September 16, 2025
The economic relationship between the United States and Asia is undergoing its most significant shift in decades. No longer defined solely by trade balances, it is now a complex interplay of geopolitics, technology, and strategic investment. This week, as U.S. and Chinese officials met in Madrid, the conversation extended beyond tariffs toward questions of supply chain security and digital sovereignty.
A TikTok Breakthrough Amid Broader Tensions
The headline development from Madrid is a potential breakthrough on the future of TikTok. According to Reuters and AP reports, U.S. and Chinese negotiators reached a preliminary “framework” agreement designed to avert a nationwide U.S. ban on the app. Details remain under discussion, but the deal could involve shifting TikTok’s U.S. operations to a structure more directly under American oversight. While not final, the move signals that both sides are willing to dial down tensions, at least on issues with strong public visibility.
Beyond TikTok, Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng led discussions on tariffs, technology export controls, and global supply chain resilience. Washington remains committed to its “de-risking” strategy, aimed at reducing reliance on China for critical goods, especially semiconductors and advanced technologies.
The “China-Plus-One” Strategy and Investment Realignment
The U.S. shift is already influencing investment patterns. Multinational companies are increasingly pursuing “China-plus-one” manufacturing strategies, relocating parts of their supply chains to Southeast Asia. According to UNCTAD, foreign direct investment (FDI) into ASEAN grew by about 10% in 2024, even as overall FDI into developing Asia declined slightly. Countries like Vietnam and Malaysia have attracted substantial investment in high-tech industries, although claims of “billions from Microsoft and Google” specifically are better understood as part of a broader trend of tech-sector diversification rather than verified single-company pledges.
For many Asian economies, this presents both opportunity and risk. Governments are seeking to strengthen ties with the United States while maintaining their vital trade relationships with China. Analysts caution that the traditional strategy of “hedging” between the two powers is becoming increasingly difficult as geopolitical frictions deepen.
A Cautious Outlook for a Fractured Global Economy
The wider economic backdrop remains mixed. Asian stock markets rose today, buoyed by expectations of a U.S. interest rate cut, yet underlying data from China continues to show a slowing economy. Some of this weakness is linked to weaker external demand and ongoing trade frictions, raising questions about the durability of China’s growth model.
The IMF projects that Asia will remain the world’s growth leader but warns the region is highly exposed to U.S. demand cycles and rising protectionism. As a result, regional economic integration, through intra-Asian trade and investment, is increasingly seen as critical for resilience.
For businesses and investors, the defining feature of today’s economic landscape is the integration of security considerations into what were once primarily commercial decisions. From building secure supply chains to forging stable political alliances, the search for reliability is reshaping investment flows. As the U.S. and its Asian partners navigate this uncertain terrain, adaptability to shifting policies and geopolitical risks may prove to be the most valuable asset of all.
References
- The Times of India: “US-China trade meet: High-level talks begin in Madrid; tariffs and TikTok top the table,” published on September 14, 2025. https://timesofindia.indiatimes.com/business/international-business/us-china-trade-meet-high-level-talks-begin-in-madrid-tariffs-and-tiktok-top-the-table/articleshow/123883206.cms
- Hindustan Times: “Last-minute deal on TikTok: Trump to speak to Xi after US-China talks go ‘very well’,” published on September 16, 2025. https://www.hindustantimes.com/world-news/no-ban-on-tiktok-trumps-big-hint-as-us-china-talks-move-forward-101757938978959.html
- Bloomberg: “Asian Stocks Set to Gain After Wall Street Rally,” published on September 16, 2025. https://www.swissinfo.ch/eng/asian-stocks-set-to-gain-after-wall-street-rally%3A-markets-wrap/90009109
- UN Trade and Development (UNCTAD): “Global foreign direct investment falls for the second consecutive year, posing acute challenges to developing countries,” published on June 19, 2025. https://unctad.org/news/global-foreign-direct-investment-falls-second-consecutive-year-posing-acute-challenges
- International Monetary Fund (IMF): “Asia Can Boost Economic Resilience Amid Surging Trade Tensions,” published on April 24, 2025. https://www.imf.org/en/Blogs/Articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions
- Carnegie Endowment for International Peace: “Building Bridges, Countering Rivals: Strengthening U.S.-ASEAN Ties to Combat Chinese Influence,” published on June 10, 2025. https://carnegieendowment.org/posts/2025/06/building-bridges-countering-rivals-strengthening-us-asean-ties-to-combat-chinese-influence?lang=en
