The real bond vigilantes hounding Trump are Asian – Asia Times

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TOKYO – The dollar extended its biggest plunge in three years on Friday after China raised tariffs on the US to 125% from 84%, a tit-for-tat step that has gold surging, markets everywhere gyrating and investors more uncertain than ever about the global economic and financial outlook.

It’s now US President Donald Trump’s move. Does the Trump 2.0 White House double down and increase its own tariff rate, now at 145%, on Asia’s biggest economy? Trump, after all, has threatened before a 200% levy on certain Chinese products.

Perhaps most interesting about this week is what global investors learned about the Trump 2.0’s pain threshold. Punters learned – to their horror – that Trump is willing to stomach epic stock market losses but not telltale signs of distress in the bond market.

Posterity will show that it wasn’t the US Congress, the judiciary or voters that forced the US president into a more relational tariff policy. It was bond traders.

In Asian trading hours on April 9, the so-called “bond vigilantes” pushed the yield on 30-year US Treasury bonds above 5%, Bloomberg reported. That — and memories of events from the mid-1990s, mid-2000s and the Silicon Valley Bank bust in 2023 — saw Trump beat a hasty and rare retreat on most tariffs.

Yet it’s concerns about the next round of vigilantes to take on the Trump White House that made him blink: Asian central banks.

Central banks in the region hold roughly US$3 trillion of US Treasuries, with Japan and China, the top holders, sitting on a combined $1.9 trillion. If they were to start selling on a significant scale, who could pick up the slack? Other than the largest global banks buying steadily, arguably no one.

That’s why chatter in bond trading pits this week that Japan, China and other Asian monetary authorities might be selling so alarmed top US Treasury Department officials. For years, traders feared China might dump its trove of US T-bills in retaliation against US sanctions and restrictions. That day may have arrived.

China, after all, has an incentive to show that “it won’t hesitate to cause turmoil in the global financial market in order to improve its negotiating power against the US,” says strategist Ataru Okumura at SMBC Nikko Securities.

Reporting was that dire warnings from household name financiers like Jamie Dimon of JPMorgan Chase & Co broke through the Trumpian bubble.

The years Treasury Secretary Scott Bessent spent working in hedge fund circles came in handy. For all Trump’s public bluster, another Long-Term Capital Management-like crash could have been catastrophic for global markets and the US economy.

LTCM’s 1998 collapse was partly due to surging Treasury debt yields. Triggering a repeat in 2025, with Trump’s tariffs upending all asset classes and China flirting with deflation, could make the 2008 Lehman Brothers crash look tame by comparison.

Yet the risk that Trump’s policies might repel Asian central banks is growing by the day. This threat is imparting a unique leverage point for the Bank of Japan, the People’s Bank of China and other top Asian monetary authorities.

Asia’s main leverage over Washington right now is bonds, currencies and trade in services. This latter category refers to America’s deep dependence on Asian markets for exports of financial services, technology and intellectual property.

The mechanics of Trump’s tariff-heavy trade war suggest an imperfect understanding of the US economy’s Asia-related vulnerabilities.

Bond traders, the kinds that take matters into their own hands when a government’s policy mix seems out of whack, are all over the debt and currency realms.

“The bond vigilantes have struck again,” says Ed Yardeni, founder of Yardeni Research, who coined the phrase. “As far as we can tell, at least with respect to US financial markets, they are the only 1.000 hitters in history.”

Even though “the stock vigilantes were clearly telling President Donald Trump that his tariff policy was misguided late last week, his advisers touted falling oil prices and bond yields as ultimately helping Main Street America,” Yardeni notes. “That changed as the 10-year Treasury yield surged.”

Yardeni has been a keen observer of this phenomenon for decades. In 1983, Yardeni said, “bond investors are the economy’s bond vigilantes. … So if the fiscal and monetary authorities won’t regulate the economy, the bond investors will. The economy will be run by vigilantes in the credit markets.”

A decade later, James Carville, then a strategist for US President Bill Clinton, made his famous observation about how he’d like to be reincarnated as the bond market. “You can intimidate everybody,” he quipped.

This was back during balanced-budget negotiations. At the time, debt investors were hypersensitive to the slightest hint, good or bad, about zigs and zags in Washington’s fiscal policy debates.

Today, as the US national debt approaches US$37 trillion, Asia has very valid reasons to worry about Washington’s fiscal health. Trump’s Republican Party, for example, is angling for another multi-trillion tax cut that could hasten the path to the $40 trillion national debt mark.

At the same time, disarray in Congress has lawmakers playing politics over the debt ceiling and funding the government even more so than in 2011. That was the year S&P Global Ratings yanked away Washington’s AAA credit rating.

That market-rattling step came two years after then-Chinese Premier Wen Jiabao voiced concern about Washington’s trustworthiness to safeguard vast Chinese state wealth sitting in dollars. Wen was particularly worried about the scale of bailouts amid the Lehman Brothers crisis.
 
“We have made a huge amount of loans to the United States,” Wen said in 2009. “Of course, we are concerned about the safety of our assets. To be honest, I am a little bit worried.” He urged Washington “to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

At the time, the US debt was less than $12 trillion, two-and-a-half times lower than when Fitch Ratings downgraded the US in 2023. Today, Moody’s Investors Service is mulling whether to maintain Washington’s last AAA rating with the US debt three times what it was in 2009.

There are long-standing fears that Chinese leader Xi Jinping’s government might dump dollars as a retaliation play against Trump’s tariffs, now at 145% after a series of escalations.

It would be a Pyrrhic victory, of course. Any surge in borrowing costs would boomerang back China’s way as US households suddenly consume less.

Nor would it be in Beijing’s interest if global investors decided the US budget deficit is a train wreck in slow motion. The potential contagion effects could make the 2008 Lehman Brothers crisis seem tame by comparison.
 
