US Tariffs Loom Over Asean Summit As Ties With China Strengthen

Summary:

Southeast Asian leaders start two days of talks from Monday, seeking to deepen ties with China and Gulf nations, and mitigate the fallout from US President Donald Trump’s tariff hikes.

Trade and economic cooperation will likely dominate the agenda of the 10-nation Association of Southeast Asian Nations summit taking place in Kuala Lumpur, along with conflicts in Gaza and Myanmar.

While the first of the two Asean summits held annually is usually reserved for Southeast Asian leaders, China is sending its No. 2 official, Premier Li Qiang. The leaders of the Gulf Cooperation Council nations, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates will also be in attendance. By contrast, the US and other Western nations won’t be represented.

For Malaysian Prime Minister Anwar Ibrahim, the summit he’s hosting is a chance to foster trade ties at a time nations with large surpluses with the US are on the hunt for new investment opportunities abroad. China is warning partners to avoid any deal with the US that comes at Beijing’s expense, leaving Asean members to walk a delicate balance between the world’s two top economies.

“There is no substitute for the United States,” said Shahriman Lockman, an analyst at the Institute of Strategic and International Studies in Malaysia. “Yes, we talk about diversification and autonomy. But let’s not kid ourselves — there is no real alternative in sight.”

Trade between China and Asean nations reached $982.3 billion last year, according to a report by state-run Xinhua News Agency. By comparison, US goods trade with the region totaled $476.8 billion in 2024 — $352.3 billion of which were American imports from the region, official data shows.

The summit comes weeks after Chinese President Xi Jinping visited Vietnam, Malaysia and Cambodia, during which he pitched for a unified “Asian family” — an apparent effort to counter US pressure on nations to limit trade ties with Beijing.

The Asean members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

New partners

Indonesia became a full member of the Russia and China-led BRICS group of developing nations earlier this year, with Malaysia, Vietnam and Thailand given partner nation status. Last week, Asean and China concluded talks to upgrade a free trade pact that includes chapters on digital and green economies and small and medium-sized enterprises, according to Chinese state media.

“I see this as a very good opportunity for us to show that Malaysia is a neutral country that wants to trade with any country that would like to trade with us,” Malaysian Communications Minister Fahmi Fadzil told reporters of the summit.

Back in Washington, negotiators from several countries in the region are working on deals to avert some of the highest tariff hikes announced last month by Trump. Whether those efforts will pan out are unclear and the US rejected a Malaysia-led attempt to negotiate as a bloc, according to local reports.

Southeast Asia has also engaged in a spate of intra-regional visits to facilitate business closer to home, although that won’t likely come close to filling the gap left by the US if it doesn’t drop levies.

“These are encouraging, but it doesn’t mean that the trouble is over,” Singapore Deputy Prime Minister Gan Kim Yong said this month. He added that Asean is negotiating to upgrade an existing trade agreement that could facilitate lower levies even though more than 90% of goods traded in the region are already tariff-free.

Conflicts abroad

Beyond trade, regional leaders are expected to have sessions ahead of the summit to discuss the ongoing civil war in military-ruled Myanmar. Anwar has also used recent trips abroad to warn of a widening chasm in the global north-south economic divide and criticize Israel’s backers over its war with Hamas in Gaza.

He told reporters last week he would “probably touch on” the subject in a bid to push for a ceasefire. Whether any other substantive outcomes are reached, meanwhile, remains to be seen.

“Despite rhetoric from the Malaysian government as chair, there has been very little evidence of an Asean effort here,” said Gregory Poling, a director and senior fellow at the Center for Strategic and International Studies. “The stakes are actually pretty low.”

Source: Theedgemarkets

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James Riley

Shares of Japan’s Nippon Steel Corp (TYO:5401) jumped on Monday after U.S. President Donald Trump expressed support for the company’s $14.9 billion bid to acquire U.S. Steel (NYSE:X).

In a post on Truth Social on Friday, Trump described the proposed acquisition as a “planned partnership” that would create jobs and bolster the American economy.

