring a no-confidence motion. In response, Anutin moved to dissolve the parliament and call the election in February, presenting the decision as an effort to “return power to the people.”

The stakes in the upcoming election are high. Voters will not only choose among political parties but will also decide in a referendum whether Thailand should adopt a new constitution, with the outcome shaping the next steps in the reform process.

Anutin enters the race with the advantages of incumbency and has benefited from heightened nationalist sentiment following the Thailand–Cambodia border conflict. However, voters may prioritize domestic needs and political change, giving the progressive PP the upper hand. The PP—which won the popular vote in 2023, yet was blocked from forming a government by the military elite—is leading in pre-election polling, setting the stage for what could be an enormous and durable shift in Thai politics.

Japan

Japan is heading into a snap election, just three months into Takaichi’s tenure, to fill all 465 seats in the House of Representatives. The race features the LDP, the Japan Innovation Party in coalition with the LDP, and the main opposition Constitutional Democratic Party now partnered with long-time LDP partner Komeito, among others. With the LDP polling relatively well, a solid victory would strengthen Takaichi’s leadership and reinforce the party’s hold on power.

Takaichi has gained support through a series of high-profile moves, including outreach to President Trump, backing a larger defense budget, and adopting a firmer nationalist stance toward China, notably in her comments on Taiwan. These positions have appealed to voters seeking a more assertive leadership style.

Still, economic concerns dominate the campaign. Rising living costs, housing affordability, and inflation weigh heavily on voters, alongside growing unease over the perceived impact of foreign residents and tourists. Younger voters have shown support for the snap election, but the outcome will ultimately test whether they and the broader electorate are ready to place their long-term confidence in Takaichi and an LDP still seen by some as a party of the old guard.

Bangladesh

The elections in Bangladesh will function as a test of whether Dhaka can restore political legitimacy and meaningfully address the demands of a new, proactive generation through democratic means. While polarization has long defined Bangladeshi politics, the current phase is marked by the prominence of a new political actor: the youth. In July 2024, the student-led protests erupted against a public sector job quota system but conveyed a much larger frustration with economic precarity, limited social mobility, and the concentration of power among entrenched political elites.

As the election approaches, voters are being asked to make two interconnected choices. Alongside selecting a new government, the country will effectively pass judgment on the July National Charter, a reform framework proposed by Dr. Muhammad Yunus’ interim government and endorsed by 25 political parties, designed to enhance constraints on executive power and improve accountability. A broad public mandate could lend momentum to reform; its rejection would leave the agenda entirely in the hands of the next government, with uncertain implications.

With the Awami League barred from contesting, the Bangladesh Nationalist Party enters the race as the most established contender. At the same time, the election is no longer structured around the historical two-party dominance. The student-led National Citizens Party is contesting the election in coalition with Jamaat-e-Islami, which leads a broader alliance including the Bangladesh Labour Party and the Liberal Democratic Party. A strong showing would mark a significant re-entry into mainstream politics after years of marginalization under Hasina’s rule. Yet the risk of renewed instability and post-election protests remain. The Awami League has warned that elections conducted without the party’s participation will face resistance.

Nepal

Years of corruption, ineffective decision-making, and entrenched elites have reinforced perceptions in Nepal that meaningful reform is difficult to achieve. Initial grievances over socio-economic inequality and shrinking opportunities for the country’s growing youth population escalated following former Prime Minister K.P. Sharma Oli’s social media restrictions last September, which were widely perceived as suppressing dissent. The resulting “Gen Z” movement protests quickly expanded beyond specific policy disputes, signaling a generational demand for broader political change. This mobilization played a key role in ending Oli’s tenure and paved the way for Nepal’s first interim female prime minister, Sushila Karki.

Yet nearly five months later, structural challenges remain, economic opportunities are limited, and citizens feel that leadership is still distant from pressing societal concerns. The gap between formal governance structures and public expectations highlights the difficulty of translating political turnover into tangible change.

The March 5 election underscores both the vibrancy and complexity of Nepal’s political arena. With 3,484 candidates from 68 parties, including independents, the contest is highly fragmented. At the same time, four former prime ministers are seeking office again, suggesting that while the political stage is open to new participants, established figures continue to hold significant sway. The election will test whether Nepal can move beyond cyclical instability to achieve meaningful institutional and policy reform or whether familiar patterns of governance and elite dominance will persist under new leadership.

What to Watch: Stakes and Signals

Beyond outcomes across these elections, watch how new or returning leaders translate mandates into reforms. Their ability to address youth aspirations and respond to public demands in the first months will signal whether these elections can retune the political ideology and strengthen democratic legitimacy or will yet again reinforce old patterns.

Leadership transitions will also have important implications beyond domestic politics. In Thailand, attention will focus on how the incoming government navigates the border tensions with Cambodia. A nationalist or uncompromising stance could strain relations with the United States, which has invested in maintaining the ceasefire. In Bangladesh, the new government’s relationship with India will be critical to watch, as New Delhi is looking for a reset in bilateral ties. Equally important will be Dhaka’s posture toward China and Pakistan, balancing economic and strategic partnerships in a complex regional landscape. How the new government manages these regional and economic partnerships will have a direct impact on Nepal’s development and ability to navigate political leverage.

Dive Deeper with ASPI

• Join us on February 19 for a webinar on “Bangladesh After the Vote: Democracy, Reform, and Foreign Policy Outlook,” moderated by Farwa Aamer.

• Watch Farwa Aamer in conversation with Shah Rafayat Chowdhary, Tanuja Pandey, and Krystle Reid Wijesuriya on “South Asia’s Youth Moment: A New Generation Rewriting the Region’s Politics and Shared Future.”

• Watch Emma Chanlett-Avery in conversation with Mireya Solis and Keiko Iizuka on “Unchartered Territory: The Japan-U.S. Alliance Navigates New Challenges.”

• Follow “The Ballot Box: Why Elections Matter for Asia” for timely updates, in-depth insights, and expert analysis on elections and political transitions across Asia. ASPI’s latest Country Election Brief features Dr. Hunter Marston on how “Military Elections Will Not Resolve Myanmar’s Deeper Problems.”

Editor’s Introduction: Hi there. In today’s issue of Asia Policy Brief, Rorry Daniels, Managing Director of ASPI; Farwa Aamer, Director of South Asia Initiatives; and Emma Chanlett-Avery, Director of Political-Security Affairs, unpack what President Trump’s first year back in office can tell us about the direction of his Indo-Pacific strategy in 2026.

State of Affairs: A New Approach

The first year of President Trump’s second term saw global market volatility, strained ties with allies and partners, and heavy use of presidential authority. The 2025 U.S. National Security Strategy calls for a readjustment of U.S. military presence to focus on combating drug trafficking in the Western Hemisphere, while urging allies in the Indo-Pacific and Asia to increase their contributions to deterrence burden-sharing in their respective regions. The document also no longer identifies China as the U.S.’ foremost strategic competitor. Shortly after the release of the latest NSS, the White House announced the U.S.’ withdrawal from 66 international organizations.

As the first year of Trump’s second term comes to a tumultuous end with unprecedented U.S. military intervention in Venezuela and threats against Greenland, the most important question facing the United States and its global partners is not what Trump has accomplished thus far—it is whether 2026 will mark a permanent shift in the nature of U.S. strategy and leadership in its 250^th year of independence. ASPI’s security and diplomacy experts focus on what Trump’s strategy in the Indo-Pacific will look like in the coming year.

What It Matters: Implications for the Indo-Pacific Region

Evolution of Great Power Competition – Rorry Daniels

The first year of the second Trump administration built on the tenets of his first term—power is fungible across the economy, military, and political sectors; is meant to be wielded by strong leaders; and ought to be aggressively used to advance the national priorities identified by the president. However, while the first Trump term was characterized by direct confrontation with the other great powers, the emerging modus operandi of the second term is to seek deals with the other major powers while pursuing U.S. power projection in situations where other big powers are unlikely to intervene.

The bombing of Iran’s nuclear sites, the targeting of ships in South America and the subsequent takeover of Venezuela, threats to Greenland’s sovereignty, and other recent maneuvers all seem to lay within the threshold of tolerance by the international community.

Meanwhile, major power diplomacy is on the rise, particularly between the U.S. and China but also with Russia, the EU, and India. Despite tariff escalation and economic security restrictions levied or threatened against each of these large powers, the Trump administration has maintained open lines of communication on their respective priorities and red lines. For example, Taiwan has not engendered special treatment despite the unique history of the unofficial relationship and escalating concerns of a hostile takeover. On the contrary, the Trump administration paused transit visits for Taiwan’s leader; concluded a trade deal with Taipei months after other important U.S. partners in Asia; and reportedly called for Japan’s Prime Minister to temper comments on Tokyo’s interests in Taiwan’s defense after taking a call with Xi Jinping. President Trump seems to be prioritizing a deal with Beijing over traditional U.S. policy interests in the cross-Taiwan Strait status quo.

