The International Monetary Fund (IMF) reports that ASEAN is benefiting from the trade tensions between the United States and China.

• Since 2018, ASEAN economies have consistently grown their share of Chinese and U.S. imports, value-added, and foreign direct investment, as indicated by IMF data.
• The IMF warned that the region, which is heavily dependent on exports, still faces risks due to global economic fragmentation.

Despite the growing geopolitical tensions between China and the United States, the Association of Southeast Asian Nations (ASEAN) has maintained its economic strength, according to the International Monetary Fund (IMF). However, the IMF warns of the risks posed by fragmentation within the region.

The region has profited from globalization for many years, establishing robust trade connections with China and the United States, the world's largest economies, as per the U.N. agency.

Despite the decline in U.S.-China relations, ASEAN has remained committed to its economic integration with the world, according to the IMF's latest report.

Despite political tensions, ASEAN has maintained economic ties with both China and the U.S.

Since 2018, ASEAN economies have gained a larger share of both Chinese and U.S. imports, with the superpowers taking a larger portion of the region's value added, according to IMF data.

Foreign direct investment from both countries has also increased in ASEAN.

The report stated that the region has benefited from trade diversion opportunities resulting from US-China trade tensions.

In 2018 and 2019, former U.S. President Donald Trump initiated a trade war with China by imposing tariffs on numerous Chinese imports, which prompted a response from Beijing. The Biden administration has maintained most of those tariffs and added additional levies in May.

According to the IMF, several ASEAN economies have experienced a faster growth in exports of products affected by Chinese or U.S. tariffs compared to other exports.

The increase in exports of tariffed goods to countries outside China and the U.S. indicates that ASEAN has benefited from trade diversion and achieved economies of scale.

The report states that there has been an increase in trade between members of the political and economic union.

The IMF states that these trends have led to ASEAN's rise in inward foreign direct investment, global exports, and added value.

Despite the financial agency's observation that China-U.S. tariffs have resulted in gains for some ASEAN members, overall exports have not been significantly strengthened across all members.

Although some countries, such as Vietnam, experienced robust export growth compared to the global average from 2018 to the present, other countries, such as Thailand, experienced a decline in export growth, while the Philippines and Singapore experienced no growth at all.

According to CNBC, Vietnam has become a popular destination for companies looking to diversify their supply chains away from China due to increased geopolitical risks, alongside other Southeast Asian countries such as Malaysia and Indonesia.

The IMF warns that the intensification of geopolitical pressures could negatively impact the region in the future.

The likelihood of global economic fragmentation is to decrease activity in ASEAN's major trading partners, such as the U.S. and China, which could lower external demand for goods from the heavily export-dependent region.

The IMF has revised its growth prospects for the Asia-Pacific region for 2024 and 2025 by 0.1%, based on its outlook on Friday.

Although the markup indicated growth, it also cautioned that risks are increasing due to "rising geopolitical tensions, uncertainty about global demand, and potential financial instability."