How Global Trade Disruptions Are Strengthening ASEAN-China Supply Chains
The conflict in the Middle East and disruptions to Red Sea shipping routes have highlighted the vulnerability of global supply chains. For ASEAN economies that depend heavily on trade, rising shipping costs, longer transit times, and energy market volatility have renewed interest in economic resilience, regional integration, and diversified trade partnerships. Disruptions in key maritime chokepoints underscore the vulnerability of critical trade routes to geopolitical tensions and their potential to transmit shocks across supply chains and commodity markets (Strait of Hormuz Sisruptions: Implications for Global Trade and Development, 2026).
While China was already ASEAN's largest trading partner before the crisis, recent disruptions have reinforced the importance of regional supply chains, cross-border infrastructure, and agreements such as the Regional Comprehensive Economic Partnership (RCEP). The result is not a wholesale shift away from Western markets, but a growing emphasis on strengthening trade relationships closer to home and reducing vulnerability to external geopolitical shocks. ASEAN leaders agreed in 2024 on a regional push to enhance supply chain connectivity, highlighting deeper intra-ASEAN trade and investment as part of a drive to keep ASEAN competitive in a more fragmented global economy (Regional Supply Chains Drive New ASEAN Cooperation Push, 2026).
Key Facts
China has been ASEAN's largest trading partner since 2020, with China-ASEAN trade reaching nearly US$1 trillion in 2024, significantly exceeding ASEAN's trade with most other major partners (China-ASEAN Trade 2024, 2024).
The Red Sea crisis disrupted one of the world's most important maritime trade corridors, forcing vessels to reroute around Africa and increasing transportation costs and delivery times (Red Sea Shipping Crisis, 2024).
ASEAN is among the world's most trade-dependent regions, with total trade reaching USD 3.8 trillion in 2024, and intra-ASEAN trade accounting for 21.4% (ASEAN Economic Bulletin, 2024).
RCEP covers approximately 30 per cent of global GDP, trade, and population, making it the world's largest free trade agreement, connecting ASEAN with China, Japan, South Korea, Australia, and New Zealand (RCEP Overview, 2023).
ASEAN economies remain deeply integrated with China, the United States, Japan, South Korea, the European Union, Australia, and India, maintaining multiple economic relationships to reduce vulnerability (ASEAN Strategic Autonomy, 2023).
Rising geopolitical tensions have increased interest in regional economic resilience and supply chain diversification, as ASEAN leaders agreed to build disaster-preparedness into supply chains (Regional Supply Chains Drive New ASEAN Cooperation Push, 2026).
Background
The conflict in the Middle East has had consequences far beyond the region itself. Attacks on commercial shipping in and around the Red Sea disrupted one of the world's most important maritime trade corridors, forcing vessels to reroute around Africa and increasing both transportation costs and delivery times (Red Sea Shipping Crisis, 2024).
For ASEAN economies, which rely heavily on international trade and imported energy, these disruptions highlighted the risks associated with long and complex global supply chains. Governments and businesses across Southeast Asia have increasingly focused on resilience, diversification, and reducing exposure to external shocks. ASEAN is among the world's most trade-dependent regions, with total trade reaching USD 3.8 trillion in 2024 (ASEAN Economic Bulletin, 2024).
Several developments have increased the relevance of this discussion. Rising geopolitical competition, supply chain disruptions, food security concerns, and energy market volatility have encouraged ASEAN states to diversify economic relationships beyond their traditional partners. At the same time, major economies across Asia have sought to strengthen regional trade links as global economic fragmentation accelerates. In 2024, FDI inflows to ASEAN demonstrated remarkable resilience with 8.5 percent growth, reaching US$226 billion (ASEAN Investment Report 2025, 2025).
For many ASEAN policymakers, the crisis also reinforced a broader concern: regional economies remain highly exposed to geopolitical tensions originating outside Southeast Asia. Whether arising from conflicts in Europe, tensions in the Middle East, or strategic competition between major powers, external shocks can quickly affect shipping costs, energy prices, inflation, and supply chains across ASEAN. This has strengthened calls for greater economic resilience, stronger regional integration, and reduced vulnerability to disruptions driven by events beyond the region's control. ASEAN leaders agreed in 2024 to build disaster-preparedness into supply chains, planning for crisis operations, not reacting after the fact (Regional Supply Chains Drive New ASEAN Cooperation Push, 2026).