While this administration has no issues confronting major powers on economic matters, it has carefully chosen its security, political and military targets to avoid direct confrontation. The rules-based order, if not over, is at least on hiatus. What remains to be seen is whether the Trump administration can continue calibrating against non-intervention in U.S. affairs when the U.S.’ own intervention is flinging farther and farther afield.

Economic Coercion and Leverage-Driven Diplomacy – Farwa Aamer

Even before President Trump returned to the White House, he signaled his ambition of ending the Russia-Ukraine war within 24 hours of taking office, casting himself as a peacemaker whose legacy would rest on resolving global conflicts and restoring America’s status as “the most powerful and most respected nation on earth.” While the Ukraine pledge remains unmet, the administration has highlighted successful U.S. mediation in eight global disputes—from India-Pakistan and Iran-Israel to the DRC-Rwanda and Thailand-Cambodia—in its 2025 NSS.

Among these, the India-Pakistan episode offers an important window into the tensions inherent in President Trump’s evolving mediation strategy. While Washington portrayed its intervention as decisive action that prevented potential nuclear escalation, India publicly dismissed this account. Meanwhile, Pakistan, keen to recast its position with Washington, embraced the narrative and even nominated President Trump for the Nobel Peace Prize. The result was a narrative gap that strained U.S.-India ties already under pressure from tariff threats and an unresolved trade deal.

But the friction has not stopped there: India has also absorbed the broader shockwaves of President Trump’s leverage-driven diplomacy. As the Trump administration poured greater political capital into the Ukraine conflict, New Delhi’s continued purchase of discounted Russian oil has drawn sharpened U.S. criticism. The imposition of additional punitive tariffs has only compounded the strain, resulting in a quick reversal for a bilateral relationship that had appeared on a high trajectory earlier in 2025. This reflects a broader paradox: President Trump’s efforts to assert U.S. influence in conflict zones risks alienating partners indispensable to Washington’s long-term Indo-Pacific strategy.

The administration’s heavy reliance on economic coercion in ending global conflicts has created a more transactional climate around conflict diplomacy. And If 2025 is any indication, U.S. mediation efforts in 2026 could lean even more on calibrated threats tied to trade, investment, and technology access.

Multilateralism Sans Washington: Middle Power Diplomacy – Emma Chanlett-Avery

The Trump administration’s contempt for global cooperation is not new, nor is its skepticism of the value of security alliances, but those instincts accelerated early in 2026. The operation in Venezuela, which put an emphatic stamp on the Trump administration’s intention to prioritize the Western Hemisphere in its foreign policy agenda, was swiftly followed by the U.S. government withdrawal from 66 international organizations. Despite a presidential tour of Asia in October that resulted in several trade and critical mineral deals, Asian allies remain unsettled as they adjust to Trump’s renewed America First approach. Japan and South Korea, particularly, have been battered by tariff negotiations and expectations that they invest billions in the United States. The public silence from the White House after Takaichi’s spoke of Japan’s obligation to come to Taiwan’s defense further reinforced the sense that U.S. alliance commitments are unreliable.

Fueled by this fear, middle powers in Asia have reached out to each other to improve their security, drive trade and economic growth, and salvage multilateral institutions that promote global norms and rules. Bilateral meetings among Japan, India, Australia, and South Korea’ leaders have flourished, as well as outreach to European countries. Security cooperation has strengthened: Japan has signed visiting forces agreements with the Philippines and acquisition pacts with India; South Korean defense and technology deals with European and ASEAN partners have expanded; and Indonesia and Australia have upgraded their economic partnership and championed ASEAN centrality. Economically, many middle powers are setting the agenda for regional trade flows through pacts such as the CPTPP and RCEP. Meanwhile, multilateral groupings like the Quad, the G7, the G20, and NATO’s Indo-Pacific 4 provide further venues for middle power cooperation even if the United States retreats.

What to Watch: Is the Shift Permanent?

• The U.S.-China relationship has oscillated so wildly in 2025 that it’s difficult to assess the durability of the agreement reached in Busan, much less the long-term implications for the relationship. The second Trump administration now has a roadmap of sorts for conducting diplomacy with China, including a list of priority areas, a timeline of key deliverables, and a structure for negotiation that mirrors past practice (though with a much narrower brief). Is this a “New Type of Major Power Relations,” and if so, what type? What are both sides’ expectations on the scope of diplomacy moving forward? How will Beijing exert its influence and fill the gap as Washington retreats from multilateralism?

• Will U.S. allies and other regional powers abandon the hub-and-spoke approach to Indo-Pacific security and deepen defense cooperation without U.S. facilitation? Will this cooperation provide sufficient deterrence to prevent regional powers from pursuing autonomous defenses, including nuclear breakouts?

• Can peace settlements achieved through economic pressure mature into durable political agreements, or will they remain fragile ceasefires crafted to minimize friction with Washington? Whether parties move toward institutionalized conflict-management mechanisms will be a key indicator of lasting U.S. impact. Also, the administration’s fusion of conflict mediation with resource-security objectives bears close watching as it could very well define the new age of U.S. foreign policy and partnerships.

Dive Deeper with ASPI:

• Join us in New York City on January 27 for an in-person program on “Unchartered Territory: The Japan-U.S. Alliance Navigates New Challenges,” featuring an expert panel discussion moderated by Emma Chanlett-Avery.

• Read Lyle Morris’ recent op-ed for Channel News Asia, “China’s Foreign Policy Calculus Goes Beyond the Current White House Occupant.”

• Read Farwa Aamer’s analysis of Washington’s strategic opportunity to link the Quad Critical Minerals Initiative and Pax Silica.

• Listen to a recent episode of Asia Inside Out with former chief U.S. negotiator for the Paris Climate Agreement, Todd Stern, in which he unpacks the shifting geopolitics of climate diplomacy following the U.S.’ withdrawal from the Paris Accords.

Editor’s Introduction: Hi there, and Happy New Year! In today’s issue of Asia Policy Brief, ASPI’s Director of Trade, Investment, and Economic Security Jane Mellsop assesses Trump’s tariff actions in 2025 and looks ahead to implications for 2026, a midterm election year for the United States.

State of Affairs: Tariffs Begin to Move Off Autopilot

In many respects, 2025 was the year of the tariff. Between new ‘reciprocal’ tariffs, sectoral tariffs, and tariffs imposed for foreign-policy reasons, the average U.S. applied tariff went from 1.5% in 2022 to almost 16% by November. This puts the U.S. tariffs at their highest levels since 1943 and moves the U.S. tariff rate more in the zone of developing, rather than developed, countries.

However, as the year drew to a close, we began to see signs of President Trump retreating from his automatic reach for high tariffs at whim. In November, President Trump excluded more than 200 mainly agricultural products from the reciprocal tariffs, largely in response to a growing consumer backlash. In December, he also announced delays in applying some tariffs—a one year postponement for higher tariffs on upholstered furniture, kitchen cabinets, and vanities, as well as a delay until June 2027 for tariffs on Chinese semiconductors following the conclusion of a lengthy Section 301 investigation. Furthermore, his 10% threat of additional tariffs on Canadian imports in October failed to materialize. President Trump also did not slap a slew of new tariffs on the EU in response to their ‘discriminatory’ digital taxes and other regulatory policies, with USTR instead referring to possible fees or restrictions on foreign services. And the trade truce with China resulted in the tariffs hikes on Chinese imports ending the year at 20%, considerably lower than the 145% it had escalated to in Spring. These moves came about as opinion polls suggest that domestic support for tariffs is falling, with certain Republican Congressional members expressing concerns as the mid-term elections draw nearer.

Why It Matters: The U.S. Economy in a Midterm Year

The costs of the tariffs are beginning to bite, and some adjustment to the aggressive tariff policy should soften the impact on the U.S. economy. For example, with more than $190 billion of food products imported in 2024, the tariff increases have translated to higher prices at the grocery store and in restaurants for the average American. Research released in November showed that imported goods were rising in price at roughly twice the rate of domestically produced goods, with many U.S. businesses forced to pay higher prices for steel, aluminum and other industrial inputs. Unemployment rates have also been rising, with November showing the highest since September 2021. Reducing reliance on tariffs as the ‘go to’ response could help bring back more certainty to the business environment, thereby encouraging investment and growth.

