ASEAN+3 Overtakes the US as the World's Largest Market, Redrawing Global Trade

Asia's Economic Centre of Gravity Moves Closer to Home

ASEAN became China's largest export market in 2023, overtaking both the United States and the European Union. Chinese exports to the Southeast Asian bloc then rose another 12% in 2024 to nearly $587 billion. Those figures capture a larger transformation: ASEAN+3, the grouping of ten ASEAN nations with China, Japan and South Korea, has become the world's largest market, generating more internal demand than the United States.

As of February 4, 2026, the region's growing purchasing power is reshaping a familiar account of global commerce. For decades, Asian economic development was described largely as a system in which factories produced manufactured goods for Western consumers, especially Americans. Washington's tariffs in 2025 revived warnings that economies dependent on exports would face an existential threat whenever US consumers pulled back.

ASEAN+3 now occupies a much broader role. It remains a manufacturing centre, but its consumers and businesses also form a major destination for the goods it produces. The ten ASEAN economies have a combined nominal gross domestic product of approximately $4 trillion. GDP measures the value of goods and services produced; nominal GDP expresses that value at current prices. Together with Northeast Asia's industrial economies, the grouping serves nearly two billion people and rapidly growing middle classes.

American demand still matters, and deeper regional integration brings pressures of its own. ASEAN's widening trade deficit with China, competition from inexpensive imports and uncertainty over how much value local businesses retain from foreign investment all sit alongside the opportunities. Asia's larger market gives governments more choices, while making the management of those choices more consequential.

What the Trade Figures Reveal

China's exports to ASEAN grew much faster in 2024 than trade moving in the opposite direction. While Chinese shipments increased 12% to nearly $587 billion, ASEAN exports to China rose only 2%. The resulting trade deficit for ASEAN now exceeds $190 billion. A trade deficit means the region buys more goods from China than it sells there.

The gap shows the strength of Southeast Asian demand for Chinese manufactured products, alongside the difficulty ASEAN producers face in matching that flow with their own exports. For individual countries, a larger regional market can therefore bring both more goods to buy and tougher competition for domestic businesses.

China itself has been the world's largest automotive market since 2009. New energy vehicles now account for more than 40% of its domestic vehicle sales. That market illustrates how Asian demand has become a force in its own right: factories in the region serve a substantial customer base close to home.

China and ASEAN traded almost $1 trillion in goods in 2024, nearly three times the level recorded in 2010. The scale of that relationship helps explain why regional commerce increasingly shapes investment and production decisions, even while access to the United States remains valuable.

Trade Routes Shift as US Exposure Falls

Research from the National Bureau of Economic Research shows that China's share of US imports fell from 21% in 2017 to just 9% by the middle of 2025. That reversal effectively undid two decades of trade integration. Over the same period, total US imports from all countries continued to grow at an average annual rate of 5.7%.

The two figures describe a change in suppliers alongside continued growth in American purchases. Vietnam and Mexico gained substantial shares of the US market as China's direct share declined. Meanwhile, ASEAN's trade with China deepened, giving Southeast Asia an expanding role as both a production hub and a destination for Chinese manufactured goods.

Since 2017, major trading economies have increasingly exchanged goods with partners aligned with them geopolitically. Within Asia, the expanding web of regional commerce has accelerated a move away from a model centred on Western demand. Goods displaced from established routes have found new routes, including within Asia.

McKinsey research identifies trade corridors connecting China with emerging economies, including ASEAN, as safe bets for growth even under scenarios in which global trade becomes more fragmented. The region's internal trade corridors are projected to grow by 4% to 5% annually through 2035. Fragmentation means trade becomes more divided by political relationships and trade barriers, making some routes harder to use while encouraging others.

US Tariffs Push ASEAN to Broaden Its Options

The Trump administration's tariff policies have accelerated diversification strategies already underway in Southeast Asia. Rates exceeding 40% for Vietnam and Cambodia, and baseline rates of 10% even for allies such as Singapore, have increased pressure on businesses serving the American market.

A tariff is a tax on imported goods. When that tax rises, selling into the destination market becomes more costly, putting pressure on prices, profit margins or both. ASEAN governments have responded by strengthening engagement with markets outside the United States rather than retreating from international trade.

Malaysia and Thailand secured observer status in BRICS in 2024. Singapore, Malaysia and Indonesia are pursuing new trade agreements with the European Union and the Gulf Cooperation Council. Those efforts reflect a recognition that the United States, although still a major export destination, can no longer serve as the region's sole economic anchor.

Washington faces the risk of losing on both sides of its tariff strategy: failing to bring inexpensive manufacturing back to the United States while raising domestic prices and pushing traditional allies toward trade frameworks led by Asian economies. The Regional Comprehensive Economic Partnership is one such framework around which regional commercial ties can deepen.

ACFTA 3.0 Extends Cooperation Beyond Goods

China and ASEAN formally signed the ASEAN-China Free Trade Area 3.0 Upgrade Protocol in October 2025. It was the most comprehensive revision of the agreement since its inception in 2010, extending cooperation into nine areas.

The areas include the digital economy, green development, supply chain connectivity and support for micro, small and medium enterprises. Those businesses range from very small operations to larger firms that still lack the resources of major corporations. Their inclusion makes the agreement relevant beyond the region's largest manufacturers.

The upgrade establishes mechanisms for data to move across borders, cooperation on renewable energy and technical standards. Such standards are the requirements products and processes must meet. Greater agreement on them can help businesses connect production and sales across different markets.

ACFTA 3.0 embeds ASEAN more deeply in Chinese value chains, the linked stages through which goods are designed, made and sold. It also attempts to address concerns about industrial overcapacity. Regional integration is therefore a deliberate policy choice as well as a response to pressure from US tariffs.

