Geopolitical Tension and ASEAN: How to Keep the World Economy Vigorous?

Abstract This policy paper argues the importance of economic assessment on geopolitical tension-related policies and reviews the economic effects of two major policies related to global supply chains (GSCs), tariff war 1.0 and high-tech export control, particularly from the viewpoint of the third countries in a three-country model including ASEAN member states (AMS). It finds that some of the AMS aggressively utilized the wave of supply chain reshuffling and gained positive trade diversion effects. Although it is difficult to predict what policies the second Trump administration would introduce, the dominant strategy for AMS is to take advantage of positive effects to upgrade their position in GSCs. With heightening national security concerns, it may be inevitable to make some parts of the economy restricted. However, the rest of the economy must keep its vigor with GSCs. Middle powers should work with newly developed and developing countries such as AMS through various channels to retain the rules-based trading regime.