The recent signals from the administration that the President may be taking his foot off the gas on high tariffs will be welcome news for U.S.’ trading partners. 2025 was a roller coaster for U.S.’ allies and partners in particular, as they tried to manage their way through the trade policy upheaval while keeping their relationships with the Washington intact. Some stabilization of U.S. tariff policy in the year ahead will allow partners and allies some breathing space, with tariff delays or product exclusions important wins for their exporters. A more measured U.S. approach in 2026 also increases the potential for partners interested in working with the U.S. to address broader trade and economic challenges where there are shared interests. These could include building more durable access to critical minerals and responding to China’s policies that flood the global market with unfairly subsidized goods.

What to Watch: How Much Will the Tariff Playbook Evolve?

More product exclusions? U.S.’ trading partners and businesses will continue to press for further product exclusions to the tariffs, especially now that the door has been opened. If the economic impacts of the tariffs continue to grow, there could well be more exclusions announced over the coming months, especially as the mid-term elections loom closer and affordability concerns heighten.

More delays in tariff imposition? President Trump initiated 12 investigations under Section 232 in 2025, with final outcomes still outstanding in most of these, including semiconductors, critical minerals, polysilicon, robotics and industrial machinery, and wind turbines. Will the President delay the imposition of any tariffs from these investigations, favor a non-tariff response to address the national security concerns, or take no action?

Will the tariff truce with China hold? The tariff truce reached with Beijing is fragile. In the lead up to President Trump’s visit to China in April, and the expected visit of President of Xi to the U.S. to follow, both sides will have a keen interest in avoiding any major friction in the relationship. Will the temporary truce on tariff escalation hold for the year? Will it be further extended, or made any more permanent, when the leaders meet? Or will trade tensions or other issues emerge in the coming months to derail efforts to stabilize the relationship?

Will the IEEPA tariffs be struck down by the Supreme Court? A decision is expected to be made early this year by the Supreme Court on the use of the International Emergency Economic Powers Act (IEEPA) as the basis for the imposition of reciprocal tariffs. Should the Surpeme Court rule against IEEPA, the administration seems ready to turn to other statutes to keep tariffs in place. However, other statutes have limitations, including the level of tariff hikes and the need for public input. This could lead to lower tariff rates, at least in the short term.

Dive Deeper with ASPI:

• Read Wendy Cutler’s recent op-ed in Barrons, “Trump Is On a Win Streak in His Trade War. Will It Last?”

• Read Shay Wester’s latest report, “Best Practices for Trusted Cloud Adoption and Interoperability in APEC Economies.”

• Watch a panel discussion on “What’s at Stake for Asia in the USMCA Review?”, moderated by Wendy Cutler.

Editor’s Introduction: Hi there. In our last issue of Asia Policy Brief for 2025, we provide an end-of-year review of our newsletters on Asia-Pacific policy issues—informed by ASPI’s experts from around the world. Please stay tuned for what’s ahead in 2026 and wishing all a restful holiday season and a healthy New Year. Thank you for subscribing to ASPI on Substack!

State of Affairs: 2025 Was No Easy Year for Asia

Countries across the region navigated a tumultuous first year under President Trump’s second term in office, which was capped off by a trip to the region in October. Threats of “reciprocal” tariffs strained ties with longtime allies and partners alike, forcing governments like Tokyo, Seoul, and New Delhi to enter trade negotiations with the U.S. and navigate new phases in respective bilateral relations. China was subject to some of the steepest tariffs for the U.S. and spent the year juggling escalations in the trade war with deepening demographic and economic strains at home. Still, Chinese President Xi Jinping was able to further consolidate his grip on power at forums like the Fourth Plenum. In Southeast Asia, border fighting between Thailand and Cambodia escalated into an all-out war, testing ASEAN mediation abilities as it navigated other challenges like a proliferation of scam centers, a surge in exports from China, and a civil war in Myanmar.

Across Asia, several countries experienced leadership transitions, with some, like Nepal, resulting from youth uprisings and others, like South Korea, from impeachment and snap elections. AI adoption emerged as a significant policy priority for the region, as did adapting to and addressing the worsening climate crisis. Throughout it all, Asia Society Policy Institute’s experts helped unpack developments across the region.

Why It Mattered: ASPI Addresses Major Policy Challenges in the Region

Starting in June, ASPI began to use Substack as a method to deliver timely analysis straight to subscribers. Below are our takes on some of the important stories to emerge from Asia in the second half of 2025.

On Trade and Technology:

• As President Trump’s initial 90-day deadline for trade talks with the U.S. approached, we explained why the U.S. securing full-fledged deals with trading partners by the deadline was unlikely.

• We also wrote about how a lack of progress on trade negotiations between the U.S. and India was testing bilateral ties. A key source of friction is India’s continued imports of Russian oil, and ASPI experts explained why New Delhi is unlikely to curb its relations with Moscow anytime soon in an edition of Asia ASAP, dedicated to unpacking President Vladimir Putin’s December visit to New Delhi.

• The pursuit of “AI sovereignty” across Asia presented challenges in 2025, but we argued that regional frameworks provide unique opportunities for Southeast Asia’s technical agency.

On Security and Diplomacy:

• Following a devastating terror attack in Kashmir earlier in the year, deadly fighting broke out between India and Pakistan. We explained why the ceasefire was unlikely to bring about lasting peace and how the conflict reflected a recalibration of strategic alignment from both sides.

• Our experts took stock of the state of U.S. alliance relations with Japan and Korea in light of Trump’s tariffs and his renewed emphasis on burden sharing, analyzing South Korean President Lee Jae Myung’s visits to Tokyo and Washington and prospects for improved trilateral U.S.-Japan-ROK relations.

• Asia saw a wave of consequential leadership transitions in 2025. In Thailand, as fighting intensified along the Thai-Cambodian border, a leaked phone call between Prime Minister Paetongtarn Shinawatra and Cambodian strongman Hun Sen precipitated her ouster. In Japan, the resignation of Prime Minister Shigeru Ishiba opened the door for Tanae Sakaichi’s election, but not without drama that briefly threw her bid into flux.

• As countries re-evaluated relationships with the U.S, multilateral gatherings became key venues for middle power engagement. This year’s G20 convening highlighted the promise of multilateralism, even without the U.S.’ presence. But Trump’s presence at the ASEAN summit still commanded attention.

On Climate Resilience:

• China’s new climate targets drew scrutiny after a cautious NDC announcement in September, but we explained how Beijing has become the world’s clean energy powerhouse and should not be counted out as a leader in climate action.

• Following COP30 in Belem, Cyclone Ditwah caused catastrophic destruction and loss of life in South and Southeast Asia. We broke down how the urgency to adapt is rising faster than the ability of vulnerable countries to keep pace in addressing severe climate impacts.

On China and Cross-Strait Relations:

• Over the summer, Taiwan’s leader Lai Ching-te attempted to recall opposition legislators and had plans for a U.S. transit on the way to Latin America reportedly cancelled by Washington. We explained how these events were likely to complicate U.S.-Taiwan ties and broader cross-Strait relations.

• When Presidents Trump and Xi Jinping met in Busan in October, ASPI experts provided both rapid and long-form analysis of the summit, which they believed helped stabilize the bilateral relationship by turning down the temperature on recent escalatory trade measures.

What to Watch: Looking Ahead to 2026 and Beyond

• China 2026: Using ASPI’s Center for China Analysis’ unique “inside-out” approach to independent, policy-relevant analysis, this third annual flagship report forecasts the most critical developments to watch in China during 2026 and beyond. Across the report, CCA experts agree that “China in 2026 is ascendant yet constrained, powerful yet fragile, ambitious but anxious.”

• The Ballot Box: Why Elections in Matter for Asia: To understand election results out of Nepal, Bangladesh, Myanmar, and Thailand in the year ahead, keep an eye on our Ballot Box hub. As the world rapidly changes, Asia stands at a critical crossroads in global leadership.

• APEC Cloud Transformation Initiative: Cloud computing has the ability to transform economies and is expected to be a central part of the conversation when APEC is held in China next year. Our trade team will continue to highlight key challenges, share best practices, and support APEC economies in the lead up to APEC 2026 as they work to accelerate cloud adoption.

• AI Impact Summit: As India gears up to host the AI Impact Summit in February, our AI team has and will continue to provide analysis of and recommendations for AI adoption across Asia. Check out the readout from an official pre-event summit ASPI Delhi convened to discuss India’s recent announcement of Digital Data Protection Act Rules and AI Governance guidelines.

Dive Deeper with ASPI:

• Subscribe to South Asia Snapshot to follow key geopolitical, economic, environmental, and social happenings in the region, and stay up to date with all our South Asia-focused events, publications, and analysis.

