[Salon] Fwd: Nikkei: "ASEAN deepens internal, external ties to weather US tariff headwinds." (9/26/25.)




9/26/25

ASEAN deepens internal, external ties to weather US tariff headwinds

Intra-region trade and China deal: Takeaways from the bloc's economic chief meetings

20250925 AEM photo

KUALA LUMPUR -- Southeast Asian countries are deepening their internal and external economic ties as the region braces for the impact of U.S. tariffs and global supply chain realignments, with ministers advancing key trade agreements and digital initiatives during a series of meetings in Malaysia this week.

At the ASEAN Economic Ministers' meeting and related gatherings, which close on Friday, the bloc concluded negotiations on its long-awaited upgrade of the ASEAN Trade in Goods Agreement (ATIGA), which is on track to be signed at the ASEAN Summit in October.

According to officials, the upgrade will reflect today's more digital and sustainability-driven economies, call for streamlined customs procedures and feature improved rules of origin. These steps are seen as critical to promoting intra-ASEAN trade, which accounts for 20% to 22% of the 10 member nations' total trade. The push to ease trade among the partner nations comes as external challenges mount.

"The ATIGA upgrade reflects ASEAN's attempt to keep pace with a rapidly changing global economy," economist Doris Liew said.

Another major item discussed this week, and for which negotiations are expected to conclude in the coming weeks, is the ASEAN Digital Economy Framework Agreement (DEFA), a proposed deal to harmonize digital trade rules, standardize cross-border data flows and accelerate the region's digital transformation.

If ratified, DEFA could help unlock a $2 trillion blocwide digital economy by 2030, creating new opportunities in e-commerce, logistics and data-driven industries, officials say.

"Digital transformation is an accelerator for growth," said Jo Miyake, head of corporate and digital banking for Asia and the Middle East at HSBC, during the ASEAN-European Union Business Summit, held on Thursday on the sidelines of the ministerial meetings. He added that standardizing data, e-commerce and cross-border payments through DEFA will make ASEAN one of the "most attractive regions" in the world for business expansion.

Alongside these initiatives for internal integration, ASEAN ministers strengthened economic partnerships with major economies to diversify trade and hedge against global headwinds.

A central outcome was the conclusion of negotiations for the ASEAN-China Free Trade Agreement 3.0, which will be signed in October. The upgraded deal expands cooperation into emerging sectors such as the digital economy, green transition and supply chain connectivity, while committing to more inclusive growth for micro, small and medium-sized enterprises (MSMEs).

Talks with the U.S. focused on updating the ASEAN Trade and Investment Framework Agreement, deepening collaboration on digital trade, the development of MSMEs, in intellectual property and trade facilitation. Both sides endorsed a new 2025-2026 work plan and reaffirmed their commitment to finalizing an agreement ahead of U.S. President Donald Trump's planned visit to Malaysia at the end of October for the ASEAN Summit.

altEuropean Union Commissioner for Trade and Economic Security Maros Sefcovic speaks to reporters on the sidelines of ASEAN-related meetings in Kuala Lumpur on Sept. 25. (Photo by Norman Goh) 

The European Union signaled its ambition to deepen its economic footprint in Southeast Asia. Commissioner for Trade and Economic Security Maros Sefcovic said the EU hopes to conclude trade agreements with Malaysia, Thailand and the Philippines by 2027, building on a deal with Indonesia signed on Tuesday as well as on existing pacts with Singapore and Vietnam.

"We believe our trade relationship can be more than an economic tool," Sefcovic said. "We want it to become a strategic asset that builds trust, creates jobs and opens new opportunities, even in times of volatility."

Amarjeet Singh, ASEAN tax leader at Ernst & Young, said the ATIGA and ASEAN-China FTA upgrades will help reduce nontariff barriers and align trade rules with the realities of global supply chains. He added that the benefits to ASEAN are expected to be "significant," and this includes modernizing trade rules to better reflect current business realities, such as digital trade, green growth and crisis response mechanisms.

"Simplified procedures and modernized rules will create a more competitive trade environment and lower costs, particularly for MSMEs," he told Nikkei Asia. "These measures will also open new opportunities in environmental goods and sustainable investment."

Asrul Hadi, a partner at ADA Southeast Asia, said that although ASEAN has made progress in breaking down barriers toward deeper economic integration, "challenges remain" due to regulatory differences and inconsistent implementation. "Disparities in development and nontariff barriers complicate the situation," he said, "suggesting that integration will be gradual rather than transformative." On a more positive note, Asrul added that ASEAN's strength lies in its credibility as a "predictable bloc, capable of advancing steadily even amid geopolitical uncertainty."

Adib Zalkapli, managing director at Viewfinder Global Affairs, pointed out that ASEAN member states largely recognize the need to strengthen the group to deal with today's geopolitical challenges. Realistically, he said ASEAN countries have to "first deal with domestic politics" before they can pursue economic integration.

Additional reporting by Ahmad Mustakim.





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