Malaysia and Singapore are struggling to stay neutral in US-China trade war

Senior ministers warn that Southeast Asian nations are finding it increasingly difficult to remain neutral as the growing trade conflict between the United States and China forces them to choose sides.

China’s influence is strong, said Malaysia’s trade minister Zafrul Aziz, who is leading tariff talks with Washington on behalf of the Association of Southeast Asian Nations. “China is looking and watching,” he told the Financial Times. “They are saying, ‘Whatever you give to the US, we want the same because whatever you give to the US is at our expense.’”

Zafrul’s remarks were similar to Singapore’s trade minister and deputy prime minister, Gan Kim Yong, who said it’s getting harder to stay neutral as the divide between the two biggest economies grows.

Speaking at a UBS conference on Thursday, Gan cautioned that trying to stay in the middle was becoming a “knife-edge” act. “If you try to be neutral and walk the middle road, the road is getting narrower and narrower, eventually it will be a knife edge and you won’t be able to stand up,” he said.

“The key is we have to take sides, we have to take positions, we have to really do so based on principles.”

But Gan stressed that Singapore’s method was not to back one power over the other, but to decide on each issue according to its own national interests. The city-state has long served as a key link between China and Western markets.

Pressure on Southeast Asian economies has grown since President Donald Trump announced “reciprocal” tariffs last month. The tariffs hit countries like Vietnam and Cambodia hard, with duties of over 40% on some products.

Soon after, President Xi Jinping visited Vietnam, Malaysia, and Cambodia to strengthen China’s ties and influence there. Beijing has also voiced criticism of a newly struck deal between the US and the UK, arguing it could be used to shut Chinese products out of British supply chains.

In response to complaints from affected nations, Washington granted a 90-day relief to give them time for negotiations.

Malaysia warns US chip tariffs could harm its economy

Zafrul has since held discussions with US Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer, including talks at an Asia-Pacific Economic Cooperation meeting in South Korea last week.

“They seem to understand [our position],” he said. “But the caveat is, they still need to convince the boss. This still depends on Trump.”

Zafrul warned that any new US levies explicitly aimed at the chip-making sector would harm Malaysia’s economy. Semiconductors make up more than 60% of Malaysian exports to the US. “This is an ecosystem that has been built over 60 years,” he said. “For each multinational that is present in Malaysia doing this business, there are at least a few hundred Malaysian companies supporting it.”

As these shifts reshape global supply chains, South-East Asia finds itself at a crossroads. “We have to balance it by not choosing a side and by understanding each side’s concerns,” Zafrul said. “All countries [in the region] are having to navigate that. It is tough.”

Next week, leaders from the Association of Southeast Asian Nations and the Gulf Cooperation Council will meet in Kuala Lumpur. They aim to negotiate a broad trade agreement at a time when the world trading system is showing signs of breaking down. Chinese Premier Li Qiang is also expected to attend the gathering.