• Check out “PLA Watch” from our Center for China Analysis. Drawing from primary Chinese-language sources, the monthly newsletter tracks the People’s Liberation Army (PLA), its activities, strategies, and evolving capabilities.

• Listen to Asia Inside Out, our flagship podcast, on your favorite listening platform. Each month we bring together ASPI experts and outside guests to take you beyond the latest policy headlines and provide an insider’s view on regional and global affairs.

Editor’s Introduction: Hi there. In this week’s Asia Policy Brief, ASPI Delhi’s Assistant Director of Climate Nishtha Singh breaks down the tension between climate finance and ambition following the COP30 Summit in Belém and the recent catastrophe wreaked by Cyclone Ditwah on South and Southeast Asia. The urgency to adapt is rising faster than the ability of vulnerable countries to keep pace in addressing severe climate impacts.

State of Affairs: Negotiations Stalled Between Ambition and Finance

COP30 witnessed a sharp political deadlock. Developing countries pushed for enhanced ambition from the Global North under Article 9.1 of the Paris Agreement, requesting developed countries to scale up their provision of climate finance. Developed countries, meanwhile, insisted on greater mitigation commitments from the Global South as part of offering additional financial pledges.

This tension stems partly from the previous year’s COP29 discussions on the New Collective Quantified Goal (NCQG), which included a headline USD 300 billion per year target for climate finance to developing countries and a broader effort to reach USD 1.3 trillion annually by 2035. The declaration sparked criticism from several developing countries, including India, which argued that the proposal failed to reflect historical responsibility and existing needs.

Then came Cyclone Ditwah, resulting in over 600 deaths and hundreds more still missing. Striking South and Southeast Asia just days after COP30 concluded, the disaster highlighted the stark mismatch between the pace of climate impacts and that of climate finance mobilization. Asia already faces some of the world’s highest climate losses, suffering USD 36 billion annually from climate and disaster events. According to the World Meteorological Organization (WMO), extreme weather has affected 50 million people in the region in 2022 alone.

The contrast between stalled climate negotiations and Ditwah’s destruction highlights a widening gap between commitment and capability. COP30’s agreement to triple adaptation finance by 2035 is a step forward, but climate impacts are intensifying now. The urgency to adapt and decarbonize is rising faster than the ability of vulnerable countries to mobilize the resources, institutions, and resilience needed to keep pace.

Why It Matters: Expensive, Loan-Heavy Climate Finance Is Deepening Debt Distress

Climate finance remains heavily loan-dependent. According to the OECD’s 2024 assessment, 69% of public climate finance from developed to developing countries is delivered as loans, while grants make up just 28%.

This model is increasingly misaligned with the needs of vulnerable economies and has contributed to a growing climate-debt trap. Countries borrow to rebuild after climate disasters, yet repeated shocks push them deeper into fiscal stress, reducing the space for long-term resilience planning.

South Asia offers clear examples:

• Pakistan: After the 2022 floods affected 33 million people and caused USD 30 billion in damages, Pakistan borrowed heavily to finance reconstruction, worsening its debt-distress status.

• Bangladesh: One of the world’s most climate-exposed countries, Bangladesh sees annual climate losses exceeding 1% of GDP, contributing to rising public debt.

A deeper inequity underlies this challenge: developing countries face sovereign borrowing costs up to 8 times higher than developed economies. Between 2016 and 2022, the average cost of climate-related borrowing for developing countries ranged from 3.5% to 7%, compared to near-zero rates in the EU and Japan.

Climate finance is therefore not only loan-heavy, but it is also more expensive, precisely for the countries that can least afford it. The more vulnerable a country is, the more it pays for the capital needed to recover.

The outcome is clear: loan-based climate finance risks becoming counterproductive, increasing fiscal fragility and ultimately limiting climate ambition rather than enabling it.

Domestic Climate Finance Tools Are Growing—But Disasters Derail Transition Plans

Several South Asian countries are building domestic climate-finance systems to enable climate mitigation and adaptation, including carbon markets, green bonds, and energy-transition funds. India’s recently launched Carbon Credit Trading Scheme (CCTS), and similar developments in countries such as Indonesia, Malaysia, Vietnam, etc., represent a broader regional trend toward self-generated climate finance.

Yet this progress remains fragile. Climate disasters regularly divert domestic funds away from transition investments and toward emergency response: This structural vulnerability, where every major disaster collapses fiscal space, risks derailing mitigation, competitiveness, and long-term resilience efforts across the economy.

Unilateral Trade Measures and Climate Justice

Unilateral Trade Measures (UTMs) were a key topic in Brazil’s presidency-led discussions in Belém. For developing economies already grappling with mounting climate losses and costly adaptation needs, measures such as the EU’s Carbon Border Adjustment Mechanism (CBAM) raise serious concerns about equity and climate justice.

UTMs introduce new compliance costs for exporters in countries already paying far more for climate impacts and climate finance. They also appear inconsistent with the Common But Differentiated Responsibilities (CBDR) principle, which underpins the obligation for financial and technological support from the Global North to the Global South.

Exporters in developing countries often lack the resources or access to clean technologies that firms in advanced economies possess. Cyclone Ditwah, arriving amid these debates, reinforces an essential question: Can climate-vulnerable economies fairly meet new trade-related carbon obligations while simultaneously managing escalating climate disasters with insufficient support?

Article 3.5 of the UNFCCC is clear: measures taken to combat climate change, including unilateral ones, must not constitute arbitrary or unjustifiable discrimination, or disguised restrictions on international trade.

COP30 created a pathway for addressing these tensions: three annual dialogues on trade scheduled for Bonn in 2026, 2027, and 2028. Given the accelerated pace of net-zero policy adoption, this debate is only likely to intensify.

What to Watch: Can Adaptation Finance Be Scaled Using New Instruments?

Traditional carbon markets have focused almost entirely on mitigation. But COP30 revived a key question: could market-based instruments—similar to Article 6 markets—help scale adaptation finance?

Developing countries have demanded that a minimum 50%, striving for 75%, of the USD 300 billion target be allocated to adaptation planning and implementation. Yet OECD mobilization analyses show that most private finance leveraged by development-finance institutions flows toward mitigation, not adaptation.

To close the adaptation gap, countries are exploring options such as:

• Outcome-based adaptation credits, tied to measurable resilience outcomes.

• Regional adaptation marketplaces, enabling countries to pool demand and create bankable project pipelines.

• Resilience bonds, already used in the United States and Mexico.

• Sovereign catastrophe bonds, such as the USD 225 million bond issued by the Philippines in 2019.

As climate impacts intensify, scaling adaptation finance will require shifting from ad hoc, loan-based instruments to predictable, rules-based, and innovative financing mechanisms.

Dive Deeper with ASPI

• Explore one of ASPI’s featured initiatives, “Developing Emissions Trading Systems in Asia,” a comprehensive and interactive hub that offers an in-depth look at ETS developments across Asia.

• Read Alistair Ritchie’s and Nishtha Singh’s paper on “Strengthening India’s Carbon Credit Trading Scheme by Inclusion of the Power Sector.”

• Read an op-ed by Li Shuo on “Ten Years After Paris Agreement, Climate Action Faces a Reckoning,” featured in Channel News Asia.

On Friday, December 5, Russian President Vladimir Putin visited New Delhi for an annual meeting between Russia and India, marking the first time that he has visited India since Russia’s invasion of Ukraine. The bilateral summit comes as Indian Prime Minister Narendra Modi navigates increasing pressure from the United States on Indian imports of Russian oil, reflecting New Delhi’s greater challenge of balancing its own strategic interests with those of its partners across the globe. The summit provided a platform for the two countries to reach a slew of economic and commercial agreements and showed that despite external pressures from Washington, neither India nor Russia has the intention to dilute their relationship.

In this edition of Asia ASAP, Asia Society Policy Institute (ASPI) experts provide their rapid reactions to the summit’s outcomes. Subscribe for access to more expert analysis of breaking news events across the Asia Pacific.

Modi’s Careful Strategic Calculus

By Farwa Aamer, Director of South Asia Initiatives

The Modi-Putin meeting became a test of how much strategic room India still has to balance between Washington and Moscow. India reduced some Russian oil inflows to ease tensions with Washington, yet it also needed to signal to Moscow that the partnership retains depth, particularly in people-to-people ties, defense cooperation, civil nuclear energy, and long-term economic planning.

The optics of the meeting were undoubtedly warm, and though the deliverables were more modest than anticipated, the clearest progress came in economic cooperation. The overall approach suggests that India is trying to preserve its relationship with Russia, while gradually reshaping it in ways that reduce exposure to sanctions and geopolitical shocks.

