Southeast Asia Can’t Hedge on the US-China Rivalry Forever

The political and economic formula that once ensured Southeast Asia’s stability and prosperity between the United States and China is breaking down.

For more than two decades, the nations of Southeast Asia have perfected the art of “hedging.” The 11 nations of the region cultivated China as an indispensable economic partner while relying on the United States as their ultimate security guarantor. This balancing act has allowed them to extract dividends from both relationships: Chinese trade and investment for prosperity and the American military presence for stability.

But as US-China competition hardens into a strategic rivalry, that equilibrium is fraying. The space between Washington and Beijing, once wide enough for ASEAN states to maneuver, is narrowing fast. Hedging bets is getting harder, and the consequences of leaning too far to either side are growing sharper.

Beijing’s maritime assertiveness and its use of economic leverage are forcing governments to clarify where they stand. At the same time, Washington presses partners to deepen security cooperation under its Free and Open Indo-Pacific strategy.

President Donald Trump’s tariff policies have further complicated matters. The new wave of tariffs on Asian exports, designed to promote US manufacturing and punish Chinese-linked supply chains, risks undermining the export-led growth models and Chinese manufacturing networks on which the regional economy depends.

The result is that Southeast Asian states now face pressure from both sides. China demands political loyalty in exchange for economic access, and the United States expects strategic clarity in exchange for its security assurances. How each country responds depends on geography, domestic politics, and threat perception.

The Philippines has moved decisively toward Washington. Facing daily confrontations with Chinese Coast Guard vessels in the South China Sea, President Ferdinand Marcos Jr. has reopened bases to US forces and reaffirmed the 1951 Mutual Defense Treaty. Manila has effectively stepped off the hedge, becoming a front-line ally in America’s Indo-Pacific posture.

At the other extreme lie Cambodia and Laos, whose dependence on Chinese loans and political backing leaves little room to maneuver. Cambodia’s Chinese-funded naval facilities and Laos’s massive Belt and Road debt show how Beijing’s economic leverage can erode autonomy.

Between these poles sits the region’s cautious majority. Singapore, Thailand, Malaysia, Vietnam, and Indonesia each strive to preserve their strategic autonomy amid intensifying geopolitical polarization.

Singapore remains the archetypal hedger. Deputy Prime Minister Lawrence Wong reaffirmed in 2023 that the city-state “rejects dominance by any single power,” maintaining open ties with both Washington and Beijing. Its wealth and diplomatic agility allow it to sustain that balance for now.

Thailand, once America’s oldest treaty ally in Asia, now epitomizes the middle ground. It hosts joint exercises with the United States but buys submarines and conducts drills with China’s PLA. Political instability and the 2014 military coup have cooled US confidence, and the alliance endures more by habit than conviction.

Malaysian prime minister Anwar Ibrahim insists Kuala Lumpur “will not be dictated by any force,” yet growing economic dependence on China, especially in energy and infrastructure, is narrowing that freedom.

Vietnam continues its delicate balancing act, upgrading ties with both Beijing and Washington to “comprehensive strategic partnerships” even as maritime tensions with China intensify. Its “Three Nos” policy, no alliances, no bases, no alignment against others, is being sorely tested.

Indonesia, the region’s natural heavyweight, faces its own dilemma. President Prabowo Subianto inherited an economy deeply tied to Chinese trade and investment, while Jakarta’s defense modernization depends on Western technology.

If hedging once offered room to breathe, it now risks leaving the region’s states stranded—too dependent on China to resist its pressure, yet too ambiguous for Washington to rely upon. 

For the United States, the challenge is to offer credible economic engagement, not just security guarantees. Without real alternatives to Chinese investment and markets, calls to “choose freedom over coercion” will ring hollow. For China, the lesson is that coercive diplomacy only drives its neighbors closer to Washington.

The recent Trump-Xi meeting, which produced a limited tariff truce, briefly eased trade tensions but did little to change the larger reality. The United States and China remain locked in structural competition, leaving Southeast Asia exposed to both protectionism and pressure. The Philippines and Cambodia mark opposite ends of that spectrum, one aligning with the United States out of necessity, the other bound to China by debt and dependence. 

The rest of ASEAN now stand on the edge of the hedge, aware that the strategic ambiguity that served them so well may soon become untenable. The question for Southeast Asia is no longer whether to hedge, but how long the hedge can hold.

This article was first published on: https://nationalinterest.org/feature/southeast-asia-cant-hedge-on-the-us-china-rivalry-forever