Reuters reported last week that Nippon Steel has committed to investing $14 billion in U.S. Steel’s operations if the merger is approved, with up to $4 billion allocated for building a new steel mill.

Tokyo-listed shares of Nippon Steel climbed as much as 7.4% in early trading. As of 00:36 GMT, the stock was trading 4.6% higher at 3,000 yen, its highest level since April 2.

Following Trump’s endorsement, U.S. Steel shares soared 21% on Friday, as investors interpreted the statement as a sign of presidential approval for the long-contested deal.

The acquisition, announced in December 2023, had faced opposition over national security concerns, leading to a block by former President Joe Biden. However, Trump’s recent directive for the Committee on Foreign Investment in the United States (CFIUS) to re-examine the deal has reignited hopes.

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Fiona Harper

U.S. stock index futures rose sharply on Sunday evening after President Donald Trump said he will postpone his recently proposed 50% tariffs on the European Union to July, offering some relief over his tariff plans.

Focus this week is also on quarterly earnings from artificial intelligence darling NVIDIA Corporation (NASDAQ:NVDA), which are set to offer more insight into the trajectory of the AI industry. Nvidia’s earnings are expected to face some headwinds from increased U.S. restrictions on sales in China, which is still a major market.

S&P 500 Futures rose 0.8% to 5,865.50 points, while Nasdaq 100 Futures rose 1% to 21,177.25 points by 20:26 ET (00:26 GMT). Dow Jones Futures rose 0.7% to 41,972.0 points.

Trading volumes were thin before the Memorial Day holiday on Monday, while futures advanced after Trump’s threats of more EU tariffs sparked deep losses in Wall Street on Friday.

Trump agrees to postpone 50% EU tariffs to July

Trump said in a social media post that he had a productive call with EU head Ursula Von Der Leyen, and had agreed to postpone his proposed 50% levies on the bloc to July 9.

Trump said trade talks with the EU were set to begin in earnest immediately, while EU head Von Der Leyen also flagged improving relations with Washington.

Trump had on Friday threatened to impose 50% tariffs on the EU due to what he saw as a lack of progress in trade talks with the bloc. Separately, Trump had also threatened to impose 25% tariffs on Apple (NASDAQ:AAPL) Inc’s imported iPhones, as well as any other smartphone.

His threats had rattled risk appetite, sparking steep losses on Wall Street.

The S&P 500 fell 0.7% to 5,802.82 points on Friday, while the NASDAQ Composite fell 1% to 18,737.21 points. The Dow Jones Industrial Average fell 0.6% to 41,603.07 points.

Nvidia Q1 earnings on tap, AI demand, China, in focus

NVIDIA Corporation (NASDAQ:NVDA) is set to report its fiscal first-quarter earnings after the bell on Wednesday, with focus squarely on whether the AI-fuelled demand boost it received over the past two years remained in play.

The company had recently flagged some headwinds for its China sales, especially after the Trump administration introduced even tighter curbs on chip sales to the country.

But outsized AI demand through the first quarter is expected to have boosted Nvidia’s earnings despite difficulties in China, especially as its biggest customers– Wall Street’s so-called AI hyperscalers– continued spending vast amounts of money on the technology this year.

Reuters reported over the weekend that Nvidia planned to sell a cheaper, lower-spec AI chip from its Blackwell line in China later this year.

Source: Investing

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Gerik

Economic

From Reactive to Strategic: Fiscal Policy as the Growth Anchor

As Vietnam targets 8% GDP growth in 2025, fiscal policy has transitioned into a structural pillar rather than a temporary stimulus. Amid constraints in monetary policy and growing geopolitical uncertainty, a comprehensive, long-horizon fiscal strategy is now at the heart of macroeconomic recovery and institutional modernization. Tax cuts, investment expansion, and financial innovation are converging into a policy architecture designed to foster both immediate recovery and sustainable growth.