Pressure did not come from Washington alone. Several European capitals voiced unease in the lead-up to the summit, adding another layer of complexity. India does not want to dilute its ties with Russia, both to avoid appearing susceptible to Western pressure and to prevent Moscow from drifting further toward Beijing at a time when India’s own relationship with China remains complicated. Yet New Delhi also has a potential U.S. trade deal on the horizon and ongoing negotiations with the EU, both of which it cannot afford to jeopardize.

In the end, the Modi-Putin meeting captured the central dilemma of India’s foreign policy today. India wants to maintain a broad network of strategic partnerships, but doing so now requires far more careful calibration. The Russia relationship remains important, as do India’s economic and strategic ties with the West. The balancing act continues, but the frictions are more visible, and the space for smooth navigation is narrowing.

An Economic Summit in New Delhi

By Akshay Mathur, Senior Director, ASPI Delhi

This year’s India-Russia summit could be branded as an ‘economic summit.’ The launch of a new ‘Programme of Economic Cooperation’ as a roadmap to achieve the target of $100 billion in trade by 2030 defined the spirit of the negotiations.

For starters, fixing the trade imbalance is now a priority. Russia has had a $58.9 billion surplus with India in FY 2024-25—nearly one-fifth of India’s total trade deficit and second only to China. Going forward, Indian pharmaceutical, agricultural, and marine exports will be welcomed in Russia. Multiple references by both leaders to the FTA with the Eurasian Economic Union signaled their preferences for a regional approach towards trade.

At the Russia-India Business Forum, Prime Minister Modi made a clarion call to develop a “simplified, predictable mechanism” for conducting business, presumably to mitigate the sanctions imposed by the EU, UK and the United States. For instance, India cut oil from Russia by 38% in October 2025 as sanctions on Russian oil became stricter. The direct sanctioning of Nayara Energy, located in Gurjarat and in which Rosneft and other Russian companies have majority stakes, is also an area for concern for Delhi.

Therefore, it was no surprise that a focus of the meeting was on bilateral settlements through national currencies, interoperability of the national payment systems, financial messaging systems and central bank digital currency platforms, and mechanisms for insurance and reinsurance. President Putin reminded New Delhi that 96% of trade is already being settled through national currencies: Sber, a Russian bank, launched rupee-denominated letters of credit for Indian exporters this week. The Governor of Russia’s central bank was part of the official delegation, as was the CEO of Rosneft.

Moscow Puts Its Asia Diversification Drive on Display

By Lyle Morris, Senior Fellow on Foreign Policy and National Security at ASPI’s Center for China Analysis

Putin’s two-day visit to India is an important step in diversifying Russia’s relations in Asia. While China remains Russia’s most important trade and diplomatic relationship in Asia, India offers Moscow a neutral economic partner at a time of increasing isolation for Putin due to the war in Ukraine. In that sense, Putin’s high-profile meeting with Modi can be viewed as an effort to expand Russia’s relations with other Asian nations beyond China, to include providing a much-needed lifeline for Moscow’s economy.

A slew of economic, trade, and defense agreements were signed between the two leaders. But the two biggest takeaways from the meeting relate to energy and defense.

On energy, Putin said “we are ready to continue ensuring the uninterrupted supply of fuel for the rapidly growing Indian economy.” India’s foreign secretary Vikram Misri told reporters that the recent U.S. sanctions imposed on Russian oil were discussed, without specifying India’s position on its purchases. Putin desperately needs oil exports to continue to New Delhi, as India represents Russia’s second largest importer of crude shipments behind China.

Modi is in a difficult position. Increasing oil imports from Russia would expose India to continued U.S. sanctions, while decreasing imports would severely damage the most important avenue of economic cooperation between the two nations. However, it is likely that Modi will ensure oil flows continue, despite pressure from Washington.

On defense, Indian Defense Minister Rajnath Singh and his Russian counterpart Andrei Belousov on Thursday underscored strong bilateral military ties based on “a deep sense of trust, common principles and mutual respect.” Singh said India was committed to developing local defense manufacturing while Belousov said that Russia is “ready to support India towards becoming self-reliant in the field of defense production.”

In related news, Bloomberg reported that India will pay about $2 billion to lease a nuclear-powered submarine from Russia, finalizing delivery of the vessel after roughly a decade of talks. India expects to take delivery of the vessel within two years. Under the lease terms, the Russian attack sub cannot be used in combat, but will help Indian sailors train in nuclear-submarine operations as it builds its own vessels. This latter development is significant, as India remains Russia’s largest procurer of arms in Asia. While China-Russia defense cooperation continues to expand, India remains Russia’s most important defense partner in Asia.

Putin views India as an important bulwark in Asia that provides Moscow an alternative to Beijing. The recent visit to New Delhi succeeded in shoring up relations between India and Russia.

Dive Deeper with ASPI:

• Join us next week for a webinar on “U.S.-India 2025: Strains, Shifts, and the Road Ahead,” featuring Lisa Curtis, Akshay Mathur, and Jane Mellsop in conversation with Farwa Aamer.

• Listen to the latest podcast episode of Asia Inside Out, featuring Raja Mohan in conversation with Rorry Daniels on “Indian Foreign Policy and the Rebalancing of Asia.”

• Subscribe to South Asia Snapshot, a monthly newsletter by Farwa Aamer on key geopolitical, economic, environmental, and social happenings in the region.

Editor’s Introduction: Hi there. In today’s issue of Asia Policy Brief, ASPI’s Director of Strategy and Engagement Juliet Lee highlights the successes of middle power participation and sideline engagement at this weekend’s G20 Summit, and a win for multilateralism despite protests from the Trump administration.

State of Affairs: The U.S.’ Noisy Absence

This year’s G20 marked the first time an African nation has hosted the multilateral convening, yet the leadup to this historic gathering was overshadowed President Donald Trump’s shifting and inflammatory statements about the host country, South Africa. After erroneously accusing the South African government of seizing white-owned land and allowing the killing of white Afrikaners, Trump announced the U.S. was boycotting the summit. Shortly ahead of this weekend’s convening, Trump further fanned the flames by discouraging member countries from accepting a leaders’ declaration, traditionally issued at the end of the sessions. Nevertheless, South Africa’s President Cyril Ramaphosa broke with tradition by beginning the two-day meeting with the adoption of a 122-point declaration, stating that there was unanimous agreement among almost all of the members present (with one objection from the foreign minister of Argentina).

The absence of a senior U.S. official at the summit drew awkward questions about how South Africa would handle the ceremonial handover to next year’s host, the United States. Shortly before the start of the summit, the Trump administration made a last minute request that the acting U.S. Ambassador to South Africa, with the ranking of charge d’affaires, participate in the ceremony on behalf of Washington, which was declined by President Ramaphosa, who refused to “hand over to a junior diplomat.”

Why It Matters: Asia’s Middle Powers Carry On

Despite the Trump administration’s efforts to oppose the Summit’s agenda under South Africa’s leadership, especially the sections that were focused on climate change, the host country succeeded in securing a Leaders’ Declaration that was signed by some of the world’s richest and top emerging economies. The Declaration called for more attention to issues that particularly affect developing nations, including climate change, rising levels of debt and unfair borrowing conditions, and the green energy transition. The unanimity on display despite U.S.’ attempts to undermine the gathering highlighted the enduring strength and convening power of multilateral institutions, often characterized as ineffective because of their inability to build consensus, and middle power diplomacy in the face of ongoing geostrategic competition.

While the United States boycotted the summit, the other participating countries sought to advocate on behalf of developing nations while striking new deals with each other in a flurry of sideline diplomacy. The “middle powers” of the G20 grouping—particularly countries of Asia such as India, Indonesia, Japan, and South Korea—saw the opportunity to take on a larger, more influential role at the meetings. In the U.S.’ absence, many of these countries sought arrangements that allow them to balance engagement with both Washington and Beijing on issues spanning from security and trade to emerging technologies and critical minerals.

Further evidence of a push towards multilateral cooperation by Asian middle powers is the flurry of bilateral and trilateral agreements that came out of sideline engagements in Johannesburg. One of the most notable accomplishments was Modi’s bilateral with Canada’s PM Mark Carney, during which the two countries agreed to restart trade negotiations that would more than double bilateral trade through a Comprehensive Economic Partnership Agreement. This thaw in India-Canada relations comes after a diplomatic row that saw the removal of the countries’ top diplomats from each other’s capital, perhaps a sign that the two countries are seeking alternative paths forward as their respective relationships with Washington stall over ongoing trade and political tensions. Furthermore, Modi, Carney, and Australia’s PM Anthony Albanese also announced a new Australia-Canada-India Technology and Innovation (ACITI) Partnership that would deepen collaboration between partners across three continents and three oceans on emerging technologies, diversification of supply chains, clean energy, and adoption of AI.