Cheap Imports Put Local Industries Under Pressure

China's industrial overcapacity presents one of the sharpest tensions in ASEAN's expanding relationship with its northern neighbour. Overcapacity occurs when industries can produce more than buyers are ready to purchase. China's domestic demand shortfalls and policies operating outside market forces have contributed to that pressure, encouraging manufacturers to seek customers abroad.

China's manufactured goods trade surplus rose from roughly $1 trillion in 2018 to more than $1.8 trillion in 2023. A surplus means exports exceed imports. ASEAN absorbed a substantial share of the accompanying export surge, making the region both an important outlet for Chinese production and a place where local manufacturers face growing competition.

Indonesia's textile sector shed 80,000 jobs in 2024, with another 280,000 at risk, as cheap Chinese imports flooded online shopping platforms. Vietnam faces an estimated 4 million to 5 million orders of low value each day from Chinese platforms selling across borders, amounting to almost $2 billion a month. Textiles and steel are among the industries under pressure from inexpensive imports.

Supavud Saicheua, chairman of Thailand's National Economic and Social Development Council, described the concern among Thai policymakers about the influx of cheap goods:

The Chinese are now trying to export left, right and centre. Those cheap imports are really causing trouble.

ASEAN's growing demand can support regional commerce while leaving some domestic factories exposed. The same flow of inexpensive products that attracts buyers can make it harder for local producers to sustain sales and employment.

Chinese Investment Brings a Different Set of Choices

Chinese foreign direct investment in ASEAN reached a record $17.6 billion in 2023. Foreign direct investment involves putting money into business operations in another economy, including establishing or expanding production. ASEAN is increasingly becoming a manufacturing base outside China for Chinese companies seeking to avoid Western tariffs.

That investment supports industrial modernisation and the region's energy transition. It gives Southeast Asian economies opportunities to participate in new production networks, alongside their role as buyers of Chinese goods.

Local value capture remains a concern. This means how much of the income and economic benefit from production stays with local businesses and workers. Vertical integration, in which a company controls several stages of production, can limit the share available to independent local suppliers. ASEAN governments must weigh those concerns alongside the investment flowing into their economies.

Washington Has a Large Commercial Stake

The United States remains deeply invested in Southeast Asia. US foreign direct investment in ASEAN totalled $74.4 billion in 2023, accounting for 32.4% of the region's total inward investment flows and supporting 625,000 American jobs.

More than 6,000 US companies operate in ASEAN. Their regional businesses generate 10% of the total global sales of US companies' overseas affiliates. Those figures show why stronger Asian trading ties also matter to American businesses: the region is an important operating base and customer market.

Washington has not concluded a major regional trade initiative since the US-Singapore Free Trade Agreement in 2003. Its withdrawal from the Trans-Pacific Partnership in 2016, followed by the apparent abandonment of the Indo-Pacific Economic Framework, has shaken ASEAN's trust in American reliability.

China's approach centres on trade agreements and regional economic diplomacy. Beijing presents itself as a defender of the global trading system against American protectionism. Washington consequently faces competition that extends beyond tariff rates to the durability and scope of its commercial relationships.

The Milestones Behind the Shift

The transformation has unfolded over more than two decades. Agreements, changing import shares and expanding investment have gradually altered how the region earns, produces and spends.

• 2003: The United States concluded the US-Singapore Free Trade Agreement, its last major regional trade initiative.
• 2009: China became the world's largest automotive market.
• 2010: The ASEAN-China Free Trade Area began, establishing the starting point for the agreement upgraded in 2025.
• 2016: US withdrawal from the Trans-Pacific Partnership became a setback for confidence in American trade engagement.
• 2017: China accounted for 21% of US imports, while trade among geopolitically aligned partners increasingly gained importance.
• 2018 to 2023: China's manufactured goods trade surplus rose from roughly $1 trillion to more than $1.8 trillion.
• 2023: ASEAN became China's largest export market, and Chinese direct investment in ASEAN reached a record $17.6 billion.
• 2024: Chinese exports to ASEAN reached nearly $587 billion, while Malaysia and Thailand secured BRICS observer status.
• By the middle of 2025: China's share of US imports had fallen to 9%.
• October 2025: China and ASEAN signed the ACFTA 3.0 Upgrade Protocol.

February 4, 2026 finds ASEAN+3 with greater internal demand and a denser network of commercial ties. The major choices now concern how regional economies balance access to that market, pressure on domestic industry and their continuing relationships with American businesses.

Key Points

• ASEAN+3 has overtaken the United States as the world's largest market, combining the ten ASEAN economies with China, Japan and South Korea.
• ASEAN became China's largest export destination in 2023. Chinese exports to the bloc rose 12% in 2024 to nearly $587 billion.
• ASEAN exports to China grew only 2%, leaving the region with a trade deficit exceeding $190 billion.
• China's share of US imports fell from 21% in 2017 to 9% by the middle of 2025, while total US imports continued growing.
• US tariffs have accelerated ASEAN's diversification toward BRICS, the European Union, Gulf markets and Asian trade frameworks.
• The October 2025 ACFTA 3.0 agreement expands cooperation in digital trade, green development, supply chains and smaller businesses.
• Cheap Chinese imports are putting local industries under pressure, while record Chinese investment supports new manufacturing and the energy transition.
• US investment in ASEAN reached $74.4 billion in 2023, underlining America's continuing commercial stake in the region.
• Regional trade corridors are projected to grow 4% to 5% annually through 2035, with McKinsey identifying China to emerging economy routes as resilient even under trade fragmentation.