Even so, Xi’s Communist Party may have calculated that the US has far more to lose in the event of a Global Financial Crisis 2.0. China pulling the plug now would catch US markets decidedly off-balance, amplifying the fallout.

In 1997, then-Japanese Prime Minister Ryutaro Hashimoto admitted to a New York audience that “several times in the past, we have been tempted to sell large lots of US Treasuries” to make a point. One such episode was the heated auto negotiations a few years earlier.

This time, the intrigue involves the Trumpian turmoil already on full display.

“Why is this happening?” Yardeni asks. “Fixed-income investors may be starting to worry that the Chinese and other foreigners might start selling their US Treasuries.” The bond market, he adds, worries “the Trump administration may be playing with liquid nitro.”

Count the ways this White House might damage the dollar’s credibility and the perceived sanctity of Treasuries, the linchpin of global finance.

They include: sticking with an inflationary tariffs arms race; meddling with the Federal Reserve’s independence; neutering the Internal Revenue Service; and seeking trillions of new tax cuts that Trump World assumes Washington’s Asian bankers will dutifully finance.

This last assumption is highly dubious considering reports Asian central banks are already limiting their exposure to the US. But eyeing Trump’s exploits — which could easily imperil America’s credit rating — from 7,000 miles away is causing serious anxiety among Asian policymakers.

One irony is Asia watching Trump’s government do many of the things the US chastised Asia for a quarter of a century ago. Back in 1997-98, when Hashimoto was spooking bond traders, US officials were counseling Bangkok, Jakarta, Kuala Lumpur, Manila and Seoul against crony capitalism, oligarch-dominated economic systems and extreme opacity.

Now it’s Asia’s turn to watch Washington torch its once-vaunted financial institutions with bewildering speed. This has policymakers busily gaming out how Trump’s tariffs and general erraticism might upend their economies. For now, it seems the trauma that Trump has delivered to stocks might be less than it will be for debt.

“Though stocks rose following Trump’s pause, Treasury yields haven’t fully recovered from the sharp moves of earlier this week, reflecting some potential damage to the US economic brand,” notes Ian Bremmer, president of Eurasia Group.

“The dollar has continued falling, too. The political ramifications of this are potentially more widespread than any market drops, as the higher yields make it more difficult for small businesses to access loans, with knock-on effects for the US economy,” Bremmer said.

The ways Trump is imperiling US growth as alarm bells ring about a possible recession would normally cheer debt markets. But given the inflation fallout from tariffs, bond traders are viewing Trump 2.0 policies dimly.

Markets worry the Trump administration has “arguably shown a greater tolerance for causing a recession than many might have thought,” notes Thomas Mathews, head of Asia-Pacific markets at Capital Economics. But the bond-market fallout is forcing Team Trump to turn tail.

The question is when the biggest of the bond vigilantes – central banks – start actively selling Treasuries. Japan and China are Washington’s biggest bankers, followed by the UK, Luxembourg, Cayman Islands, Belgium, Canada, France, Ireland, Switzerland, Taiwan and Hong Kong.

If markets got a whiff of any of their central banks either aggressively selling debt or just halting new purchases, the result could be bedlam in global credit markets. If Trump understands this risk, he’s done little to demonstrate it to the Asian central bankers who effectively hold the deed to the US economy.

Follow William Pesek on X at @WilliamPesek

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China braces for strong winds with millions told to stay indoors

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Because of the severe winds that are expected to affect northern China this weekend, staff have been instructed to hurry house, classes have been suspended, and outdoor activities have been postponed.

Millions have been urged to stay indoors, with some state media outlets citing the possibility of “easily blown away” those who weigh less than 50 kg ( 110 lbs )

As a cold vortex moves southeast from Mongolia, winds crest 150 kph ( 93 mph ) are expected to sweep Beijing, Tianjin, and other parts of the Hebei region from Friday to Sunday.

Beijing has issued an orange notice for storms, the second-highest in a four-tier wind reminder system, for the first time in a decade.

Particularly during this time of year, strong winds are no unusual coming from Mongolia. However, it is anticipated that the area’s gusts will become stronger than anything in recent memory.

Beijing’s temperature is expected to drop by 13 degree Fahrenheit on Saturday when the strongest winds will make an impact, according to officials.

The Beijing Meteorological Service described this strong storm as intense, lasts for a long time, affects a large location, and is “highly disastrous.”

China uses a scale of 1 to 17 to determine wind velocity. The China Meteorological Administration claims that a degree 11 wind can cause” serious damage,” while a degree 12 wind can cause “extreme death.”

This weekend’s winds are expected to range from stage 11 to 13.

The world’s first human-made half marathon, which will then take place on April 19, has been put on hold as a result of the suspension of several sporting events scheduled for the weekend.

Design work and train service have been suspended while parks and tourist destinations have been closed and people have been advised to avoid backyard activities.

In the area, hundreds of trees have been reinforced or pruned to stop them from falling.

People are being advised to avoid entering mountains and forests, where winds are anticipated to be particularly strong.

Social media users are finding humor in their post-holiday ideas as locals squabble.

A Weibo users commented,” This breeze is therefore logical because it starts on Friday night and ends on Sunday, without causing any disruption to work on Monday at all.”

Hashtags have been popular on Chinese social media about the strong winds and the admonition that those who weigh less than 50 kg may be thrown aside. I eat but little, just for this day, as one Weibo user remarked.

Beijing has also issued a warning for forest flames and forbids outdoor flames from people.

On Sunday nights, the gusts are forecast to commence easing.