The proposed G20 initiatives, particularly those from Modi, were in direct response to global challenges such as strengthening healthcare systems, upskilling workers along with the mass adoption of AI, and responding to climate-related disasters. Indonesian VP Gibran Rakabuming Raka stressed that all countries are entitled to determine their own designs and strategies for advancing development, and that no country has the right to impose its views on development upon others because “there is no one-size-fits-all model” for global cooperation. While the U.S. may not have participated, this year’s G20 Summit is evidence that the global order continues to spin without it.

What to Watch: Whither Unilateralism?

• G20 in 2026: U.S. officials have already claimed that the G20 under U.S. leadership will look very different: “We have whittled down the G20 back to basics,” according to U.S. Treasury Secretary Scott Bessent. After four consecutive Global South presidencies, how will a U.S. administration with an “America First” agenda bring together countries representing 85% of the world’s GDP and more than 75% of global trade? Who will be invited, and perhaps more importantly, who else might boycott in 2026, following the U.S.’ example this year?

• Don’t Forget China: China’s Premier Li Qiang, who led the Chinese delegation to this year’s G20, echoed Xi Jinping’s call for unity in tackling global economic challenges, warning against rising unilateralism, protectionism, and growing trade restrictions. China is set to host next year’s Asia-Pacific Economic Cooperation (APEC) Forum, another multilateral convening that President Trump skipped attending earlier this month. How will Beijing exert its influence and fill the gap as Washington continues to retreat from multilateralism? How will middle powers respond as many continue to pursue and implement trade agreements beyond relying on the U.S. and China?

• Is the Momentum Sustainable? Global interdependence, while presenting distinct advantages for developed countries, has not resulted in equitable benefits for emerging and developing economies. As the U.S. continues to wield unilateral, punitive actions, many countries around the world are seemingly seeking alternatives and rallying together on behalf of the global good. Following the successes of the G20, as well as the COP30 Summit in Belém where the Trump administration was also a no-show, can the multilateral momentum led by middle powers by sustained?

Dive Deeper with ASPI:

• Join ASPI in Washington, D.C. on December 16 for an in-person panel discussion on “Risks and Opportunities for the U.S.-Japan Alliance.”

• Read a recent Australian Financial Review op-ed by Taylah Bland on how “COP30 Escaped Echo Chamber Despite Trump No-Show.”

• Watch a recent panel discussion on “After Gyeongju: APEC 2025 Outcomes and the Future of Regional Cooperation,” moderated by Wendy Cutler.

• Read ASPI’s report, “Cementing the Quad in the Indo-Pacific,” written by Farwa Aamer and Emma Chanlett-Avery.

Editor’s Introduction: Hi there. In this week’s Asia Policy Brief, ASPI’s Managing Director Rorry Daniels asks three key questions following the Trump-Xi Summit in Busan last month: what is the nature of U.S.-China relations today; can the two sides maintain a “no surprises” expectation; and what more will be asked, and what more will be given as diplomacy between the U.S. and China moves forward into 2026 and beyond?

State of Affairs: A Durable Ceasefire?

Presidents Donald Trump and Xi Jinping met on October 30 in South Korea to codify a ceasefire in the U.S.-China trade war following months of negotiations that were punctuated by high-profile announcements of additional trade restrictions. The two leaders agreed to roll back these restrictions for at least one year; to suspend or halt additional investigations on both side in the trade, tariff, and tech spaces; and for China to take additional actions on fentanyl precursors as well as purchase key U.S. agricultural and forestry goods. Though both sides characterized the meeting as productive, with Trump giving it a 12-out-of-10 rating, key questions remain regarding the durability of the deal, U.S.-China relations on areas outside the scope of the deal, and what it all means for bilateral, regional, and global stability.

Why It Matters: Questions Remain, So What to Ask?

The U.S.-China relationship has oscillated so wildly in 2025 that it’s difficult to assess the durability of the agreement reached in Busan, much less the long-term implications for the relationship. Instead, here are three questions to consider as events unfold:

Is this a “New Type of Major Power Relations,” and if so, what type?

The second Trump administration now has a roadmap of sorts for conducting diplomacy with China, including a list of priority areas, a timeline of key deliverables, and a structure for negotiation that mirrors past practice (though with a much narrower brief). However, these parameters set the table for the period ahead, not the floor or ceiling for the relationship. Trump went into the meeting touting a “G2,” but the meeting did not produce a joint statement that suggests such a G2 with a unified view of its own relationship or how the world should work. Trump’s statement is best viewed as a factual observation—these two countries have the most power in the world—instead of a predictive theoretical lens in which the two countries make coordinated decisions regarding leadership of the rest of the world.

Nor is the relationship destined to overcome the so-called Thucydides trap, in which anxiety about a rising power prompts war with an established power—the purpose behind Xi Jinping’s articulation of a “new type of major power relations.” The reverberation of ups and downs in the bilateral relationship through global economic and security planning show that we are also not in a truly multilateral, G-zero world.

So, what is the nature of the U.S.-China relationship today? How will the two countries navigate a G2 structure in which they remain economically co-dependent while fiercely competing for absolute influence and power? Are the ceiling and floor of the relationship closer together, or are we facing a funhouse of different sized rooms and distorting mirrors depending on the issue?

Will leaders successfully devolve negotiating authority to mitigate policy surprises?

Both leaders, in their own ways, are willing to force their domestic political economy strategies on the rest of the world through industrial policy and weaponized interdependence. These are long-term, big-picture, top-down strategies to navigate transitions in the political economy regarding the changing tech and security landscapes, and they are often the source of friction between the two economies. The strategies can be accelerated or decelerated depending on leader-level priorities, but the ultimate destination—self-sufficiency and deference to power at home and abroad—aren’t going to change.

The challenge is that these strategies not only clash with the reality of economic interdependence and its effect on political economy, but they are now considered a negotiation tactic. At the end of the summit, the leaders basically agreed to walk back escalatory strategies and make minor gestures of goodwill. In other words, many of the deliverables erase, delay or lower trade restrictions that weren’t present at the start of negotiations.

What remains to be seen is whether this escalation and ceasefire pattern will continue as a new normal or if it can be confined to an adjustment period with a new U.S. administration. It’s also unclear to what extent new export controls, commercial investigations and other restrictions are seen as negotiation leverage or simply the culmination of ongoing process, poorly timed. Can the two sides set a ‘no surprises’ expectation and stick to it, despite bigger machinations at play in both bureaucracies? Or will we see another cycle of escalation to ceasefire to negotiation to escalation?

What are both sides’ expectations on the scope of diplomacy moving forward?

Both sides feel like they injected some goodwill back into the relationship, but what do the leaders believe these investments augur in the short and medium term? The readouts provide a sharp contrast into how the meeting was assessed by each side. The Chinese readout is narrative-based, focused on a vision for the long-term future of the relationship, and heavy on describing Trump’s praise for Xi Jinping’s leadership. The U.S. readout is action-oriented, heavy on deliverables, and describes the meeting as a win for the American people.

Both readouts support the mindset the leaders want to foster at home—they are in charge, they know what they’re doing, and they’re getting results. If the U.S. and China are locked in a long-term competition, both sides want to show they are on the winning path. However, to keep this momentum up will require continued success in implementing the deliverables as well as success in asking for more. What more will be asked, and what more will be given? What status quo would be mutually acceptable, and can it be reached? And how will what has primarily been a trade negotiation evolve to address other priorities like maritime territorial issues and Taiwan?

What to Watch: 2026 and Beyond

• A new cycle begins. The most stabilizing outcome of the summit was a notional timeline for assessing results and making continued progress. The two leaders not only committed their teams to monitoring compliance and holding further talks, while President Trump also announced his commitment to visit Beijing next April. With China hosting APEC next year, there is another opportunity in November to solidify bilateral agreements. These two opportunities are action-forcing moments for the two teams to get over the finish line.

• The world reacts—and has to press their own interests. The U.S.-China goldilocks era is over and may never return, when relations were not too hot and not too cold and therefore created space for the rest of the world to play the powers toward their own interests without fear of being forced to choose a side. Instead, this is an opportunity for the middle powers to foster and bolster a rules-based order, but it remains unclear if there is enough shared interests and collective will to balance the two enormous superpowers in tandem. Expect to see new and riskier balancing strategies emerge from the countries of Asia, while India makes a play for leadership of the Global South.

