On November 12-13, 2024, Pacific Forum and the Institute of International Relations, National Cheng-chi University convened approximately 70 experts from government, industry, and academia to examine issues related to the evolving geostrategic, trade, and technological landscape in the Indo-Pacific. The closed-door seminar addressed interrelated issues shaping today’s international security, diplomacy, and trade arena: the highly anticipated return of    United States (US) President Trump, China’s economic slowdown, rapid supply chain restructuring, rising protectionist and tech disruptions. Key findings from the meeting are described below:

The State of US-China Trade and Tech Rivalry

Despite various efforts to curb China’s access to key technologies particularly in semiconductors, the United States continues to face mounting challenges to effectively implement its export controls, foreign direct investments screening, and expanded oversight on technology transfers, especially in research and development. Incoming US President Donald Trump’s vow to onshore manufacturing supply-chains and combine tariffs with domestic tax reductions may cause a major disruption to the global financial market.

Given the US interest in derisking and decoupling further from China, Beijing continues to exploit informal trade networks to obtain access and facilitate the flow of sensitive technologies, including allies and partners like Japan, South Korea, and Taiwan. With the US heightened drive to cut China’s access to high-end semiconductors, and declining commitment to free trade agreements, Beijing continues to champion an open and multilateral approach to regional trade and investments. China is utilizing various ministries, institutions, and channels to promote regional economic integration especially with ASEAN through the Regional Cooperation on Economic Partnership (RCEP), and its Belt and Road Initiative.

While trade relations with China offer immense benefits to developing economies in Southeast Asia, they are also cognizant of its ability to leverage its resources and expertise to exert more influence and achieve strategic ends. As a result, most Southeast Asian nations are proactively hedging due to increasing economic dependency on China and rising geopolitical tensions in the South China Sea disputes.