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Lingering resentment at unequal treaties stiffens Chinese resolve – Asia Times

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Donald Trump has partially walked back on his so-called “liberation day” tariffs on nearly all US imports after fears mounted that the move would result in a global recession and much higher borrowing costs for the US government. On Wednesday, April 9, a mere 13 hours after his higher rate of “reciprocal tariffs” had come into effect, Trump announced they would be paused for 90 days.

“I thought that people were jumping a little bit out of line, they were getting yippy, you know … a little bit afraid,” Trump said to reporters outside the White House. Markets soared immediately upon hearing the news.

But at the same time, a volatile new stage in America’s trade war with China has emerged. The White House has excluded China from the pause and has hiked tariffs on all Chinese imports to 125%. This, Trump says, is because Beijing has shown “disrespect” to Washington and global markets.

Beijing, which has declared it will “fight to the end if the US side is bent on going down the wrong path”, was quick to respond. It has announced duties of 84% on American products and services, and has even floated the possibility of banning the import of Hollywood films.

What China’s response has shown is that it is no longer the same country as it was in 2017, when Trump managed to obtain some trade concessions from it by imposing tariffs. Beijing seems more willing to strike back at Washington, as well as showing signs of being more proactive in its response to American measures.

The impact of China’s response has not yet been fully realized, but tariffs have already raised the specter of increased prices in the US. Many of the clothing and consumer electronics that Americans buy are shipped from China. It’s possible that far from boosting Trump’s popularity, these tariffs may eventually end up reversing it.

At a fundraising dinner in Washington, less than a day before he shelved plans to hike tariffs on US trading partners, Trump insisted: “I know what the hell I’m doing.” But his subsequent loss of face in pausing tariffs for other countries may mean he has no option but to double down on a tit-for-tat trade war with China.

China is his administration’s go-to villain, and any delay or reversal in responding to Chinese retaliation will be a humiliation to Trump’s strongman image. This suggests a tumultuous period ahead for relations between China and the US.

Expect more hostility

The tariffs will probably have a mobilizing effect on the Chinese population. A 2022 survey on public opinion in China found that people born after 1990 are more likely than previous generations to hold an unfavorable view of the US. The survey concluded that Trump’s actions during his first term were much more to blame than propaganda.

Beijing has also traditionally invoked the history of the “unequal treaties” forced upon its ailing Qing dynasty in the late 19th century as a means to mobilise its population against western policies. This has been aided by how the economic demands made by Trump to China are, in the mind of the Chinese leadership, reminiscent of the demands made by the western powers of that period.

Fears of again falling prey to foreign powers play a significant role in Beijing’s policies, encapsulated by what is known as China’s “never again mentality.” This mentality could be used as a means to unify the Chinese population against an outside enemy in a way similar to how many US politicians have attempted to cast China as a foe.

Beijing appears to be banking on the Chinese population’s supposed ability to withstand greater hardships than Western consumers as being able to give it a key advantage over Washington. However, with China’s prosperity being a comparatively recent development, this ability will be put to the test.

Trump’s tariffs against traditional American allies will also play into Beijing’s hands on the international stage. Tokyo has discussed reducing its holdings of American treasuries, while simultaneously bolstering trade ties with China. These moves would have been unthinkable even a year ago – Japan has long been a key US ally and a regional rival of China.

Equally unthinkable is the possibility that the EU will follow a similar path. Spain’s prime minister, Pedro Sanchez, has called on Brussels to review its relationship with China. Moves aimed at sidelining China may end up isolating the US instead.

And, perhaps most concerningly, the tariffs may also undermine America’s ability to prevent a Chinese invasion of Taiwan. One of the key factors deterring an invasion was the threat of a 100% tariff on Chinese goods. With Trump’s tariffs on China already exceeding this, Beijing has less incentive to not go after Taipei.

What liberation day has shown us is that the Chinese-American relationship has entered a stage of protracted competition, a phase that Beijing has been preparing for over the past decade. Faced with a choice between humiliation on the international stage or economic disaster at home, it would appear neither side is willing to back down.

Tom Harper is a lecturer in international relations at the University of East London.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Commentary: US tariffs are ‘Making China Great Again’

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When asked how Washington may defeat Beijing in the worldwide sport of power, departing US embassy to China Nicholas Burns said, be kind to friends. If Donald Trump wants to stay relevant in Asia, he may take this advice. &nbsp,

Asia is currently in line to renounce his levies, with Asian nations currently in range. They will work toward enhancing assistance with one another over the long term, according to them. They’ll also consider the advantages of returning to China, which isn’t punishing them with fresh taxes, even though its interventionist policies in the Indo-Pacific have eroded some of its appeal. Washington is missing a chance to take advantage of Beijing’s steps, which is unsettling. &nbsp, &nbsp,

As Trump attempts to correct perceived wrongdoing caused by trading companions on behalf of rivals, going after them like China makes sense. However, some of the other choices are perplexing.

Nearly no nation was left unharmed, not even the allies like Australia, India, Japan, and South Korea. It is also destructive to alienate Indonesia, Taiwan, Vietnam, Singapore, and the Philippines, which have all been effective in assisting Washington in reversing Beijing’s rise in the area. &nbsp,

As I’ve already mentioned, the harm to American trust won’t be quick, but it will be felt for a long time. It will be considered when deciding who to trade with, form security alliances with, &nbsp, purchase of weapons, seek development assistance from, and promote intelligence with. &nbsp,

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Neither US nor China ready for once-in-a-lifetime trade war – Asia Times

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Donald Trump’s trade war with China is producing one of the most tantalizing split screens in the history of global economics.

On one, the US president is going full bore against China and threatening a 104% tariff. This includes Vice President JD Vance dismissing the 1.4 billion-plus people generating the gross domestic product of Asia’s biggest economy as “Chinese peasants.”

On the other is Trump’s apparent willingness to talk to Japan, South Korea, Vietnam and other nations cowering in fear over reciprocal tariffs.