The ASEAN View
ASEAN's response has not been to choose one economic partner over another. Instead, the region has sought to strengthen economic relationships across multiple markets while deepening regional integration. This approach reflects ASEAN's long-standing commitment to strategic autonomy. By maintaining strong ties with China, the United States, Japan, South Korea, India, Australia, the European Union, and Gulf states, ASEAN seeks to maximise economic opportunities while reducing vulnerability to geopolitical disruptions (ASEAN Strategic Autonomy, 2023).
From an ASEAN perspective, the lesson of the Middle East conflict is not necessarily that one partner should replace another. Rather, it highlights the risks associated with excessive dependence on external trade routes and geopolitical stability outside Southeast Asia. As a result, many policymakers have placed renewed emphasis on regional supply chains, diversified partnerships, and economic arrangements that provide greater resilience during periods of international uncertainty. ASEAN's approach to international relations has historically focused on engaging multiple partners rather than becoming dependent on any single power (ASEAN Multi-Vector Foreign Policy, 2024).
Some Southeast Asian commentators have also argued that the crisis illustrates the extent to which global trade can be disrupted by decisions and confrontations involving major powers outside the region. The resulting economic costs have strengthened arguments for a more multipolar economic order in which ASEAN maintains strong relationships with multiple partners, including China, rather than relying excessively on any single external market or security framework. This diversification strategy allows ASEAN states to maximise economic opportunities while reducing vulnerability to geopolitical disruptions (ASEAN Strategic Autonomy, 2023).
Analysis
Why China Benefits From Regionalisation
China was already ASEAN's largest trading partner before the Red Sea crisis. The conflict did not create this relationship, but it highlighted some of its advantages. Geographic proximity, extensive manufacturing networks, established logistics infrastructure, and deep supply-chain integration allow trade between ASEAN and China to remain relatively efficient compared with longer-distance trade routes. China-ASEAN trade reached nearly US$1 trillion in 2024, significantly exceeding ASEAN's trade with most other major partners (China-ASEAN Trade 2024, 2024).
Unlike many external partners, China occupies a unique position within ASEAN-centred supply chains. It is simultaneously a major export market, manufacturing hub, investor, infrastructure partner, and participant in RCEP. This level of integration means that efforts to shorten supply chains and reduce transportation risks often reinforce existing ASEAN-China economic linkages rather than replace them. ASEAN leaders agreed in 2024 on enhanced connectivity goals, including transport links and digital infrastructure development (ASEAN Connectivity 2025, 2024).
For many ASEAN businesses, particularly manufacturers and exporters, regional supply chains became even more attractive as global shipping disruptions intensified. The crisis reinforced the importance of nearby production networks capable of reducing transport costs, shortening delivery times, and improving supply chain reliability.
The Role of RCEP
The Regional Comprehensive Economic Partnership (RCEP) has become increasingly important as businesses seek greater predictability and lower transaction costs. The agreement connects ASEAN with China, Japan, South Korea, Australia, and New Zealand through a common trade framework, creating opportunities for companies to diversify suppliers while remaining within a largely integrated economic zone. Together, RCEP economies account for approximately 30 per cent of global GDP, trade, and population, making it the world's largest free trade agreement (RCEP Overview, 2023).
As geopolitical uncertainty increases, RCEP provides a mechanism for strengthening regional trade resilience while supporting ASEAN's long-term economic integration agenda. ASEAN leaders agreed to reduce costs and improve cross-border efficiency, including wider use of advanced technologies in logistics and trade processes (ASEAN Leaders' Declaration on Enhancing Supply Chain Connectivity, 2024).
What This Means for MSMEs
Micro, small, and medium-sized enterprises (MSMEs) are often the most vulnerable to global disruptions. Unlike large multinational corporations, many MSMEs lack the resources to absorb rising shipping costs, manage supply chain disruptions, or rapidly shift suppliers when crises emerge. The Red Sea disruptions highlighted this vulnerability. Higher freight costs, delayed deliveries, and supply shortages tend to disproportionately affect smaller firms, which often operate with tighter margins and fewer alternative sourcing options.
