As the US hikes tariffs and slashes aid, Southeast Asia is feeling the squeeze—putting pressure on regional supply chains and growth. Australia's returned government faces a choice: double down on trade, reshape its aid strategy, or rethink both. We asked four experts—so what for Australian aid and trade?
Many countries in Southeast Asia will be badly affected if the US implements the tariffs proposed by President Trump on ‘Liberation Day’. The 30% tariffs on China and the uncertainty created by a 90 day pause on the Liberation Day tariffs, and more recent pause on the 145% tariffs on China, are having a chilling effect on investment in the region. The export led growth strategy that Southeast Asian countries are relying on is looking increasingly shaky.
While Australia cannot offer a market on the scale of the US, we can help support countries in our region by remaining open to trade and investment. We should work with countries in the region to engage in reforming the WTO and invest in making our regional trade agreements more effective platforms for reducing barriers to trade and investment.
Most Southeast Asian countries are well past the stage of relying on aid to deliver the basic human services in their countries. Most are facing the same problems that Australia has or is still dealing with. These include how to stablise insurance markets in the face of rising rates and costs of natural disasters; raise tax revenue in the least distorting way; and develop and enforce environmental standards to manage water resources, including across borders. Australia has a lot of experience to share, and can learn a lot from working with Asian partners on their challenges. It will be partnerships - on trade, investment, regulatory design, standards setting, and on thorny issues like verifying real carbon offsets, where Australia can best engage with Southeast Asia.
Jenny is an expert in international economic policy and the former Chief Economist for Australia’s Department of Foreign Affairs and Trade. At the Lab, we’re big fans of Jenny’s sharp questions and ‘suffer no fools’ approach. We admire people with experience across the public, academic and private sectors – Jenny is one such gem.
As researchers who have long focused on poverty, inequality, and the distributional impacts of trade and climate change in Indonesia and the broader Southeast Asian region, the current global moment is deeply concerning. The combination of US foreign assistance cuts and rising tariff barriers threatens to reverse years of development gains, especially for vulnerable groups in our societies.
While the region is not as aid dependent as others, the aid cuts are already being felt—particularly in sectors like health and basic services, where international support has historically filled critical gaps. At the same time, new US tariffs are disrupting trade flows, raising production costs, and introducing uncertainty that hurts small exporters and workers most. These pressures are not distributed evenly; they are compounding inequality across communities, sectors, and countries.
In this context, Australia must go beyond business-as-usual. Its recent aid reallocations are welcome, but if Australia wants to be a genuine partner to the region, it must sharpen its focus on the equity implications of both aid and trade. This means investing in programs that directly address inequality—such as social protection, education, and inclusive green transition strategies— and supporting policies that ensure trade benefits rural areas and does not deepen income gaps.
Just as important is Australia’s role in reshaping global governance. The multilateral system is fragmenting, accelerated by US withdrawals from institutions like the WHO and the Paris Agreement. Australia, alongside Southeast Asian partners, can help forge a more inclusive and legitimate global platform—one that reflects the priorities of developing countries and centers equity, solidarity, and shared responsibility. Middle powers like Australia have a critical bridging role to play.
Rebuilding trust in global cooperation and ensuring fairer systems is not optional—it’s essential for regional stability and long-term prosperity.
Dr. Arief Anshory Yusuf is Professor of Economics at Universitas Padjadjaran, Indonesia, as well as a visiting professor at King's College London and an honorary senior lecturer at the Australian National University. Andy Sumner is Professor of International Development at King’s College London and President of the European Association of Development Research and Training Institutes. Arief and Andy have collaborated closely on issues of country-level and global poverty, inequality, and development. At the Lab, we love the combination of academic rigor and real world application that they bring to their work and policy advice.
Always important, Southeast Asia is now critical to Australia’s security, economic and environmental interests, with our over-reliance on Chinese markets and the US military laid bare. Perilously for us, Southeast Asia’s highly successful, trade-based development model is at risk, due to geopolitical instability; US and Chinese economic imbalances; and the Trump tariffs. Cambodia, Lao and Vietnam will be amongst the worst hit by Trump’s anti-trade, 50% taxes.
SEA must stick together and find new development pathways through greater regional cooperation and integration and by progressively shifting to the manufacture of higher value products. It should also encourage a win-win shift by China to a more sustainable, consumer-driven growth model, to pick up the slack in US demand for regional and global products.
Australia can broaden and deepen its engagement with this increasingly pivotal region by:
Richard is a leading voice in Australia’s development and international relations reform debate. He’s been with the Lab since the start, and he is a relentless source of ideas. Richard’s knowledge of the Australian development program and Southeast Asia is unparalleled. For the record, we don’t think he is a crusty old hand, but at the Lab, we do learn a lot from Richard’s experience, and love his quick wit, policy ambition and pragmatism.