Japanese Prime Minister Shigeru Ishiba rushed key economic ministers, including Finance Minister Katsunobu Kato, to Washington to try to talk Trump out of tariffs sure to deal a huge blow to Japan’s export-heavy economy. 

As US Treasury Secretary Scott Bessent told Fox News, “Japan is a very important military ally. They’re a very important economic ally, and the US has a lot of history with them. So I would expect that Japan is going to get priority just because they came forward very quickly.”

South Korea is doing the same. On Tuesday, Korea’s acting President Han Duck-soo said he and Trump had a “great call” about tariffs — Trump slapped a 25% tax on Seoul — and potential deals in energy and shipbuilding.

“We have the confines and probability of a great deal for both countries,” Han says. On social media, Trump said, “things are looking good.”

Trouble is, these two split-screen dramas will collide in short order as the “Tariff Man” attempts to knock China, the center of Asian trade, off its economic axis.

At least one thing seems certain: the odds of a giant US-China “grand bargain” trade deal are falling even faster than Trump’s approval rating.

Trump threatening to add another 50% to China’s already crushing 54% tariff level is the last thing Asia needs.

So far, Chinese leader Xi Jinping is pushing back against the Trumpian onslaught. Along with responding in kind to Trump adding a 34% tariff to the earlier 20% — imposing a 34% tax on US goods — Xi is signaling there will be no backing down.

Xi’s China is calling Trump’s bluff in ways Bessent and Trade Representative Jamieson Green clearly didn’t expect. And upping the odds that a clash of the titans in Washington and Beijing might lay waste to the global financial system.

Here, the US should be careful about what it wishes for. Neither nation is as ready for this economic brawl as their respective policymakers seem to project.

A Fitch Ratings downgrade last week reminded investors that China isn’t in a state-of-the-art financial position. Fitch downgraded China’s sovereign rating to ‘A’ from ‘A+’ amid concerns about shaky public finances.

“The downgrade reflects our expectations of a continued weakening of China’s public finances and a rapidly rising public debt trajectory during the country’s economic transition,” says Fitch analyst Jeremy Zook.

Zook adds that “in our view, sustained fiscal stimulus will be deployed to support growth, amid subdued domestic demand, rising tariffs and deflationary pressures. This support, along with a structural erosion in the revenue base, will likely keep fiscal deficits high.”

At the same time, Zook notes, “we expect the government debt/GDP to continue its sharp upward trend over the next few years, driven by these high deficits, ongoing crystallization of contingent liabilities and subdued nominal GDP growth.”

In other words, China has fiscal space to protect its 5% growth. But it’s not unlimited and deploying the stimulus “bazooka” yet again could come at a high cost in the long run.

The US, meanwhile, is carrying a US$36 trillion-plus national debt into this fight as recession talk heats up. Even worse is the self-inflicted nature of the US reckoning to come, one punctuated by a $10 trillion stock market loss so far.

As Mark Zandi, chief economist at Moody’s Analytics, notes, it “feels like we’re being pushed into recession – it’s recession by design.”

Hedge fund manager Bill Ackman, meanwhile, warns of a self-inflicted “economic nuclear winter” in Trump’s America.

“By placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we’re in the process of destroying confidence in our country as a trading partner,” says the Trump-supporting billionaire founder of Pershing Square.

Ackman adds that “business is a confidence game. The president is losing the confidence of business leaders around the globe. The consequences for our country and the millions of our citizens who have supported the president — in particular low-income consumers who are already under a huge amount of economic stress — are going to be severely negative. This is not what we voted for.”

Larry Fink, head of BlackRock, the globe’s largest asset manager, notes that “most CEOs I talk to would say we are probably in a recession right now.”

Over the weekend, economists at Goldman Sachs assigned a 45% probability of the US falling into a formal recession within the year, up from 35% a week earlier.

Nobel economics prize laureate, Paul Krugman, observes that “Donald Trump burned it all down,” adding that “Trump isn’t really trying to accomplish economic goals. This should all be seen as a dominance display, intended to shock and awe people and make them grovel.”

Only China is not bending the knee, much to Trump’s surprise. The People’s Daily, the Communist Party’s official newspaper, reports that Beijing is no longer “clinging to illusions” of striking a giant trade deal with the US.

Ray Dalio, the billionaire founder of Bridgewater Associates, warned that investors are too narrowly fixated on tariffs and not paying enough attention to the bigger “once-in-a-lifetime” breakdown occurring in major monetary, political and geopolitical orders.

“It is obviously incongruous to have both large trade imbalances and large capital imbalances in a deglobalizing world in which the major players can’t trust that the other major players won’t cut them off from the items they need (which is an American worry) or pay them the money they are owed (which is a Chinese worry),” he wrote on X.

On Tuesday (April 8), China’s commerce ministry criticized the “blackmail nature of the US” trade war and vowed Beijing will “fight till the end.” It called Trump’s threat to layer another 50% tariff on China “a mistake on top of a mistake.”

Hong Kong’s leader John Lee calls Trump’s trade war “reckless” and representative of “ruthless behavior” that’s imperiling the city’s economy.

“The reckless imposition of tariffs affects many countries and regions around the world with huge tax rate increases and covering a wide range of goods, disrupting the world’s economic and trade order, bringing great risks and uncertainties to the world,” Lee says.

These provocations, he adds, have Hong Kong pivoting toward increasing trade with Southeast Asia and the Middle East.

All this has President Xi ramping up moves to bolster the domestic economy. The People’s Bank of China has been cautious about rate cuts this year amid concerns about yuan weakness.

The PBOC has latitude to ease amid weak pricing power in the $18 trillion economy. Especially with China suffering from deflationary forces and fending off rampant “Japanification” talk as China lowers its inflation target to 2% from 3% in 2024.