The proposed extension of the 2% VAT cut through 2026 is a keystone measure. By broadening the scope to include strategic goods such as fuel, IT, chemicals, and refined petroleum, the policy aims to inject spending power directly into the real economy. Despite projected budget revenue losses of over VND 121 trillion, historical data suggests this is a growth multiplier, not a fiscal drag. In fact, tax cuts implemented from 2022–2024 coincided with revenue surpluses and rising consumer spending, with retail sales up 8.8% in Q1 2025.

This supports a broader macroeconomic narrative: fiscal stimulus through tax incentives can expand the tax base via increased production and employment, as echoed by both academic analysts and investment banks like VDSC.

Public Investment: A Supply-Side Catalyst

Parallel to consumption-driven measures, public investment plays a crucial supply-side role. With state spending reaching VND 428.2 trillion in Q1 2025 (up 11.6% YoY), focus has shifted to sectors with high multiplier effects—interprovincial infrastructure, education reform, and digital transformation. Although disbursement remains slow (under 9% of the annual plan), effective capital deployment could push GDP growth to 7.4%, surpassing pre-pandemic averages.

Construction, machinery, and logistics stand to benefit most, while the public investment push also underpins long-term productivity and economic diversification.

Fiscal Credit Tools: Providing Liquidity Without Inflationary Risks

Tax deferrals and fee waivers—amounting to nearly VND 900 trillion by the end of 2024—have emerged as indirect zero-interest credit lines for businesses. With VND 204 trillion projected for 2025 alone, this policy helps firms navigate tight credit conditions without increasing monetary expansion risks. For SMEs, especially in manufacturing and exports, these measures offer vital breathing room to upgrade machinery and cut input costs, particularly amid volatile global commodity prices.

Digital transformation is accelerating fiscal policy delivery and transparency. Near-universal e-filing and e-invoicing reduce compliance costs while enhancing traceability. Meanwhile, enhanced post-audit mechanisms ensure that benefits from VAT cuts and tax support reach intended beneficiaries—especially end consumers—while deterring misuse by intermediaries.

This blend of automation and oversight strengthens investor confidence and enables more accurate fiscal impact assessments.

Green Fiscal Ecosystem: Toward a Sustainable Private Sector-Led Economy

The fiscal strategy now embraces long-term structural transformation. With Resolution 68-NQ/TW aiming for 70% GDP contribution from the private sector by 2045, policies are targeting startups, R&D, green manufacturing, and digital industries. New financial instruments like green bonds and climate funds are under design to mobilize and de-risk capital.

This shift positions fiscal policy not just as a stabilizer, but as a systems architect for institutional innovation and green growth, aligning with global ESG standards and investment benchmarks.

From Fiscal Shield to Economic Pathfinder

Vietnam’s 2025 fiscal policy signals a paradigm shift—from short-term relief to long-term leadership. With coordinated tax relief, scaled public investment, liquidity support, and structural incentives for green and digital growth, fiscal policy is now the vanguard of the country’s development agenda.

As Dr. Cấn Văn Lực notes, the future of economic leadership will hinge on fiscal strategy being not just counter-cyclical but transformational—anchored in transparency, execution capability, and cross-sector alignment. With a coherent and well-communicated policy mix, Vietnam is positioned to not only recover but structurally ascend in the coming decade.

To stay updated on all economic events of today, please check out our Economic calendar

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Political

Economic

A New Wave of Sanctions: Financial and Energy Pressure Intensifies

As the Russia–Ukraine conflict drags on with no resolution in sight, the European Union is preparing a sweeping new sanctions package—its 18th—designed to deepen economic pressure on Moscow. According to Bloomberg, the proposed measures include removing 20 Russian banks from the global SWIFT financial messaging system and reducing the G7-imposed price cap on Russian seaborne oil from $60 to $45 per barrel.

This expanded sanctions effort reflects a strategic push to disrupt the Kremlin’s revenue streams and curb its capacity to finance and equip its military.

Targeting SWIFT Access and Energy Revenues

Disconnecting Russian banks from SWIFT would further isolate the country from the global financial system. While several major Russian banks were already removed in previous sanctions rounds, this proposal would extend the restrictions, choking off access to cross-border transactions and complicating currency operations for businesses and state institutions.

