Economic spillover: tariffs overshadow annual Asian defence dialogue
Economic spillover: tariffs overshadow annual Asian defence dialogue
WRITTEN BY JULIET LEE
25 June 2025
The Trump administration’s global trade war and steep tariffs on allies and adversaries alike have caused many of the United States’ partners around the world to question Washington’s commitment and reliability. This uncertainty was evident at the Shangri-La Dialogue in Singapore earlier this month.
The meeting occurred against the backdrop of a challenging moment for international security, including ongoing tensions in the Taiwan Strait and South China Sea, active conflicts in the Middle East and Europe, and a recent unprecedented escalation between two nuclear powers, India and Pakistan. As has been the case in recent years, this dialogue’s agenda highlights the growing overlap between the European and Asian theatres and the rapidly changing international security environment.
US Secretary of Defence Pete Hegseth, in his second trip to the region this year to attend Asia’s premier defence summit, had the difficult task of reassuring US allies and partners of Washington’s security commitments following President Trump’s April announcement of “reciprocal” tariffs. In his remarks, Hegseth declared that the US was back and “here to stay” in the Indo-Pacific. Unlike Vice President JD Vance’s speech at the Munich Security Conference earlier this year, where he criticised European allies over free speech and immigration policies, Hegseth attempted to reassure US allies and partners in the Indo-Pacific of Washington’s commitment to deterrence against China. While some remarks raised eyebrows, such as the warning that China poses an “imminent” threat to Taiwan, other comments were perhaps more diplomatic, including a surprising acknowledgement that many countries in the region have close economic relations with Beijing and defence ties with Washington.
Given the importance of economic integration for the Indo-Pacific region, the linkages between security and economic issues are becoming increasingly difficult to address in siloes.
Although the Shangri-La Dialogue is a defence forum, what was uniquely palpable at this year’s security convening was the frustration over President Trump’s tariff policies. Following his speech, Hegseth responded to questions about tariffs by replying that he was “happily in the business of tanks, not trade”. His dismissal of concerns about tariffs from US partners reveals a deep disconnect between the US approach to security cooperation and Trump’s economic and trade policy.
Reading the room
As anxieties about the reliability of US commitment have compounded, Hegseth attempted to use the Shangri-La Dialogue to reassure Indo-Pacific allies and partners that the region remains a “priority theatre” for US foreign policy. Still, he called for Asian allies to take ownership over their security and increase defence spending up to five per cent of their respective GDPs to collectively deter the threat posed by China. This new benchmark for defence spending matches the one given to America’s European allies, whom Hegseth called “pathetic” and accused of free-loading in a text chain earlier this year.
Although Beijing did not send a high-level delegation to the defence forum this year, China has been doubling down on its own engagement in the region, strengthening economic ties and defence partnerships with Southeast Asian countries. Chinese President Xi Jinping’s April visit to Vietnam, Malaysia, and Cambodia was seen as a calculated and strategic response to US tariff pressures, as he signed numerous agreements related to trade, infrastructure, technology, health, and education — 45 deals with Vietnam, 31 with Malaysia, 37 with Cambodia. This heightened engagement contrasts starkly with the “reciprocal tariffs” recently imposed by President Trump on these same countries of 46 per cent, 24 per cent, and 49 per cent respectively. Both Beijing and Washington have been outwardly critical of each other’s approach. In response to President Xi’s visits, President Trump accused Beijing of trying to undermine US interests in the region, while Beijing criticised Washington of “economic bullying” through its unilateral tariffs.
At Shangri-La, Hegseth took advantage of the absence of China’s defence minister, accusing China of seeking to become a “hegemonic power”. While his comments signalled continuity in prioritising deterrence and security alliances in the region, they did little to assuage deep concerns about the Trump administration’s preference for leveraging tariffs in the name of protecting US national interests. There is a disconnect in Washington between punitive economic measures and claims to be an indispensable security partner. In the same weekend, while Hegseth outlined the US defence commitment to the Indo-Pacific, President Trump announced a doubling of steel and aluminium tariffs. This most recent round of tariffs would impact allies and adversaries alike, heavily impacting China but also South Korea, Japan, and Vietnam.