Fears of sending the yuan tumbling have dominated PBOC discussions. The central bank also wants to safeguard the progress Beijing has made in deleveraging the financial system in recent years. PBOC Governor Pan Gongsheng worries that cutting rates might incentivize bad lending and borrowing decisions.

At the same time, a weaker yuan might trigger defaults among property developers as it becomes more expensive to make bond payments on offshore debt. Already, global investors are keeping close tabs on liquidity problems at major Chinese developers.

Putting yuan internationalization in jeopardy is another concern. For nearly a decade now, Xi’s government has been working to increase the yuan’s use in trade and finance.

Beijing stepped up cooperation with the BRICS — Brazil, Russia, India, China, South Africa — and Global South nations to pivot away from the dollar-centric world order.

Pivoting back to the beggar-thy-neighbor policies of the past might alarm international funds and tarnish the yuan’s chances of securing global reserve currency status.

A weaker yuan might have Japan, South Korea and other top Asian economies believing they have a green light to weaken exchange rates, too.

That would not go unnoticed by the Trump White House, which is escalating the biggest trade war in world history. If the White House concludes Beijing is manipulating the exchange rate, Trump might target China with even bigger tariffs.

Japan also is in Trumpian harm’s way. Corporate Japan was already reeling over Trump’s 25% import tax on all foreign-made automobiles when he hit the nation with a 24% import tax.

Hence Ishiba dispatching a trade negotiation team to Washington to secure a lower levy or buy Japan some time. Korea, too.

For Seoul, “it’s clear that major export products such as automobiles will be hit hard, and exports to the US through production bases in Vietnam will also be hit hard,” says Park Sang-hyun, an economist at iM Securities.

Late last month, trade ministers for China, Japan and Korea met for the first high-level economic dialogue in five years. The theme: beefing up regional trade as Trump’s White House supersizes its tariffs regime.

The nations’ trade ministers pledged to “closely cooperate for a comprehensive and high-level” process to create a three-way free trade agreement centered on “regional and global trade.”

Trump tossing new tariffs at the global trading system has officials in Seoul and Tokyo so worried that they’re talking despite historical enmities. 

Ishiba’s Liberal Democratic Party is turning to Beijing as the US, once Japan’s most reliable partner, becomes wildly unpredictable. Ditto for Seoul, which has had a decidedly rocky relationship with the Xi era.

Yet Trump’s apparent determination to hit China Inc harder and harder will send shockwaves through Tokyo, Seoul and beyond. In Asia, the collateral damage zone is growing as we speak.

Follow William Pesek on X at @WilliamPesek

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What SE Asia does and doesn’t want from Trump – Asia Times

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US Defense Secretary Pete Hegseth stressed the need for Japan to increase military vigor in mild of China’s growing confidence and the looming threat of a Taiwan emergency during his first official visit to Asia.

From Manila to Hanoi, local leaders have publicly welcomed reassurances of the US’s security appearance, viewing America’s “robust, ready and reliable” approach to China – as described by Hegseth – as a needed barrier that their own militaries cannot support only.

But beneath the hushes of strategic approval is a quieter undercurrent of worry: May America’s Indo-Pacific ultimately cause the region to become unstable rather than recover equilibrium?

US protection concerns have been shown to function more as economic leverage than as corporate interests in new upheaval involving Canada, Panama, Greenland, and Yemen.

” If the US properly restores freedom of navigation ( for shipping roads around the Middle East ) at great cost, there needs to be some additional economic get extracted in profit”, wrote S. M., according to leaked Signal messages reported by various media outlets. Stephen Miller, the White House’s deputy chief of staff, is reportedly the subject of a S. M. theory.

The logic of” America First” extends beyond economics to the realm of security, as articulated by Defense Undersecretary-nominee Elbridge Colby.

America’s Indo-Pacific strategy is clear: deny China regional hegemony through forward military posturing, strengthened alliances and assertive naval operations.

That approach has appeal to many ASEAN states, of course. China’s rise, after all, hasn’t just harmed the security of trade routes; it has militarized the South China Sea and exacerbated regional asymmetries. The US’s focus on deterrence thus presents a timely hedge.

Risk of overreach

However, that deterrent logic is fragile. Consider Taiwan, the Indo-Pacific’s geopolitical tripwire. Through continued high-profile arms deals and repeated rhetorical affirmations, President Donald Trump’s administration has encouraged Taipei.

The US State Department removed the phrase” we do not support Taiwan independence” as part of what it described as a routine update in February.

While these moves boost morale in Taiwan and draw praise in Tokyo and Manila, they simultaneously narrow China’s strategic options.

The People’s Liberation Army’s most recent live-fire demonstrations around the self-governing island highlight a sombering truth: Beijing views US actions as a prelude to a permanent separation. China is more likely to test its resolve the more the US resolute it becomes.

This feedback loop raises the specter of strategic overreach.

Tokyo established the Japan Joint Operations Command, a new body tasked with coordinating its Ground, Maritime, and Air Self-Defense Forces, in conjunction with Hegseth’s Asia tour. This is a significant step toward enhancing Japan’s ability to respond to regional emergencies and enhancing operational cooperation with US forces.

There are currently 55, 000 US soldiers stationed in Japan, 28, 500 in South Korea, and a growing rotational presence in the Philippines. Add AUKUS nuclear submarine deployments and increased intelligence-sharing under the Quad, and the region increasingly resembles a Cold War-era containment arc.

Trump’s strategy, however, lacks the broad-spectrum diplomacy that once supported credible deterrence. His strategy heavily relies on trade coercion without providing a corresponding vision for regional development. His strategy is unsupported by an effective economic program for ASEAN.