Greater regional integration can help address these challenges by reducing transportation distances, expanding access to regional suppliers, improving trade facilitation, increasing access to digital commerce platforms, and lowering transaction costs through trade agreements. For many smaller businesses, a more integrated regional economy may provide greater protection against future geopolitical disruptions than dependence on distant supply chains. In 2024, FDI inflows to ASEAN demonstrated remarkable resilience with 8.5 percent growth, reaching US$226 billion (ASEAN Investment Report 2025, 2025).
The Limits of the Shift
Despite China's growing importance, ASEAN is unlikely to become economically dependent on any single partner. The United States remains a major export destination for many ASEAN economies. Japan, South Korea, India, Australia, the European Union, and Gulf states continue to play significant roles in trade, investment, and development. ASEAN economies remain deeply integrated with China, the United States, Japan, South Korea, the European Union, Australia, and India (ASEAN Strategic Autonomy, 2023).
The broader trend is therefore not one of replacement, but diversification. ASEAN's strategy remains centred on maintaining multiple economic relationships while strengthening regional resilience and reducing vulnerability to external shocks. China may benefit from regionalisation, but ASEAN's long-standing objective remains strategic autonomy rather than economic alignment with any single power. This diversification strategy allows ASEAN states to maximise economic opportunities while reducing vulnerability to geopolitical disruptions (ASEAN Strategic Autonomy, 2023).
What Should Happen Next?
Strengthen Regional Supply Chains.
Reducing dependence on vulnerable long-distance trade routes can improve resilience during future disruptions and support regional economic growth. Continued investment in transport connectivity, logistics infrastructure, and cross-border trade facilitation should remain a priority. ASEAN leaders agreed in 2024 to build disaster-preparedness into supply chains, planning for crisis operations, not reacting after the fact (Regional supply chains drive new ASEAN cooperation push, 2026).
Accelerate RCEP Implementation.
Removing remaining barriers to trade and investment can help businesses take greater advantage of regional economic integration while strengthening economic resilience. More effective implementation of RCEP will allow firms to diversify suppliers and reduce exposure to future shocks. RCEP covers approximately 30 per cent of global GDP, trade, and population (RCEP Overview, ASEAN Secretariat, 2023).
Support MSMEs.
Smaller firms require better access to financing, digital tools, logistics networks, and regional markets if they are to benefit fully from deeper integration. Policymakers should ensure that regional trade initiatives are accessible not only to multinational corporations but also to local businesses. Greater regional integration can help address MSME challenges by reducing transportation distances and lowering transaction costs through trade agreements.
Ultimately, the Middle East crisis did not fundamentally alter ASEAN's trade strategy. It reinforced it. The disruptions demonstrated why regional integration, diversified partnerships, and resilient supply chains are becoming economic necessities rather than policy preferences. As geopolitical uncertainty continues to reshape global commerce, ASEAN's ability to balance multiple economic relationships while strengthening its own regional foundations may prove to be one of its greatest competitive advantages. Disruptions in key maritime chokepoints underscore the vulnerability of critical trade routes to geopolitical tensions (Strait of Hormuz disruptions: Implications for Global Trade and Development, 2026).
Frequently Asked Questions
Did the Middle East conflict make China ASEAN's largest trading partner?
No. China was already ASEAN's largest trading partner before the recent disruptions, with China-ASEAN trade reaching nearly US$1 trillion in 2024.
How did the Red Sea crisis affect ASEAN economies?
The crisis increased shipping costs, disrupted trade routes, and contributed to concerns about supply chain resilience, inflation, and energy security. Attacks on commercial shipping forced vessels to reroute around Africa, increasing transportation costs and delivery times.
Why is RCEP important?
RCEP helps reduce trade barriers and strengthens economic integration between ASEAN and several major Asia-Pacific economies, covering approximately 30 per cent of global GDP, trade, and population.
Is ASEAN becoming more dependent on China?
Not necessarily. While China benefits from deeper regional integration, ASEAN continues to pursue diversified economic relationships with multiple major partners.
What is the biggest lesson from the crisis?
The importance of resilient supply chains, diversified economic partnerships, and stronger regional integration in an increasingly uncertain global environment. ASEAN leaders agreed in 2024 to build disaster-preparedness into supply chains.