Meanwhile, the proposed cut in the oil price cap would significantly reduce Russia’s profit margins on one of its most vital exports. Analysts note that while enforcement of the existing $60 cap has been patchy—due to “shadow fleets” and opaque shipping arrangements—a tighter cap could force Moscow to sell at deeper discounts, especially to non-aligned buyers in Asia and Africa.

This move echoes growing calls within the G7, particularly from the UK, to coordinate a stricter approach toward Russian oil, seen as one of the Kremlin’s few remaining lifelines.

Expanded Trade Bans and Technology Restrictions

In addition to financial and energy sanctions, the EU is reportedly considering €2.5 billion in new trade restrictions targeting dual-use goods and technologies relevant to arms manufacturing. These restrictions would focus on curbing Russia’s access to critical components such as semiconductors, advanced machinery, and software—materials that have sustained its defense sector despite prior sanctions.

The EU has emphasized that its sanctions are designed not only to punish but also to degrade Russia’s long-term war-making capacity by systematically removing its access to the global supply chain of high-tech components.

Nord Stream and Political Backing in Germany

One potentially controversial measure under discussion is a formal sanctions clause targeting the Nord Stream pipeline project. Although Nord Stream has already been physically disabled, its legal and financial framework remains. German Chancellor Friedrich Merz has expressed support for the inclusion of Nord Stream-related measures in the next sanctions package, signaling broader EU alignment on energy decoupling from Russia.

While the EU and G7 ramp up their punitive measures, the United States appears to be adopting a more restrained approach. TASS reports that U.S. Secretary of State Marco Rubio confirmed President Donald Trump is delaying the imposition of new sanctions on Russia. The rationale, according to Rubio, is to preserve diplomatic flexibility and maintain leverage over both Moscow and Kyiv in ongoing backchannel negotiations.

Trump’s administration reportedly believes that withholding immediate sanctions gives Washington more influence in shaping potential ceasefire discussions—a tactic that has drawn scrutiny from European allies prioritizing escalation.

A Divided but Determined Sanctions Front

As the EU pushes forward with its 18th sanctions package—potentially its most expansive yet—the divergence between Brussels and Washington highlights the complexity of coordinating international pressure on Russia. While European policymakers emphasize immediate economic disruption, the U.S. under Trump appears to be playing a longer game, focused on strategic diplomacy.

Nevertheless, the message from the EU is clear: with no sign of de-escalation from the Kremlin, the bloc is prepared to keep tightening the screws—financially, technologically, and politically—to shift the balance in the war of attrition.

Source: Pravda

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China–U.S. Trade War

Economic

An Industry on the Edge: Too Many Players, Too Few Profits

China’s electric vehicle (EV) sector, long hailed as the engine of global innovation and volume, is now facing its most decisive reckoning. Despite producing record numbers of EVs and surpassing other countries in adoption rates, the vast majority of the more than 50 active EV brands in China are bleeding capital. According to recent data, only three—BYD, Li Auto, and Seres—have turned a profit amid the cutthroat race for market dominance.

Over 95% of Chinese EV makers are currently operating at a loss, the result of a relentless price war that began in earnest in 2023 and continues to intensify. These companies have been prioritizing sales volume over profitability, with deep discounting becoming a survival tactic rather than a competitive edge.

Record-High Discounts and Shrinking Margins

According to JP Morgan, average EV discounts in China hit a record 16.8% in April 2025, slightly up from the 16.3% seen in March. The China Passenger Car Association (CPCA) reports that promotions have averaged 8.3% since the start of the year, following a 10% average price drop in late 2024.

As prices fall, profit margins have shrunk dramatically. In 2020, the average gross margin on EV sales in China was around 20%. By 2024, that figure has halved to just 10%—a level considered unsustainable for long-term industry viability. This has left many automakers unable to cover rising input costs or invest in innovation, prompting warnings of imminent market shakeout.

Industry Shakeout Imminent as Survival Pressure Mounts

Analysts widely predict that dozens of smaller EV brands will either be forced out of the market or absorbed by larger players in the coming years. The capital-intensive nature of EV production—combined with falling margins and unrelenting competition—makes it nearly impossible for smaller, less-capitalized firms to remain independent.