• Whither Taiwan? Taiwan was a very risky topic to raise at the actual meeting, given Trump’s tendency to speak off-the-cuff and his immediately prior meetings with Japan’s new hawkish prime minister. But the Trump administration did pay lip service to Beijing’s preferences on Taiwan before the meeting—curtailing a transit visit from Taiwan’s president, Lai Ching-te, and publicly stating the U.S. position that it does not support Taiwan independence. Do continuous U.S.-China negotiations put the U.S.-Taiwan unofficial relationship on ice for the duration? If not, how will Beijing use the negotiations to press its interests?

Dive Deeper with ASPI:

• Watch Wendy Cutler moderate an expert panel discussion that unpacked the 2025 APEC Summit’s outcomes; evaluated APEC’s path forward in addressing trade tensions, digital transformation, and supply chain resilience; and previewed China’s 2026 priorities.

• Watch an ASPI experts rapid reaction discussion—featuring Wendy Cutler, Shay Wester, Emma Chanlett-Avery, and Michelle Ye Hee Lee of The Washington Post—as they explored how President Trump’s trip to Asia could reshape U.S.-Asia relations and trade deals.

• Read ASPI’s first issue of Asia ASAP: Trump and Xi Meet in Busan, featuring expert commentary from Wendy Cutler, Rorry Daniels, and Neil Thomas.

On Thursday, U.S. President Donald Trump and Chinese President Xi Jinping met for a highly anticipated 90-minute face to face meeting in Busan, South Korea. The meeting marked the final engagement of Trump’s nearly week-long Asia tour, during which he also made stops in Kuala Lumpur for the ASEAN Summit and Tokyo. After the meeting with Xi, Trump announced that the two leaders had de-escalated their trade standoff, agreeing to a yearlong ceasefire that would roll back steep tariffs and reopen U.S. access to Chinese rare earth metals, among other things.

In this first edition of Asia ASAP, Asia Society Policy Institute experts provide their rapid reactions to the summit outcomes. Subscribe for access to more expert analysis of breaking news events across the Asia-Pacific.

A One-Year Trade Truce

- By Wendy Cutler

The long-awaited Trump-Xi meeting was an important step in stabilizing the U.S.-China bilateral relationship by turning down the temperature on recent escalatory actions by both countries for at least one year.

However, the announced outcomes do little to resolve underlying structural issues that are at the heart of bilateral economic tensions, including exports of excess capacity manufactured goods, excessive subsidies and other types of state support, and unfair trade practices. As such, this truce, while intended to last one year, may not even last that long.

Unlike the Phase One U.S.-China trade agreement concluded during Trump’s first term, this time around Beijing drove a hard bargain insisting on getting paid for every concession it made. Specifically, Beijing succeeded in getting the U.S. to reduce existing tariffs by ten percentage points, delaying for one year the export control affiliates rule and unwinding its Section 301 actions on ports, including high fees for Chinese ships.

This is in sharp contrast to the other trade agreements that Trump has concluded with Asian partners in recent days, which were heavily tilted in the U.S.’ favor. Trump has met his match with China, which has shown that two can play at this game. Beijing has clearly demonstrated it knows its leverage points and is willing to activate them.

It’s welcome news that Beijing agreed to hold off implementing its recently announced sweeping rare earth export restrictions for one year. However, we should expect Beijing to use this threat as a hammer over the U.S.’ head, making U.S. tariff threats less credible and more costly going forward.

Moreover, U.S. farmers will be glad to hear that China will resume significant purchases of soybeans, but the actual dollar amounts have yet to be announced. Finally, it’s welcome news that China will take further unspecified steps on curbing fentanyl precursor exports.

This one-year truce will give breathing room to both sides to reduce dependencies on each other in strategic sectors. For the U.S., this means stepping up work with allies and partners to develop alternative sources of rare earths, building on the multiple bilateral agreements with Australia, Malaysia and others announced in recent weeks, including by linking them together in a plurilateral critical minerals agreement.

Will the Stabilization Last?

- By Rorry Daniels

Presidents Trump and Xi succeeded in stemming the active bleeding in the relationship, but whether the bandage will stick remains to be seen. It’s very positive and stabilizing when the leaders meet and confirm that neither side wants to destroy the other, but the groundwork hadn’t been laid for this meeting to produce more than a vibe check. The post-meeting comments and announcements don’t reach the status quo ante on trade or detail specific commitments on security issues.

President Trump’s announcement of U.S. resumption of nuclear testing is both reflective of long-standing U.S. frustration on China’s nuclear build-up as well as potential leverage to encourage arms control talks. However, the key priority remains ending the war in Ukraine, and President Trump’s expectations that he will receive genuine support from China on this issue have been raised. China now has to flesh out its commitments and deliver.

The U.S has work to do as well. What needs to happen next to maintain the stabilization is a period of trust building where both sides detail and deliver on their commitments and create the conditions for more substantive discussions. This means that both sides need to have full control of their respective bureaucracies and at minimum pursue a ‘no surprises’ policy. China would be wise to lift its sanctions on National Security Advisor and Secretary of State Marco Rubio so that security issues can be covered in subsequent rounds.

However, the structure of a year-to-year agreement suggests that continuous negotiation will be a permanent feature of U.S.-China relations moving forward, with high potential to revive cycles of tit-for-tat escalation when one side or the other feels its expectations are not being met. Odds remain high that all the associated market and political volatility we have seen over the last nine months continues indefinitely as political priorities shift and events occur that require the U.S. or China to react. And evidence to date suggests that officials in the second Trump administration are unwilling or unable to constrain the president from issuing threat or punishment via social media while they work to strike a durable deal.

Taipei may be breathing a sigh of relief today that Taiwan wasn’t raised in the meeting, but discomfort could eventually set in about why it didn’t come up and what its absence in Beijing’s agenda for this leaders’ meeting means for China’s Taiwan policy moving forward. Frankly, no news is probably good news in the Taiwan Strait. The rounds of negotiations leading up the meeting were run by Treasury Secretary Scott Bessant and his counterpart He Lifeng, rather than the national security officials who would focus on strategic issues like Taiwan policy. Of course, Xi could have raised the issue anyway and Trump seemed prepared for him to do so. However, Xi may not have wanted to be in a position where adverse comments on Taiwan would force him to take actions in the Taiwan Strait as a political signal, especially with the churn of leadership at high levels in the PLA.

Buying Time for Beijing

- By Neil Thomas

Xi is finally getting the “new type of great power relations” he sought between China and the United States when he first took office in 2012. Trump is dealing with China as a fellow superpower, and he clearly respects Xi’s status as a powerful leader on the world stage. Direct communication between the American and Chinese presidents can reduce risks, clarify red lines, and create space for selective cooperation; efforts to build a more peaceful and prosperous world—and greater stability—should be welcomed.

Yet little has changed in the broader, structural picture of bilateral relations. The two sides have not resolved the fundamental economic and technological conflicts that underpin U.S.-China strategic competition, from market access and data governance to export controls, supply-chain security, and the race to dominate critical technologies. Frictions will persist, still, even if the tone improves. It is not all plain sailing ahead. Beijing could use this diplomatic truce to buy time to build the bureaucratic capacity necessary to implement rare earth and other strategic export controls in a more calibrated, effective fashion. That will give China additional leverage in future U.S.-China negotiations.

Dive Deeper with ASPI:

• Sign up for a rapid-response webinar, “Assessing Trump’s Asia Tour,” to be held October 31, 8:30am U.S. Eastern Time. The panel discussion will feature Wendy Cutler, Shay Wester, Michelle Ye Hee Lee, and Emma Chanlett-Avery.

• Based in NYC? Please join ASPI for an in-person program on November 4, “After Gyeongju: APEC 2025 Outcomes and the Future of Regional Cooperation,” featuring Chul Chung, Richard Cantor, Daniel Russel, and Wendy Cutler in a panel discussion. ROK Ambassador to the U.S. Kang Kyung-wha and U.S. Senior Official for APEC Casey Mace (pending) will provide keynote remarks.

• Read Neil Thomas’ recent op-ed for Time, “Why the Trump-Xi Summit May Disappoint.”

Editor’s Introduction: Hi there. This week’s Asia Policy Brief covers President Trump’s first stop on his second administration’s Asia tour: the ASEAN Leaders’ Summit in Kuala Lumpur. On the sidelines, he presided over the signing of a number of deals, including a ceasefire deal between Thailand and Cambodia, and “reciprocal trade” deals with Malaysia and Cambodia, respectively. ASPI’s Press and Program Officer Bryanna Entwistle and Director of Asian Economic Affairs Shay Wester offer their analysis on what happened and what to watch for next.

