Donald Trump’s talk of sweeping new tariffs on American trade partners has leaders from Mexico to France looking for conciliatory gestures that might help them skirt the threat. The risk is felt keenly in Southeast Asia, where countries are closely integrated with the giant Chinese economy but have an interest in maintaining strong economic and political ties with the United States.
The key, says former Singaporean diplomat Kishore Mahbubani, is to leverage existing ties with American companies that have invested heavily in the region and look for win-win deals with the incoming administration. “We buy lots of Boeing aircraft, we buy defense equipment, we buy agricultural products,” says Mahbubani, who served two stints as Singapore’s permanent representative to the United Nations and as dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore. “So there's a lot of potential for American business to do more in Southeast Asia.”
Mahbubani’s outlook reflects his confidence that China’s lead in green technologies and other industries of the future as well as demographically dynamic India and Southeast Asia position the region for global leadership. His recently published memoir is titled “Living the Asian Century.” He spoke recently with Ben Simpfendorfer, a partner of Oliver Wyman’s Finance and Risk practice who leads the Oliver Wyman Forum’s initiatives in Asia.
Singapore has managed to maneuver between China and the United States during the past few years. What sort of challenges do you expect with Donald Trump's return to the White House?
Well, there's no question that the US-China contest will intensify. But that's driven by structural factors, not by personalities. What's interesting is that Donald Trump launched the US-China contest by imposing tariffs. During the 2020 election, Joe Biden criticized Trump's tariffs on China, but after he got elected, Biden retained the tariffs.
At the same time, Trump will bring a new level of unpredictability. He can be very mercurial, capricious, and impulsive. So I expect relations at least initially to be very bumpy between the US and China.
The only consolation is that at the end of the day, Donald Trump is a very transactional person. If the Chinese offer him some kind of a good deal where they buy a lot more products from United States, he might go for the deal. He's got no ideological compulsions in that sense.
You've called for Singapore and other Asia countries to pursue win-win deals with the Trump administration. What do you have in mind?
One advantage Singapore has is that Donald Trump likes Singapore. The reason why he chose Singapore for his 2018 meeting with Kim Jong Un was he wanted Kim to see a very modern, successful country, and tell him this is the model you should follow. At the same time, Donald Trump doesn't like trade deficits. He likes trade surpluses. And the US has a trade surplus with Singapore.
As for win-win policies, the remarkable thing is that US companies have invested more in countries of the Association of Southeast Asian Nations (ASEAN) than they have in China, Japan, South Korea, and India combined. It seems these companies are making good profits in Southeast Asia. We can use them to persuade the Trump administration that you don't want to kill the goose that lays the golden egg. The United States is benefiting a lot from investment in Southeast Asia.
We can also buy more products from the United States. We buy lots of Boeing aircraft. We buy defense equipment. We buy agricultural products. So there's a lot of potential for American business to do more in Southeast Asia. And the advantage the United States has is that there are reservoirs of goodwill toward Americans because during the Cold War, ASEAN was founded as a pro-American organization.
Given that China's economic growth rate is half of what it was 10 years ago, and the US is quite robust, do you still believe we're living in an Asia century?
The good news is that Asia is much bigger than China. Asians make up 55% of the world's population, and China represents a minority within Asia. You have 1.4 billion people in India and 700 million people in Southeast Asia.
You also have to look at the progress of the Chinese economy not year by year, but decade by decade. Right now there's no question that the Chinese economy is going through a bad patch. Consumer sentiment is bad, business sentiment is bad, you have the real estate bubble. But these are cyclical problems that they can fix eventually.
But if you ask yourself which of the leading economies is investing the most in industries of the future, no one can beat China. In terms of electric vehicles, solar panels, wind turbines, battery technology, China is ahead of the world. So 10 years from now, Chinese industries will become stronger and stronger. By contrast, look at the trepidation that automobile companies in Europe and Japan feel in the face of Chinese competition.
What about the rest of Asia?
Asia is not just about China. India is still growing very fast. Southeast Asia is growing very fast. You have many engines of economic growth, and not just one.
The most important statistic everyone should know is that in the CIA countries (China, India, and ASEAN), there were only 150 million people enjoying middle-class living standards in the year 2000. By 2020 that number had exploded 10 times, to 1.5 billion. And by 2030, it'll be 2.5 to 3 billion.
This is the largest explosion of middle-class population ever seen in human history. And this affluent middle class will be the drivers of the Asian century.
You mentioned in your recent book that after 26 months on the UN Security Council, you concluded that power always trumps principles. How does that experience shape your views of today's geopolitical events?
Geopolitics is not for nice guys or the naive. If any great power has to choose between power and principles, it will always choose a position that will enhance its power.
I also believe that since geopolitics is a cruel game, when you see peace in a region like in Southeast Asia, it reflects geopolitical competence. But when you see the Ukraine war being fought, that reflects geopolitical incompetence.
There's no question that Russia’s invasion of Ukraine is illegal. But at the same time, could the war have been avoided if the European Union had been a bit more geopolitically sophisticated in managing its neighbor? If you have a strong neighbor like Russia, you have to understand its geopolitical concerns, its security concerns, and also take them into consideration.
How do you see ties between Asia and the Middle East evolving?
The Middle East is often dysfunctional. Just when you think there won't be a war there, another war erupts. It's not entirely due to the countries in the region; the Great Powers are using the Middle East as their trampling ground.
I believe that the members of the Gulf Cooperation Council (GCC), especially Saudi Arabia and the United Arab Emirates, want to strengthen their ties with China, India, and ASEAN. That's good. If the GCC moves closer to East Asia, hopefully they'll be able to create a region of peace and prosperity in the same way that ASEAN has been able to achieve in its region.