The” Liberation Day” tariffs, announced on April 2, 2025, threaten to deliver a sharp economic blow to all ASEAN states, including strategic ally Singapore, despite its Free Trade Agreement with the US and existing trade deficit, not surplus.

Cambodia is the country with the highest tariff, at 49 %, followed by Laos at 48 %, Vietnam at 46 %, and Myanmar at 44 %, despite the country’s trade with the US remaining sluggish because of current sanctions.

Thailand and Indonesia are subject to tariffs of 36 % and 32 %, respectively, while Brunei and Malaysia are each subject to tariffs of 24 %. The Philippines fares slightly better at 17 %, while both Timor-Leste and Singapore face the baseline 10 %.

Trump’s punitive trade measures come without meaningful investment or assistance, further erodering regional goodwill, in contrast to China’s Belt and Road Initiative, which continues to position Beijing as the region’s leading infrastructure partner.

There is also a more in-depth historical irony at play. In Washington, Japan’s growing military assertiveness is widely seen as a success of US security leadership. However, Taiwan’s reputation as being essential to Japan’s own national security is revived by its Southeast Asian neighbors, who have bitter memories.

The echoes are obvious: In 1931, Japan justified its invasion of Manchuria in response to the staged Mukden Incident on strikingly similar grounds, shielding important interests from a perceived Chinese encroachment.

Without a meaningful reckoning with this past, Japan’s shift away from postwar pacifism, however US-encouraged, risks alienating ASEAN rather than uniting it under the American banner.

The US “doctrine of denial” is set up for theater-specific flashpoints like Taiwan, the South China Sea, and the Senkaku Islands, which poses the greatest risk of overreaching.

However, important ASEAN nations like Indonesia, Thailand, and Malaysia are not eager to join these permanent alliances. Southeast Asia seeks deterrence without entrapment.

Trump, however, doesn’t offer much nuance. His current zero-sum worldview, where failing to align with America is seen as siding with China, risks alienating the very middle powers whose support is essential to maintaining US power and influence in the area.

As Singapore’s Foreign Minister Dr Vivian Balakrishnan reminded Parliament at last month’s Committee of Supply debate,” We must maintain an omnidirectional balance and a constructive engagement with all partners”.

China’s charm reset

China is waging a parallel campaign to reshape perceptions and re-anchor Southeast Asia in its orbit, even as the US restores deterrence in the Indo-Pacific.

Long gone is China’s snarling rhetoric of “wolf warrior” diplomacy from 2017. A strategic reset is positioned in its place, surrounded by charm, trade, and respect for ASEAN centrality.

Chinese Foreign Minister Wang Yi is now using the phrase “multipolar world” to advocate for Southeast Asia’s “right to choose,” echoing the language of regional autonomy.

Beijing’s statecraft appears to have shifted from confrontation to courtship. It has also strengthened its position as ASEAN’s largest trading partner for 16 consecutive years.

President Xi Jinping’s upcoming travels to Malaysia, Cambodia, and Vietnam this month reflect China’s deeper, concerted push for personal diplomacy and economic pragmatism.

Even Indonesia’s recent decision to join BRICS and strengthen digital and green cooperation with China underlines a wider regional trend: hedging against American volatility by embracing Chinese steadfastness.

China’s multilateral rhetoric, which promotes regional comprehensive economic partnerships like the Regional Comprehensive Economic Partnership and promotes minilateral initiatives like” Security Belt 2025,” gives it even more legitimacy as a partner invested in peace rather than provocation.

To be clear, China’s charm offensive has its own flaws. Take its tense relationship with the Philippines as an example. The Philippines remains a crucial node in America’s first island chain of forward defense.

Hegseth made the announcement during his recent visit to Manila that the US would use more sophisticated military capabilities for joint training, improve interoperability for “high-end operations,” and prioritize cooperation with the Philippines from the defense industry.

Manila has strengthened its security ties to Washington under President Ferdinand Marcos Jr., including welcoming more US troop rotations, participating in expanded trilateral exercises with Japan and Australia, and publicly deny Chinese harassment of Filipino vessels close to the Second Thomas Shoal and other disputed sea features.

Meanwhile, China’s maritime assertiveness in the South China Sea has grown more calibrated – aggressive enough to assert red lines, yet measured enough to avoid outright conflict. However, this delicate balance act demonstrates Beijing’s soft-power reset’s limits.

China may outsource and outsource the United States ‘ infrastructure projects in Southeast Asia, but it is unable to quickly address the deep concerns it has caused as a result of its territorial assertiveness. ASEAN nations may engage with Beijing’s diplomacy, but many remain wary of its gray-zone tactics.

In essence, Southeast Asia is balancing, hedging, and gaming both Washington and Beijing. The danger lies in mistaking polite nods for alignment. Trump’s administration must be aware that regional nations favor dialogue over ultimatums and options over dominance.

American abandonment

Critics may argue that Trump’s tough talk has at least reawakened America’s strategic muscle. However, history encourages skepticism.

His first term was marked by erratic diplomacy, with his party wooing Kim Jong Un of North Korea while reneging on crucial multilateral agreements like the Trans-Pacific Partnership and the Paris Agreement.

For all its bluster – from a Ukraine ceasefire that has failed to hold, to hostages still held by Hamas, to Houthi rebels continuing to menace shipping lanes near Yemen – Trump’s brand of deterrence so far feels more performative than institutionalized.

In fact, Indo-Pacific allies and partners are left to wonder whether US support has a time limit. In” Strategy of Denial,” US Defense Undersecretary-nominee Colby recommends putting together a cohesive coalition to combat Chinese hegemony.

But ASEAN doesn’t just want a wall. Partner who are willing to build bridges are necessary given the country’s young populations, emerging industries, growing infrastructure needs, and desire for investment, whether it be financially, technological, or developmentally.

