Since taking office in January, the second Trump administration has rapidly set about dismantling the climate policies implemented under the Biden administration, cutting climate finance commitments, rolling back carbon emissions regulations, and withdrawing once again from the Paris Agreement. For the Association of Southeast Asian Nations (ASEAN), a region that is extremely vulnerable to climate change and depends on outside financing and technology for its green transformation, these reversals present serious obstacles.
Climate action is an issue of growing urgency for ASEAN states, with temperatures steadily rising and natural disasters becoming more intense and more frequent. However, ASEAN’s climate policy and infrastructure is also uniquely complicated by intensifying geostrategic and green competition between the U.S. and China – the world’s largest carbon emitters.
The rollback of climate policies and funding, a looming U.S.-China trade war, and tariffs on solar panels and clean energy technologies under the Trump administration pose significant challenges to ASEAN’s advancements in climate finance, clean energy adoption, and diplomatic positioning in global climate governance. In response to these challenges, ASEAN states should enhance regional cooperation, diversify climate finance sources, strengthen clean technology industries, advocate for fair trade policies, and balance strategic engagements with both the U.S. and China to ensure their energy security and resilience.
Climate Financing Shrinks Further
Southeast Asia is one of regions most vulnerable to climate change. However, insufficient climate finance has been a critical impediment to decarbonization and other green efforts in the region, as many governments continue to struggle to set aside enough domestic funding.
The International Energy Agency estimates that clean energy investment in Southeast Asia needs to quadruple to $130 billion per year by 2030, with similarly substantial investment needs for climate adaptation. While international partners have made big funding promises, these promises have largely failed to translate into action on the ground, leaving ASEAN states justifiably frustrated.
Climate regressions under Trump will worsen a bad situation, by shrinking an already limited pool of climate finance and undermining international collaboration. The global shutdown of U.S.-funded aid and development programs will undermine energy transition and climate related initiatives throughout Southeast Asia. The U.S. has withdrawn from its leadership role in the Just Energy Transition Partnership (JETP) initiatives for Indonesia and Vietnam, which were designed to help the countries ditch coal power and switch to clean energy. Major Wall Street banks have also withdrawn from the Net-Zero Banking Alliance (NZBA). Previously, U.S. banks had comprised $14.9 trillion, or about almost 20 percent, of the NZBA’s assets,.
For economies in Southeast Asia seeking investments and loans for climate-resilient infrastructure, the U.S. retreat from climate finance is reducing already limited options. There is also concern that Trump’s abrupt withdrawals might embolden other countries to follow suit, which would severely undermine the international cooperation that is so crucial for a region like ASEAN.
U.S.-China Green Competition in ASEAN
As the U.S. steps back from climate engagements, and with further regression to come in the next four years, China is simultaneously rising in the green tech sector and “greening” its Belt and Road Initiative (BRI)-funded projects.
U.S. withdrawals from climate leadership and finance position China to further expand its influence in ASEAN through investments in renewable energy and infrastructure.
China is already the largest single source of international renewable finance in Southeast Asia, with massive infrastructure projects, especially hydropower dams along the Mekong, built under the BRI.
If ASEAN chooses to welcome increased Chinese involvement for greater financial backing on regional green projects, it will result in strategic dependencies that ASEAN needs carefully to manage. Southeast Asian nations such as Cambodia are already struggling to mitigate their overdependence on China. Furthermore, China’s climate contributions raise concerns in regard to transparency and damage to local ecosystems. For example, hydropower dams in Laos have destroyed the livelihoods of fishing and farming communities. However, with U.S. disengagement, ASEAN states will have fewer options.
Green competition between the U.S. and China has previously benefited ASEAN in some regards. For example, the JETPs were designed in large part to balance China’s dominance in renewable energy investments in Southeast Asia. As Trump now slashes climate finance, green competition with China will likely take a more destructive turn in Southeast Asia, characterized by his aggressive tariff policy.
The Impacts of Trump’s Tariff Policy on ASEAN
During Trump’s first administration, tariffs on solar panels and other clean energy technologies increased the cost of renewable energy projects. On February 1, Trump signed an executive order levying an additional tariff of 10 percent on all goods from China. This move will raise total tariffs on certain Chinese solar products up to 60 percent, and Chinese batteries nearly 40 percent, which will raise the price of clean energy investments in ASEAN. Countries with emerging solar and EV industries such as Vietnam, Malaysia, Indonesia, and Thailand will be impacted by increased tariffs on exports to the U.S. The higher costs associated with tariffs could make it more challenging for ASEAN nations to meet their Nationally Determined Contributions under the Paris Agreement.
Many ASEAN countries also depend on cheap Chinese solar panels to reach their renewable energy commitments; and tariffs could disrupt the supply chain and delay project implementation. The tariffs might also reduce investment in renewable energy projects by causing uncertainty in the clean technology sector.
It is possible that tariffs imposed on China could actually benefit ASEAN nations by positioning them as alternative suppliers to the U.S. market for solar panels and batteries. Chinese green tech giants, including solar panel battery producers, have extended operations in Southeast Asia to bypass U.S. tariffs. However, if Trump targets firms based on Chinese ownership rather than location, this will hurt ASEAN even more.
Strategies and Recommendations for ASEAN
Southeast Asia is now caught in the crossfire of a looming U.S.-China trade war, with increased vulnerability due to the loss of U.S. climate engagement and financing. U.S.-China competition may disrupt supply chains, inflate costs, and create uncertainty for industries worldwide. For ASEAN, the trade war could bring both challenges and opportunities. As a region that is heavily reliant on trade, and with a growing commitment to renewable energy, ASEAN must take calculated steps to mitigate the effects of tariffs and trade restrictions while also establishing itself as a leader in the clean technology industry hub.
ASEAN states should coordinate to weigh the economic benefits of building up manufacturing exports against the constraints posed by rising import costs for key components. For example, Vietnam and Malaysia, key players in the solar panel supply chain, may gain new market opportunities while also suffering high production costs.
The member states must work together to establish common standards for solar panels and clean energy. By strengthening regional policy coordination, common regional standards could facilitate trade and ensure the quality of products. Furthermore, ASEAN should have a consistent stance on the international stage, arguing for fair trade practices and tariff reductions on clean technologies. A unified strategy will strengthen ASEAN’s voice and influence in global trade negotiations and aid the region in positioning itself as a strong partner for the U.S. and China, and in seeking other partners.
To build long-term resilience, ASEAN should lessen its dependence on China for clean technology by diversifying its supply chain and boosting intraregional trade and investment in clean technology production. This will result in a stronger supply chain that is less susceptible to outside shocks. ASEAN governments need to boost investment in regional innovation and production capacities, especially financial incentives and technical assistance to expand their operations should be provided to small and medium-sized enterprises that operate in clean technologies manufacturing. While financing those businesses, developing a skilled workforce will also position ASEAN as a global leader in clean technology.
While the Trump administration won’t entirely make or break ASEAN’s climate related efforts or green technology development, it will complicate an already challenging landscape. By strengthening regional cooperation, securing diverse climate finance, and mitigating dependence on China for clean technology and infrastructure, ASEAN can strengthen its green transition and become an increasingly attractive partner and target for investors. Ultimately, ASEAN’s success in protecting its most climate vulnerable communities hinges on its ability to navigate the U.S.-China competition with strategic foresight and a unified stance on climate and trade.