US-China Negotiations in London Signal a Tough Road Ahead for Southeast Asia

Meetings in London between the US and China have just concluded, as both countries sought to address concerns over export controls and to permanently set aside temporarily paused tariffs. Both sides characterised the talks as positive and announced a framework for implementing the consensus reached between top officials at last month’s meeting in Geneva and between President Xi and President Trump in their recent phone conversation, although the framework lacked details.

For Southeast Asian countries also engaged in negotiations with the US to avert tariffs, the London discussions illustrated three key realities which unfortunately do not bode well for their ongoing attempts to reach a trade deal with the mercurial US administration.

First, leader-to-leader rapport is important. US-China trade discussions had taken a sharp downward turn in the aftermath of the Geneva meetings last month, as the US claimed China was dragging its feet on export licenses for rare earths while China objected to the US’ tightening of technology restrictions.

Treasury Secretary Bessent characterised the negotiations as being at an “impasse” while President Trump took to social media to proclaim, using his typically bombastic — and all caps — language, that China: “HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.” China’s Commerce Ministry did not hesitate to fire back strongly, saying the US has “severely violated” their trade truce.

It is not uncommon for trade discussions to get stuck in a rough patch. Indeed, most trade negotiations go through at least one or two “near death experiences”. In those cases, nothing is as effective in getting talks “unstuck” as a phone call between leaders with an established relationship, a history of working together successfully, and at least a begrudging degree of mutual respect.

This is especially true when dealing with the Trump White House. The President places an inordinate — his critics would say reckless — amount of emphasis on the importance of personal rapport and his ability to “get deals done” with leaders with whom he enjoys strong personal chemistry.

Trump believes these ingredients are in place with Chinese President Xi, and that laid the groundwork for the successful resumption of talks in London. A similar personal rapport does not exist to any meaningful degree between Trump and the leaders of Indonesia, Vietnam, Malaysia, or any other Southeast Asia country. When trade discussions with these countries hit inevitable rough patches, the leaders will not have the option of getting things unstuck by placing a 90-minute phone call to the Oval Office.

Southeast Asian countries should continue to proactively negotiate with the US in good faith and forcefully assert their rights and national interests, although the current state of play suggests these efforts might not yield the desired agreements.

Second, Trump responds to leverage in negotiations. The President’s negotiating perspective derives entirely from his formative experience as a bare-knuckle New York City real estate developer. Everything is a one-off deal that you either win or lose, and might makes right. In that world, outcomes are determined by leverage: who needs the “deal” more than the other and which party has the greater ability to inflict pain on the other.

Trump now seems to be belatedly realising that China enjoys considerably more leverage than he initially recognised. Trump’s overly simplified view was that China exports more to the US than the US exports to China; therefore, in a stand-off over escalating tariffs, the US wins.

As China now increasingly flexes its muscles by restricting exports of critical materials that US industry cannot readily source elsewhere, and as US tariffs threaten to translate into bare retail store shelves in the US, Trump seems increasingly interested in a deal. The leverage dynamic has shifted.

Unfortunately, no countries in Southeast Asian enjoy anywhere near the same level of leverage. Granted, some can offer inducements that could be helpful, such as Malaysia’s offer of access to rare earth deposits or Vietnam’s approval of a Trump golf resort, but lacking any significant sticks to accompany these carrots, the White House is likely to feel comfortable squeezing these countries hard.

Third, the US’ bandwidth is limited, and Southeast Asia could find itself on the outside looking in. The Trump administration’s ridiculously over-optimistic desire to conclude “90 deals in 90 days” is being replaced by a recognition of its limited capacity to actually negotiate and conclude those agreements. The China discussions are proving to be difficult and time-consuming, and with the exception of a vague agreement in principle with the UK, no agreements with key economic and strategic partners such as Japan, South Korea, and the EU have been concluded.

With the 90-day clock rapidly winding down (it is currently set to expire on 8 July), how much attention can Southeast Asian countries realistically expect from the Trump administration? While there is always the possibility of an extension to the negotiating window, most of the extra time “put on the clock” could be soaked up by the larger economic and strategic partners.

This leaves some countries in Southeast Asia facing the prospect that they will be left without an agreement to avert or reduce tariffs. The Trump administration has indicated that for any such countries, they will simply be informed by Commerce Secretary Lutnik of the tariff rates they will be facing under the “Liberation Day” tariffs — an outcome which is unlikely to be positive.

Southeast Asian countries should continue to proactively negotiate with the US in good faith and forcefully assert their rights and national interests. Unfortunately, though, the current state of play suggests these efforts might not yield the desired agreements.

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