The Association of Southeast Asian Nations’ (ASEAN) member countries remain especially sceptical of Washington’s commitment to the region, as they were hit with some of the steepest “Liberation Day” tariffs in April. At Shangri-La, Philippine Secretary of National Defence Gilberto Teodoro Junior asserted that the Philippines was not a mere pawn with “no strategic agency”. Meanwhile, Prime Minister Anwar Ibrahim of Malaysia, the 2025 chair of ASEAN, was particularly sharp in his address to the forum, noting that “trade is not a soft power indulgence, it is part of our strategic architecture” and that it must be protected “not from competition, but from the onslaught of arbitrary imposition of trade restrictions”. Although he did not specify countries by name, the comment was a clear reference to Trump’s sweeping “Liberation Day” tariffs. For Indo-Pacific countries, security is not just about presence in the region — predictability and respect for sovereignty are equally, if not more, important.
A budding partnership
Anxieties surrounding US commitment to security alliances have pushed ASEAN and Europe closer over a shared sense of the importance of maintaining free and open trade. According to ISEAS-Yusof Ishak Institute’s The State of Southeast Asia 2025 Survey Report, the level of trust — defined by the survey as the belief that the major powers will “do the right thing” in the wider interests of the global community — ASEAN member states have in the EU saw a significant increase, rising from 41.5 in 2024 to 51.9 per cent in 2025. The survey also notes that the EU remains the most preferred and trusted strategic partner, at 36.3 per cent, as ASEAN continues to navigate US-China competition.
As Europe seeks to position itself as an alternative partner to ASEAN and other countries across the Indo-Pacific, this year’s Asia defence summit saw a particularly large presence of European delegations. Notably, French President Emmanuel Macron delivered the Shangri-La Dialogue’s keynote address, where he emphasised the shared responsibility in ensuring that “our countries are not collateral victims of the imbalances linked to the choices made by superpowers”. He also highlighted the EU’s cooperation with ASEAN and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) on a network of “new-generation agreements”, including prospects for an EU-ASEAN free trade agreement. Prior to the Shangri-La Dialogue, Macron’s visit to Vietnam, Indonesia, and Singapore further demonstrated France’s economic and security commitment to the region, including elevating France and Singapore’s relationship to a comprehensive strategic partnership.
Needing both tanks and trade
As Australian Deputy Prime Minister Richard Marles noted in his remarks at Shangri-La, free and open trade have been the “lifeblood of the Asian region, and the shock and disruption to trade from high tariffs has been costly and destabilising”. The real cost of tariffs is not just economic, it’s also geopolitical. While Indo-Pacific leaders would certainly welcome a stable and predictable United States that can counterbalance China, they also see regional economic integration as essential to the development and economic growth of the region and would not want to risk jeopardising prosperity by alienating China. Free and open trade brings significant benefits to international partnerships beyond defence cooperation.
As President Trump seeks trade deals with allies and adversaries alike, Hegseth’s reassurances about US security commitments can only go so far. A more balanced Indo-Pacific strategy is needed, one which accurately assesses both the security and economic concerns of its partners in the region. Given the importance of economic integration for the Indo-Pacific region, the linkages between security and economic issues are becoming increasingly difficult to address in siloes. It is incorrect to assume that the imposition of tariffs on allies will not impact defence partnerships, and the US risks being left behind by the world’s fastest-growing and most dynamic region, where countries see the convergence of security and economic development differently. As US Senator Jeanne Shaheen recently noted during a Defence Appropriations Subcommittee hearing with Secretary Hegseth, “you can’t buy tanks without trade”.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Juliet Lee is the Director of Strategy and Engagement at the Asia Society Policy Institute (ASPI) in New York. Previously, she was the Deputy Director for Asia at the National Committee on American Foreign Policy (NCAFP), where she organised Track II dialogues on Asia-Pacific security issues. Image credit: Wikimedia Commons/US Secretary of Defense (cropped).