This anticipated wave of consolidation mirrors past cycles seen in China’s solar and steel industries, where rapid early growth was eventually followed by a purge of inefficient or redundant firms. The EV market now appears to be approaching a similar inflection point.

Export Becomes Lifeline for Struggling Brands

As the domestic market becomes increasingly inhospitable, some EV makers are shifting their focus toward international expansion. By targeting less saturated foreign markets, these firms aim to restore pricing power and tap into higher-margin opportunities.

Export data supports this pivot. In the first four months of 2025, EVs accounted for roughly 33% of all vehicle exports from China—up significantly from the 25% average over the past two years. By offloading inventory abroad, smaller manufacturers can reduce pressure at home while gaining a foothold in emerging markets like Southeast Asia, the Middle East, and Latin America.

Industry Evolution or Reckoning?

China’s EV sector is entering a new phase of maturity, one defined not by explosive growth, but by strategic consolidation, export orientation, and the prioritization of financial sustainability over market share.

While national leaders continue to support the sector as a pillar of industrial policy, market forces are now doing what subsidies once delayed: forcing unviable brands out and incentivizing operational efficiency. The next two years will likely define which players emerge as global champions—and which disappear in the aftermath of China’s EV price war.

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Economic

Service Sector Hit Hard by Economic Fatigue

South Korea’s restaurant and retail landscape is undergoing a contraction amid prolonged economic stagnation and falling consumer demand. According to newly released data from the National Tax Service (NTS), the first quarter of 2025 recorded a notable decline in the number of operating food and beverage establishments nationwide, highlighting the fragility of small businesses in a saturated and cost-heavy market.

The number of operating cafes fell to 95,337 as of March 2025—a decrease of 743 outlets compared to the same period last year. This marks the first year-on-year drop since cafe data tracking began in 2018, signaling a potential turning point for the once-thriving coffeehouse culture in South Korea.

Fast Food and Retail Also Feel the Squeeze

The contraction is not limited to cafes. The number of fast food outlets declined by 180 units year-on-year, falling to 47,803 as of Q1. Similarly, the count of convenience stores dropped by 455 locations, totaling 53,101. This broad-based downturn across different segments of the service sector reflects both oversaturation and broader economic malaise.

According to analysts, many businesses—especially small and independent operators—are closing due to persistent revenue declines and unsustainable operational costs. A key financial burden has been the steep commission fees demanded by delivery platforms, which have become an essential but costly distribution channel in the post-pandemic era.

Declining Revenues Highlight Structural Challenges

The struggles of South Korea’s small business ecosystem are further underscored by falling average revenues. In Q1 2025, the average income for small business owners was approximately 41.79 million won (USD 30,558), down 0.72% from the same quarter in 2024. While the decline appears modest, it is significant in a high-cost, low-margin sector and suggests that profitability is steadily eroding.

This drop comes despite persistent efforts by businesses to attract foot traffic and diversify their service offerings, and underscores that the recovery in consumer spending has been uneven and fragile.

Broader Economic Implications

South Korea’s consumption-driven sectors are often viewed as a barometer of the country’s middle-class confidence and spending power. The closures and revenue decline hint at more systemic challenges, including stagnating wage growth, high household debt, and demographic pressures such as an aging population and shrinking workforce participation.

Moreover, the market saturation—especially in urban areas like Seoul, where cafe and convenience store density is among the highest globally—has made survival even more difficult for new or small-scale entrants.

Restructuring Ahead for South Korea’s Service Economy

The recent wave of closures signals a sobering moment for South Korea’s food and retail industry. As high fixed costs, digital platform fees, and soft demand converge, many businesses are finding the current climate unsustainable.

Unless broader economic conditions improve and structural reforms are introduced—such as reducing operational burdens or revising platform fee structures—the country may witness a continued contraction in small-scale service businesses. This trend not only threatens local entrepreneurship but may also reshape urban consumer culture in one of Asia’s most vibrant retail markets.