State of Affairs: Trump’s Whirlwind Visit to Kuala Lumpur

The attendance of an American head of state at the annual leaders meeting of the Association of Southeast Asian Nations (ASEAN) has long been considered a litmus test for the significance of the region to Washington’s foreign policy agenda. Over the past eight years, U.S. Presidents have only participated in two ASEAN meetings—President Trump traveled to the region in 2017 during his first term, and former President Biden called in virtually in 2022. Given that Southeast Asia faces some of the highest tariff rates globally and transshipment penalties that could disproportionately affect the region, Trump’s announcement that he would attend the 2025 leaders’ meeting in Kuala Lumpur came as somewhat of a surprise.

At this year’s summit, Trump attended the signing of the Thailand-Cambodia ceasefire deal, the U.S.-ASEAN Summit, and several meetings that involved signing trade agreements with Malaysia and Cambodia and framework agreements with Vietnam and Thailand. Moreover, critical minerals agreements were signed with Malaysia and Thailand to expand processing capacity, strengthen supply chains, and promote partnerships with U.S. companies. Despite the showmanship and flattery from several Southeast Asian leaders, there is much more work to be done on many of the agreements that Trump signed in Malaysia, and these countries will still be subject to tariffs going forward. The protests against Trump across Kuala Lumpur underscored that things are far from stabilized in U.S.-Southeast Asia relations—and it will take more than one visit to reverse course.

Why It Matters: What’s in a Deal?

Thai-Cambodia Ceasefire Deal

When a longstanding border conflict between Thailand and Cambodia turned deadly in May, it became an enormous test of ASEAN’s ability to mediate between member states and fulfill its mandate of preventing conflict within the bloc. Diplomatic maneuvering by ASEAN Chair Malaysia, in addition to President Trump’s threats to suspend tariff negotiations, convinced Cambodian and Thai leaders to agree to an initial ceasefire in July. Malaysia then oversaw negotiations for the enhanced ceasefire that was signed at the ASEAN Summit, dubbed the “Kuala Lumpur Accords.”

President Trump has claimed full credit for driving the ceasefire deal, and his decision to stop in Malaysia was driven by a desire to preside over the signing ceremony—another photo opportunity for his Nobel Peace Prize campaign. The White House reportedly told summit organizers that Trump did not want Chinese officials in attendance at the ceremony, despite China’s documented role in facilitating early ceasefire negotiations. While pressure from Washington undoubtedly helped bring Thailand and Cambodia to the negotiating table, Trump’s attempts to take credit for the agreement undermine ASEAN’s historic accomplishment of ending a conflict between two of its member states. Furthermore, the expanded ceasefire is far the all-encompassing peace deal that Trump claims it is, as it fails to address the historic root causes of the border dispute. Thailand’s own foreign minister refused to refer to the joint declaration as a peace agreement, calling it a “pathway to peace” instead.

Rapprochement with Cambodia?

Cambodian leadership was much more enthusiastic about Trump’s involvement at the signing ceremony, and the agreement may have even cleared the way for rapprochement between Washington and Phnom Penh, which has increasingly drifted into Beijing’s orbit. In the first leader-to-leader meeting since Prime Minister Hun Manet assumed office 2023, President Trump agreed to remove an arms embargo on Cambodia that has been in place since 2021 and to restart the bilateral Angkor Sentinel Defense exercise, which was last held in 2017. In return, Hun Manet signed an agreement to “expand cooperation” on combatting Cambodia-based scam centers, an extension of recent U.S. Treasury efforts to crack down on cybercrime targeting American citizens. However, the Cambodian government’s deep ties to the industry makes real progress questionable. (For background on the cyber-scam industry, see ASPI’s most recent Asia Inside Out podcast episode).

A U.S.-Malaysia Upgrade

Another diplomatic achievement was the elevation of the U.S.-Malaysia relationship to a comprehensive strategic partnership, marking the first upgrade in ties between the two countries since 2014. In addition to the trade agreement, it involves enhanced cooperation on maritime security, new critical minerals partnerships, and greater transparency on foreign exchange interventions.

All Eyes on Trade

Beyond the security and diplomatic maneuvering, Trump’s visit focused on advancing his tariff-driven trade agenda through bilateral deals with Southeast Asia. This included two “reciprocal trade” agreements (Malaysia, Cambodia) and two frameworks (Thailand, Vietnam) built on a common template: Washington keeps high baseline tariffs (19-20%) while carving out certain products for lower or zero rates, while partners slash duties, remove a range of non-tariff barriers, accept U.S. standards, and agree to purchases of U.S. products and pledge further investments in the U.S. However, carve-outs for specific products do not shield them from future Section 232 or 301 actions, only noting that the United States may take these new deals into account.

Malaysia’s agreement goes the furthest: providing greater market access across automotives, agriculture, and manufacturing, while embedding forward-leaning digital rules. The agreement bundles headline purchase pledges of $150 billion over five years for semiconductors, aviation, and data center equipment, and a $70 billion U.S. investment commitment by Malaysia. On the other hand, Cambodia’s deal is a bit softer, reflecting its Least Developed Country status, but includes many similar provisions. Both agreements pledge closer alignment with U.S. export controls and sanctions, tighter screening of sensitive investments, and cooperation to police rules of origin, content, and transshipment to deter duty evasion. These provisions clearly target China and risk provoking retaliation. Neither agreement provides a dispute settlement mechanism, while giving Washington the ability to reimpose tariffs without consultation and leaving unresolved transshipment and foreign content questions that could still trigger tariffs of 40%.

President Trump also signed critical minerals MOUs with Malaysia and Thailand aimed at deepening cooperation, accelerating development, and diversifying supply chains away from Chinese dominance. Malaysia also committed to refrain from restricting exports of critical minerals and rare earth magnets to the U.S. These steps build on the U.S.-Australia Critical Minerals Framework announced one week earlier, which aims to scale mining and processing through targeted financing and market-stabilization tools.

As Prime Minister Anwar acknowledged in his plenary remarks, “growing geoeconomic fragmentation” is forcing ASEAN to diversify its economic strategy even as it negotiates with the U.S. ASEAN’s two-track response to U.S. tariffs includes pursuing individual accommodations with Washington (as reflected in these bilateral deals) while accelerating regional integration and diversifying trading partners. In Kuala Lumpur, the bloc completed an upgrade to the ASEAN Trade in Goods Agreement, reached substantial conclusion of the Digital Economy Framework Agreement (DEFA), signed the ASEAN-China Free Trade 3.0 agreement, and convened a meeting of Regional Comprehensive Economic Partnership (RCEP) leaders. Prior to the summit, the new ASEAN Geoeconomics Task Force also issued its first report, the bloc’s most coordinated response yet to geoeconomic fragmentation.

What to Watch: Will the Momentum Last?

• Implementation Over Announcements: The test of Trump’s Southeast Asia deals lies in execution. Watch whether Malaysia secures preferential treatment on semiconductors when the Section 232 review concludes, and how countries are treated by future U.S. rules of origin to deal with third country shipments. In addition, how economic security commitments are implemented will reveal whether these are substantive obligations. For Malaysia and Cambodia, do agreements move quickly to implementation or get bogged down in domestic procedures? For Thailand and Vietnam, do frameworks lead to binding agreements?

• The Missing Deals: Indonesia, Vietnam, Thailand, and the Philippines remain without bilateral trade agreements despite being major U.S. trading partners in Southeast Asia and previously announcing deals with the Washington. Vietnam and Thailand’s framework announcements suggests movement, but Indonesia and the Philippines’ absence is conspicuous. Southeast Asian countries will face pressure to cut similar deals quickly, as those without agreements risk being at a competitive disadvantage with Malaysia and Cambodia.

• ASEAN Cooperation Going Forward: The 47th ASEAN Summit marked watershed moments beyond Trump’s visit. Timor-Leste’s admission as the 11th member completes ASEAN’s geographic footprint, while peace in Myanmar remains elusive and a challenge to the bloc’s unity. With the Philippines set to chair ASEAN in 2026 under the theme ‘Navigating Our Future, Together,’ expect a focus on implementing ASEAN Vision 2045, integrating Timor-Leste, and pushing for measurable progress on a South China Sea Code of Conduct, all while navigating the pressures that tested Malaysia leadership this year.

Dive Deeper With ASPI

• Rorry Daniels speaks with transnational cybercrime expert Jacob Sims on the “Political Economy of Cybercrime in Southeast Asia” in our latest podcast episode of Asia Inside Out.

• In July, an expert panel, moderated by Bryanna Entwistle, unpacked the roots of the Thai-Cambodia border conflict and discussed what was needed in a long term peace agreement.

• For a deeper look at how ASEAN is navigating the pressures of China’s export surge and intensifying Western de-risking, read Shay Wester and Brandan Kelly’s report, “ASEAN Caught Between China’s Export Surge and Global De-Risking.”