Cuong Minh Nguyen
The Trump tariff shock has profoundly disrupted East Asia’s economic landscape, presenting mounting challenges for the region’s export-driven economies. The unjustified tariffs imposed on ASEAN, China, Japan and South Korea have significantly increased costs and reduced competitiveness. The uncertainty that these measures have created will discourage long-term business investment, threatening employment and economic growth across the region.
Trump’s tariffs signal a broader shift towards protectionism, undermining the global rules-based trading system that has long provided economic stability. The United States is setting a precedent that may encourage other nations to follow suit, leading to an increasing fragmentation of trade norms and an increase in worldwide trade disputes.
Trump’s protectionism reflects a historical trend in which the United States externalises the cost of its internal adjustments onto its trading partners. The American trade deficit, driven by structural imbalances such as low savings and high consumption, cannot be resolved through short-term interventions. Addressing it would require significant, politically challenging reforms that Washington has historically avoided.
The economic history of the United States, including the Plaza Accord of 1985 and the abolition of the gold standard in the Nixon Shock of 1971, demonstrates the nation’s tendency to repeatedly shift economic burdens externally rather than implement difficult domestic policy adjustments.
East Asia must deepen economic integration to face the challenges posed by the worldwide rise in protectionism. But strengthening regional ties alone is insufficient — establishing the East Asian Economic Community (EAEC) is essential not only to mitigate current trade disruptions but also to proactively shape the evolving global trade landscape.
East Asia’s economic prominence is rising, with its share of global GDP in purchasing power parity terms reaching 25.84 per cent in 2025 compared to the United States’ 14.5 per cent. The EAEC’s primary objective is to accelerate economic integration by eliminating intra-regional trade barriers. Existing frameworks such as the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Economic Community (AEC) have already advanced regional trade by reducing tariffs and harmonising standards, though non-tariff barriers remain a challenge.
Financial mechanisms like the Chiang Mai Initiative and the ASEAN+3 Macroeconomic Research Office serve as crucial financial safeguards against economic volatility, ensuring greater regional stability. The renewed high-level policy dialogue among China, Japan and South Korea at the March 2025 11th Trilateral Foreign Ministers’ Meeting, ongoing negotiations for the China–Japan–Korea (CJK) free trade agreement and the ASEAN+3 leaders’ summit lay the political and economic groundwork for the EAEC.
During the 1997 Asian financial crisis, the East Asia Economic Caucus was proposed to advance regional economic integration. But the restrictive nature of this economic caucus, which focused solely on East Asian countries, led to a division in perspectives, particularly from the Plus Three countries, ultimately stalling the initiative. Learning from past setbacks, the principle of ‘open regionalism’ must serve as the foundation for the establishment of the EAEC. Prioritising open regionalism ensures that East Asia will remain outward looking, rather than forming an exclusive bloc.
Adopting unilateral trade liberalisation enables individual nations to lower trade barriers independently without requiring reciprocal agreements — an approach that has proven effective in Singapore and China’s early economic strategies. Addressing development disparities is critical for fostering inclusive growth, with targeted initiatives supporting less developed members through extended implementation timelines, capacity-building programs, infrastructure development, and financial assistance.
Market integration will be driven by the progress of three mutually reinforcing regional initiatives — RCEP, AEC and the CJK free trade agreement. The CJK agreement will deepen trilateral cooperation, serving as a key catalyst for accelerating EAEC market integration. As the world’s largest trade bloc, RCEP enhances regional supply chains by strengthening linkages between ASEAN, China, Japan and South Korea. The AEC will not only bolster ASEAN’s internal economic cohesion but also help bridge development disparities within the EAEC. Together, these frameworks will create synergies that reinforce and advance the EAEC’s economic integration.
Financial cooperation will enhance the effectiveness of the Chiang Mai Initiative and the ASEAN+3 Macroeconomic Research Office, improving regional financial stability and crisis response mechanisms to foster greater self-sufficiency in managing economic risks.
But East Asia still faces persistent geopolitical and economic challenges. Historical tensions between China, Japan and South Korea, rooted in wartime grievances and territorial disputes, continue to hinder regional cooperation, while instability in the South China Sea threatens regional unity.
ASEAN nations have also expressed concerns about China’s export dominance and its impact on local industries. Addressing these issues is crucial to ensuring that the EAEC is both economically viable and politically sustainable. While existing trade frameworks provide valuable platforms for collaboration, East Asian nations must now take the decisive next step towards the next stage of regional cooperation and integration.
The establishment of the EAEC presents a critical stage to deepen economic integration and strengthen regional stability.
East Asian nations should rise above historical divisions and reaffirm their commitment to regional cohesion. The stakes have never been higher and the opportunity has never been greater for bold and decisive action.
Cuong Minh Nguyen is a retired economist, previously serving as the Principal Economist for Regional Economic Integration at the Asian Development Bank.
Source: East Asia Forum