Regional Responses from East Asia, Europe and Australia

• In the face of a Trump 2.0., Japan is preparing for a potential increase in US tariffs.  At its core, Japan’s economic strategy is to promote open and free trade without comprising national security, employing both defensive and offensive approaches under the remit of the World Trade Organization’s principles. Absent the US engagement in regional trade mechanisms, it continues to demonstrate its leadership in upholding the Comprehensive and Progressive Agreement on the Transpacific Partnership (CPTPP) alongside key partners like Korea, Australia, Canada, and ASEAN. It continues to demonstrate leadership in promoting free trade and engaging in economic development assistance.
• On derisking, Japan is focused on reducing its dependency on China while maintaining an open dialogue for business and economic opportunities. But greater stability in Japan’s domestic political landscape will sustain its regional leadership that further builds trust among its partners.
• In recent years, South Korea has been experiencing an overall trade deficit due to its high dependency on exports, limited domestic demand, trade imbalances with China and the U.S., and setbacks from semiconductor-related export controls from Japan, the United States, and China. In response, South Korea has enacted stricter domestic tech control laws, identified national core technologies, and formed a National High-Tech Strategy Committee to identify new tech growth areas beyond semiconductors.
• South Korea has become more proactive in supply chain security resilience through its trilateral U.S.-Japan-Korea summit and growing strategic focus toward the Global South, particularly Southeast Asia. However, South Korea’s involvement in initiatives like CHIP4 remains constrained by domestic challenges, including economic conditions, a low birth rate, lingering North Korea-related issues, and regional and global trade and supply chain uncertainties.
• Taiwan continues to recalibrate its manufacturing and investment strategies in response to U.S. derisking strategy and China’s dual circulation policy. To mitigate risks, Taiwan is adopting the “China+1” and “Taiwan+1” models. In practice, this means that Taiwan’s supply chain adjustments are driven by risk diversification, lower labor costs, market access, and policy incentives. Taiwan’s strategy in supply chain restructuring requires planning that encompasses technological innovation, regional partnerships, and sustainability. Taiwan’s successful experience in its own semi-conductor sector could help create new ecosystems elsewhere.
• Different sectors in Taiwan are also adapting specific strategies to accommodate the changing geostrategic landscape: the Information and Communications Technology sector is focused on retaining research and development and establishing tech hubs domestically, while the automotive sector emphasizes near-customer production and regional logistics. Traditional manufacturing industries are relocating labor-intensive operations offshore to diversify market exposure.
• The CHIP4 alliance, aimed at friend-shoring to counter China’s access to advanced chips, has experienced lukewarm support from South Korea, primarily due to domestic economic constraints and limited incentives for participation. Although, Japan and Taiwan have cautiously engaged with the US-led initiative to strengthen semiconductor collaboration, varying degrees of enthusiasm and engagement among its domestic tech sector has hampered progress.
• But given their shared challenges and interests in navigating the US-China tech rivalry, practical collaboration between Japan, Korea, and Taiwan is crucial to anchor East Asia’s role in global trade and manufacturing. Despite historical tensions and existing competition among their respective semiconductor companies, there is a mutual recognition that a coordinated approach could enhance Northeast Asia’s resilience against geopolitical pressures, particularly in critical sectors like semiconductors and critical technologies. If harnessed, such a coordinated approach will bring positive benefits throughout the entire region, especially in Southeast Asia.
• As the US-China trade and tech rivalry deepens, most Southeast Asian countries will continue to pursue hedging as a policy of multi-alignment. Southeast Asian countries are responding to the great power rivalry using three strategies: being ambivalent toward decoupling and recognizing that the United States and China can be sources of problems and solutions; exerting agency based on national interest, rather than being led passively based on deep historical memories of colonization and finally seeking additions or alternative collaborators to existing partners. For instance, Indonesia’s response to US-China rivalry is driven more by extracting the best possible outcome with the least possible cost and risk. Its intent to join Brazil, Russia, India, China, and South Africa (BRICS) and outreach to African nation states attest to its hedging policy and finding alternatives to existing partners.
• With Trump’s return to power and China’s drive for self-sufficiency, RCEP can be an effective mechanism among small and medium-sized economies to buffer against the uncertainties of great power competition. To support a wider regional integration agenda, the RCEP Joint Committee was set-up to tackle contemporary issues like environmental preservation and climate change, skills development, and green transformation. Furthermore, it promotes capacity building and technical assistance among smaller members and supports micro, small, and medium enterprises (MSMEs).
• In contrast to the United States, the European Union’s approach to China is centered on “derisking, not decoupling,” where derisking is a strategy to mitigate potential threats without fully severing ties. While de-risking remains the primary framework, decoupling is seen as a more extreme alternative that goes beyond derisking. The preference toward derisking reflects the EU’s desire to reduce vulnerabilities while maintaining economic relations with China.
• Observing and preserving the rules based international order remains the prevailing view in Australia built around open and regional trade frameworks like the CPTPP and RCEP. The Indo-Pacific Economic Framework remains an important vehicle for US engagement in the region and can be complementary to existing bilateral agreements despite not considered a formal trade agreement. However, it also recognizes that the sustainability of the IPEF in the new Trump administration is doubtful.

Balancing interdependence and self-sufficiency in the age of protectionism

• Amid the growing trend of techno-nationalism, US and Japan have adopted export controls targeting China while embracing industrial policies to rebuild domestic manufacturing supply chain capacity. China and India have emphasized self-reliance to reduce dependency on the current global high-tech supply chain.
• Singapore, Malaysia and Vietnam, are likely to remain pragmatic in balancing regional trade integration and domestic resilience to minimize the negative impact of de-globalization and maximize emerging opportunities.
• Taiwan, however, takes a slightly distinct stance. It aims to deepen interdependence in the semiconductor supply chain with like-minded democratic countries in response to Beijing’s efforts to remove it from critical technology sectors, through intellectual property theft and economic coercion. Taiwan is also positioning itself for the next big technological wave by investing in AI research and development, a strategic backup should its chip manufacturing advantage decline.
• It remains debatable if economic trade and technological interdependence is likely to be sustainable over the medium to long-term, however, there is a consensus among experts and participants that, for now, it is the most viable option as long as small and medium-sized economies adopt a robust and proactive collective response as the two superpowers continue down the path toward isolation and self-reliance.
• The US-China rivalry may have a negative impact on the global economy, but there may be a positive aspect to the rivalry: it will give small and medium powers the opportunity and space to leverage resources and negotiate with larger powers.

This document was prepared by Carl Baker ([email protected]). These preliminary findings provide a general summary of the discussion. This is not a consensus document, and the views expressed do not necessarily reflect the views of all participants.