When Chinese President Xi Jinping visited Southeast Asia last week, on his first overseas trip of the year, he did not just come bearing economic cooperation agreements and orchestrating photo ops. He brought something the United States has struggled to offer: a long-term, coherent economic vision for Southeast Asia.
President Xi’s state visits to Vietnam, Malaysia, and Cambodia were strategic affirmations that China remains the most consistent and committed economic partner for ASEAN, especially as American engagement continues to oscillate between promises and pullbacks.
With China-ASEAN trade already nearing $1 trillion and digital yuan pilots expanding into regional payment systems, Beijing is doubling down on its economic statecraft. Meanwhile, Washington’s approach remains reactive: the imposition of punitive tariffs, vague supply chain “friend-shoring” rhetoric, and no substantive trade agreements with the region’s major economies. Nowhere is this gap more evident than in how the U.S. has mismanaged the China Plus One (C+1) outcome.
Originally a private-sector response to geopolitical risk, C+1 has quietly evolved into a geopolitical instrument. Over the past decade, American and related firms have shifted substantial manufacturing capacity from China to nations in Southeast Asia. Initially seen as a way for multinationals to diversify production and reduce dependency on China, Chinese firms themselves began using it as a workaround between 2018 and 2023.
As U.S. tariffs over the years expanded to over 2,000 product lines, Chinese manufacturers responded by rerouting supply chains through ASEAN to maintain access to the American market. Chinese outbound FDI into ASEAN manufacturing surged from $12.5 billion in 2017 to $37.3 billion in 2023. In January 2025, Chinese firms accounted for 30 percent of new investment projects in Vietnam, while 38 percent of the country’s imports came from China. A 2022 Rhodium Group report documented widespread “indirect export substitution,” where Chinese inputs are finished in ASEAN to avoid U.S. tariffs, then exported to the U.S. labeled as Vietnamese or Thai origin.
C+1, in effect, became “China Through One.”
U.S. President Donald Trump responded earlier this month by imposing “reciprocal” tariffs of up to 49 percent on exports from ASEAN countries. Even Singapore – a long-standing U.S. economic and security partner – is facing a blanket 10 percent baseline tariff. Intended to target the circumvention of existing trade restrictions, the policy will ultimately harm U.S. firms and consumers, disrupting supply chains and inflating costs across key industries.
Apple is a case in point. Most of Apple’s devices are still made in China, with Evercore ISI estimating that the country accounts for around 80 percent of the company’s total production. Chinese factories assemble 90 percent of iPhones, 80 percent of iPads, and 55 percent of Macs. Vietnam is rapidly rising as Apple’s second hub: it’s now home to 20 percent of iPad production and assembles the vast majority – about 90 percent – of Apple Watches, reflecting a strategic shift in the tech giant’s supply chain diversification. New tariffs could increase U.S. retail prices by 20 to 35 percent, according to internal industry estimates. A base model iPhone could cross the $1,000 threshold.
While Washington wields tariffs, Beijing has been deepening trade and investments. China-ASEAN trade reached $998 billion in 2024, outpacing U.S.-ASEAN trade by nearly 90 percent. ASEAN is now fully integrated into the Regional Comprehensive Economic Partnership, the world’s largest trade bloc, which includes 30 percent of global GDP. Chinese tech giants are embedding across ASEAN: Huawei is building 5G infrastructure in Malaysia and partnering with Thai Telecom for digital transformation projects. Tencent and Ant Financial dominate digital payments, and Alibaba powers e-commerce logistics. In March 2025, China upgraded its free trade agreement with ASEAN and expanded cross-border digital RMB pilots with Malaysia and Thailand.
As President Xi undertakes a charm reset in ASEAN, Beijing has a renewed opportunity to broaden its economic proposition to the region. This could begin with debt restructuring and the renegotiation of Belt and Road Initiative-linked loans, particularly in countries like Laos, Myanmar, and Indonesia, where repayment risks are rising.
Beyond infrastructure, China could deepen its engagement through joint R&D initiatives in strategic sectors such as green energy, semiconductors, and agri-tech – areas aligned with both ASEAN’s development priorities and China’s industrial ambitions. Education and talent mobility should also be part of the equation. Expanding student exchanges and vocational training would help ASEAN build its human capital while reinforcing long-term people-to-people ties.
In the digital domain, Beijing may push for a formal ASEAN–China Digital Trade Protocol, designed to compete with the U.S.-led Indo-Pacific Economic Framework. Such a platform would deepen regional integration in e-commerce, logistics, and payments, and further anchor China’s economic presence in Southeast Asia.
The United States, for its part, must move beyond rhetoric and offer something meaningful on the economic front. China Plus One could serve as the foundation for a new U.S.-led economic architecture in Southeast Asia, if Washington is willing to invest in it strategically. That begins with offering real incentives. A carveout from the CHIPS Act’s $52.7 billion could support back-end semiconductor operations in the region, while production tax credits and green subsidies under the Inflation Reduction Act (IRA) should be extended to solar and EV supply chains in Vietnam, Thailand, and Indonesia.
While comprehensive free trade agreements may remain politically difficult, bilateral or sector-specific deals in digital trade, clean energy, and cybersecurity – modeled after the U.S.-Japan Digital Trade Agreement or the Singapore-led DEPA – could help promote regulatory alignment and provide the predictability that ASEAN economies seek in a viable economic alternative to China.
To be sure, for C+1 to work in America’s favor, nations, including ASEAN member-states, must not feel compelled to bandwagon against the U.S. itself. That would risk triggering what some are calling a “World Minus One” scenario, where diversification strategies begin to regard the U.S. as part of the problem, rather than the solution.
What ASEAN Wants: Autonomy, Access, Alternatives
C+1 is already reshaping global trade flows. Between 2017 and 2024, China’s share of U.S. imports fell from 21.6 to 13.3 percent, while ASEAN’s rose from 6.8 to 12.2 percent. These shifts are not incidental; they are structural.
In an April 2025 joint statement, ASEAN’s economic ministers reaffirmed their strong ties with the U.S. but voiced “deep concern” over the imposition of unilateral tariffs. The world’s fifth-largest economic grouping and the U.S.’s fifth-largest trading partner seeks not to take sides, nor to serve as a pawn in great power competition. ASEAN’s strategic interests lie in securing autonomy, access, and meaningful alternatives.
The question is whether Washington can recognize the opportunity and deliver before Beijing does.