ASEAN wants a US that can stifle China while also reassuring the area. It wants an America that upholds international rules without provoking war. It desires a US that makes investments in shared prosperity that are supported by an equilibrium-creating security architecture.

Southeast Asia, which has long been a hub for powerful rivalries, is acutely aware that diplomacy without deterrence is a risky move.

Living in permanent proximity to China, and mindful of America’s history of strategic withdrawals, the region understands that US overreach today could lead to hemispheric abandonment tomorrow.

Marcus Loh serves as the director of Temus, a Singapore-based company that offers digital transformation services, where he leads public affairs, marketing, and strategic communication.

He previously served as the Institute of Public Relations of Singapore’s President, and he is currently a member of SG Tech’s executive committee for the digital transformation chapter.

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Palau deports Chinese criminals, reinforces Indo-Pacific security – Asia Times

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In the last three months, the Pacific island country of Palau has executed a master class in how to quietly, professionally and effectively rid itself of serious national security threats – including striking a powerful blow against some major Chinese bad guys (and gals). Given Palau’s location, and who it has as allies, this is having an outsized effect on Indo-Pacific security.

We’ll get to how Palau did it (and what it did) but first, to understand how important this is, a bit more about Palau itself.

The Republic of Palau is made up of over 300 islands, has about 20,000 people and shares a maritime border to the west with Philippines and to the south with Indonesia. It’s Micronesian, linked to cousins in places like Yap by centuries of skilled navigators. Some of the famous Yap stone money was quarried in Palau and brought back to Yap.

Palau’s strategic location made it a magnet and a target for outsiders from the colonial period onwards. First it was Spain, then Germany, then Imperial Japan. Japan held it as part of the “Japanese Mandate” that also included what is now the Northern Mariana Islands, Federated States of Micronesia (FSM) and Marshall Islands, from 1914 to 1944.

During that time, the Japanese built up agriculture, industries and trade in Palau, and increasingly militarized it. It was because Japan held the central Pacific that it was able to hit Pearl Harbor, and that it was so difficult for the US to fight back across the Pacific and be within striking distance of Japan. Palau is the site of several brutal World War II fights, including the Battle of Peleliu.

Washington took that lesson to heart and, after the war, worked to make sure the central Pacific couldn’t be used to hit the US again. The islands that had been part of the Japanese Mandate became a United Nations Trust Territory under American administration. The US was an uncomfortable colonial power and looked for ways to end the trusteeship that would mean no other aggressive power could use the central Pacific to attack America, and Americans.

Threading the strategic needle

After decades of debate and negotiations with leaders from across the Trust Territory, and local referenda, the end result was an agreement unlike anything the US has offered any other countries. Palau, the Federated States of Micronesia and the Marshall Islands became independent countries and agreed to a compact of free association with the United States.

The Compact allows citizens of the three “Freely Associated States” (FAS) to live and work freely in the US, serve in the US military and get a range of services, including postal service at domestic US rates. The U.S. also agrees to defend the three states “and their peoples from attack or threats,” can set up military facilities in the FAS and has the ability to block the militaries of other countries from operating in the FAS.

Bottom line, the message from Washington is: We are in this together. Do what you want, we will help, but others can’t use you to strike the United States.

Here comes China

The problem is that the US lens has been adjusted to see traditional military threats, but the way China operates is much more complex. It uses what Philippines Chief of Staff of the Armed Forces General Romeo Brawner Jr. calls China’s illegal, coercive, aggressive and deceptive (ICAD) operations.

For China, Palau’s close relationship with the US, its location just the other side of the Philippines and the fact that it recognizes Taiwan make Palau a high value target. If China should go after Taiwan without “disabling” Palau, its Taiwan operation could be jeopardized. This is one of the reasons the US is putting new military infrastructure (or, in some cases, bringing back to life World War II-era infrastructure) in Palau.

So, China has been targeting Palau’s economy and politics. It built up Palau’s tourism sector, during which land was leased in strategic locations. Then Chinese tourists disappeared, with the implied promise that they would return if Palau abandoned Taiwan. (It didn’t.) There were also problems with Chinese organized crime, including with at least one major Chinese Triad leader.

This has been destabilizing politically, economically and socially. In such a tight-knit society, if your cousin the police officer is selling illegal drugs for a dangerous foreign kingpin, what are you supposed to do?

This corruption, fueled by (for the most part) Chinese crime has created social fractures, distrust and fear – which Beijing likes. This kind of “entropic warfare” creates the opening Beijing needs to find compliant leaders it can ride to its preferred destination – in this case, derecognition of Taiwan, the breaking of the Palau/US relationship and the accomplishment through political warfare of what the Japanese failed to do through shooting war: pushing the US out of the Pacific.

Taiwan recognition map: Pavak Patel, Reece Breaux, and Cleo Paskal

What about those bad guys?

Palau is under constant attack. There’s been a range of sources, but the vast majority link back to China. Some of it is almost certainly China-state-linked – for example, the cyber-attack that hit Palau on the day it was signing renewals of key sections of the compact with the US.

Others are opportunistic criminality – but, given the linkages between Chinese organized crime and the Chinese Communist Party, it is a thread Beijing can pull if needed.

So, on December 18, 2024, Palau’s President Surangel Whipps Jr. signed Presidential Directive 24-65. It read, in part: “In recent months, there have been numerous instances of crimes being committed by foreign nationals who entered Palau with tourist visas or nonresident worker permits…. These crimes include a murder … and seizures of methamphetamines totaling over 500 grams from foreign nationals on tourist visas.”

Additionally, “previous years have seen large-scale illegal gambling operations being conducted in Palau, and such operations are often accompanied by other instances of crime such as immigration fraud and prostitution…. It has become clear that Palau has a serious crisis of criminals posing as tourists to enter the country and staying long-term to carry out bad acts and put our citizens in danger.”

The directive granted Palau’s national security coordinator (NSC) the authority during a 90-day trial period to vet all visa applications. The process included

  • names cross-checked against the INTERPOL criminal database;
  • applicants undergoing background checks, employment history validation, assessment of certifications and more; and
  • high-risk applicants being subject to travel movement analysis and site visits.

To ensure transparency and accountability, the NSC office had seven days to review each application and provide recommendations. Any application recommended for denial was accompanied by a detailed report giving the reasons for rejection. The directive reiterated that ultimate authority rested with the president.

What happened next?

Previously, visas were rarely denied. After the directive, of the 80 immigration visa applications from China, 65 were denied. By comparison: 41 applied from Japan, and none were denied; and 124 applied from the Philippines, and 15 were denied.

Of the 24 non-resident worker applications from China, 23 were denied. From the Philippines, 22 applied and 2 were denied.

Additionally, multiple illegal Chinese-run operations were dismantled, including illegal gambling and scamming. And there were several high-profile deportations, including Wang Shuiming, who was listed on an INTERPOL Red Notice. He was later arrested in Montenegro.

Two other high-profile deportations were Cary Yan and Gina Zhou, Chinese nationals who were convicted in New York of bribing officials in an attempt to set up a “country-within-a-country” in the Marshall Islands (another country that recognizes Taiwan). They have not only been deported, they have been put on Palau’s “undesirable aliens” list, meaning they will not be allowed back in.

There were around 40 other deportations, including Xiaoli Chen and Yanli Zhu, long-term undesirable Chinese residents.

This is a fundamental change in Palau’s security profile.

Now what?

On March 20, after the 90 days were up, to assess the outcomes the president held a meeting with the NSC, the attorney general, a special prosecutor, representatives from Immigration, Employment Services, the Foreign Investment Board and other stakeholders.

It was decided to renew the exercise for another 90 days and to use lessons learned to propose regulatory changes and draft legislative proposals to submit to the Palau legislature. The fight continues.

Means what?

It is difficult to overstate how hard it is to do something like this in such a tight-knit country. Chinese strategic corruption targets family members of key individuals so that the pressure to protect the Chinese operations comes from inside the home. You can be sure a lot of calls were made to try to change the minds of the leadership in Palau.

This took intelligence, insight, strength and courage.

Palau is showing you can fight back, no matter your size. It’s not easy, but it’s the only way forward to protect lasting sovereignty, prosperity and freedom.

Palau achieved this mini-miracle on its own. Now, it needs help. The success is only going to increase pressure from China. For one thing, the “Palau example” undercuts China’s “inevitability narrative,” in which Beijing tries to get people to think, especially in countries that recognize Taiwan, that China is the only – the inevitable – option moving forward, so it’s best to give in now.

The good news is that the stand taken by Palau has been contagious. Yan and Zhou were finally stripped of their Marshall Islands passports. The Philippines didn’t let them in, either. Taiwan has been helping Palau with investigations. Japan has been supportive. The US has revoked a few visas of its own and may take even stronger moves soon.

There is an excellent resident US ambassador, but there needs to be more. Palau’s national security coordinator needs support for her office; the attorney general needs lawyers; the country needs a drugs lab that can do forensics for court cases, etc.

This is what the frontline looks like now. While the US Marines are rebuilding 80-year-old airstrips in places like Peleliu, there is a Guam National Guard state partnership program with Palau that could be sending lawyers, investigators and forensic accountants. If they do their job right, the airstrip may not be needed for a fight for another 80 years.

But, in the meantime, Palauans are holding the line, and showing us all that, yes, it can be done.

Cleo Paskal is non-resident senior fellow at the Foundation for Defense of Democracies and columnist with The Sunday Guardian, which originally published this article. Asia Times is republishing it with permission.

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JD Vance: Beijing calls US VP ‘ignorant’ over ‘Chinese peasants’ remark

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After he claimed that America had been borrowing money from” Chinese farmers,” China has called US Vice-President JD Vance “ignorant and inappropriate” and called him “ignorant and unfriendly.”

Foreign government spokesman Lin Jian told reporters on Tuesday that Vance’s remarks were” astonishing and unfortunate,” which had already caused a stir on Chinese social media.

Vance made the remarks on Thursday during a Fox News interview where he defended US President Donald Trump’s taxes, which are already escalating trade tensions between the country’s two largest economy.

The vice-president said,” We borrow cash from Chinese villagers to buy the things those Chinese farmers manufacture.”

On Monday, Trump gave China – one of the world’s largest holders of US Treasury bonds – until Tuesday to scrap its 34% counter tariff or face an additional 50% tax on goods imported into the US.

US companies could be subject to a total rate of 104 % on Chinese imports if Trump complies with his threat, which comes on top of the 20 % tariffs that were already in place in March and the 34 % that were announced last week.

China has declared that it will “fight to the close” and that its actions against Trump are “bullying.”

Lin stated on Tuesday that” China’s place on China-US economic and trade ties has been made very evident.”

Vance’s opinions had already sparked outrage among Taiwanese social media users, some of whom had demanded that he be made to leave the country.

It is truly shameful for Vance to say such things in front of a powerful US federal official, one Weibo users wrote.

” Hillbilly Elegy” is not his narrative, is it? a guide to Vance’s reserve that detailed his upbringing in rural America, wrote another person.

Trump and his supporters have long argued that jobs will be protected and that his price plan will increase the US economy.

But economists have warned that this would cause major disruptions to international supply chains, push up prices for consumers and bode disaster for all trade.

Financial institutions have been warning of the increased risks of a crisis, both domestically and internationally, following the announcement regarding the levies.

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