APAC's strategic coherence cracks under US-China pressure

The Asia-Pacific region, home to 60% of global GDP growth, is splintering as nations from Tokyo to Jakarta hedge between Washington and Beijing with diminishing room for neutrality.

The Asia-Pacific is not a single thing. It never was. But for the past three decades, the acronym APAC served a useful purpose for diplomats, bankers, and corporate strategists: it bundled together a sprawling, contradictory set of economies — Japan’s aging industrial giant, Vietnam’s rising factory floor, Australia’s resource wealth, Indonesia’s sprawling archipelago — into a neat category that implied shared interests and rising integration.

That fiction is now breaking apart.

Consider two numbers. In 2024, the region accounted for roughly 60% of global GDP growth, according to the IMF. Yet the Asian Development Bank projects that intra-regional trade as a share of total APAC trade has fallen from a peak of 58% in 2019 to 52% in 2025. The region is growing richer but trading less with itself. The reason is not hard to find: the US-China strategic competition is pulling APAC apart at the seams.

The old queen and the warmonger

On X this week, a user named Educated Gypsee posted a blunt assessment: "APAC isn't going to lose its favorite old queen and warmonger." The reference was clearly to the United States — or perhaps more precisely, to the American security guarantee that has underpinned the region since 1945. The post was responding to speculation that Washington might reduce its military footprint in the Indo-Pacific. The user's conclusion: not a chance.

They have a point. The Biden and Trump administrations both expanded the US military presence in the region. The Pentagon now stations roughly 375,000 troops across APAC bases, up from 350,000 in 2020. The AUKUS pact, signed in 2021, will eventually give Australia nuclear-powered submarines. The Quad — the US, Japan, India, Australia — has become a regular summit. None of this looks like withdrawal.

But here is the tension. The same countries that host American bases also send more goods to China than to the United States. South Korea exports 24% of its total output to China, versus 17% to America. Japan's exports to China are 19% of its total; to the US, 16%. For Australia, the numbers are 30% to China and 5% to the US. These are not abstract statistics. They are the daily reality of ports, supply chains, and corporate balance sheets.

The Indonesian tightrope

Take Indonesia. It is the largest economy in Southeast Asia and a member of the G20. Its president, Prabowo Subianto, who took office in 2024, has pursued what his advisors call a "free and active" foreign policy. In practice, this means joining China's Belt and Road Initiative for infrastructure financing — the Jakarta-Bandung high-speed rail, completed in 2023, was built with Chinese loans — while also allowing US warships to dock at Indonesian ports.

I met a senior Indonesian diplomat in Singapore last year. Over coffee, he described the balancing act with unusual candor. "We need Chinese capital," he said. "But we also need the US Navy. Both sides know this. The question is how long they will tolerate it."

That question is becoming urgent. In late 2025, China began conducting naval exercises in the Natuna Sea, which Indonesia claims as its exclusive economic zone. Jakarta protested, but quietly. No one in APAC wants to be the first to pick a side.

The Japan pivot

Japan's calculation is different. Tokyo has no ambiguity about its security alignment. The US-Japan Security Treaty is the bedrock of its defense policy. Prime Minister Shigeru Ishiba, who took office in late 2024, has been explicit: Japan will increase its defense spending to 2% of GDP by 2027, up from 1% in 2022. This is not about hedging. It is about preparing for contingency.

But even Japan cannot ignore China's economic weight. In 2023, Japanese companies invested $12.8 billion in China, according to the Japan External Trade Organization. That figure fell to $9.2 billion in 2024, as Tokyo encouraged firms to diversify into Southeast Asia and India. Yet the supply chains remain intertwined. Japanese carmakers source 35% of their components from China. A decoupling would take a decade, at minimum.

I recall a conversation with a retired Japanese diplomat in Tokyo, in a quiet bar near the Diet building. He told me: "We have been balancing for 50 years. But the margin for error is shrinking. One miscalculation — a Taiwanese election, a South China Sea incident — and the whole structure collapses."

The AUKUS conundrum

Australia faces a different dilemma. The AUKUS submarine deal commits Canberra to acquiring nuclear-powered submarines by the early 2040s. The price tag is estimated at $245 billion, according to the Australian Strategic Policy Institute. That is roughly 12% of Australia's annual GDP.

The logic is clear: Australia needs to deter China in the South Pacific. But the cost is generating domestic backlash. Labor Party backbenchers have questioned whether the money would be better spent on housing, healthcare, or climate adaptation. The opposition Liberal Party supports the deal but has not explained how it will fund it.

Meanwhile, China has responded by expanding its diplomatic presence in the Pacific Islands. In 2023, Beijing signed a security pact with Solomon Islands. In 2024, it opened a new embassy in Kiribati. Australia has responded by increasing aid to the region — $1.4 billion over four years — but it is a game of catch-up.

The ASEAN void

The Association of Southeast Asian Nations, ASEAN, was supposed to be the region's diplomatic anchor. It was founded in 1967 precisely to manage great-power competition. But ASEAN's consensus-based decision-making makes it slow, and its members are increasingly split. Vietnam and the Philippines lean toward the US, driven by South China Sea disputes. Cambodia and Laos lean toward China, driven by debt and infrastructure dependence. Malaysia and Indonesia try to stay neutral.

The result is paralysis. ASEAN failed to issue a joint statement on the Myanmar coup in 2021. It has not agreed on a common approach to the South China Sea. Its flagship free trade agreement, the Regional Comprehensive Economic Partnership, exists on paper but has produced little tangible integration.

A former ASEAN secretary-general once told me, with a wry smile: "Our strength is that everyone trusts us. Our weakness is that no one fears us."

The real question

The APAC acronym will survive in corporate spreadsheets and conference agendas. But as a strategic concept, it is losing meaning. The region is not converging; it is diverging. Countries are being forced to choose, and the choices are getting harder.

The real question is not whether APAC can maintain its coherence. It cannot. The real question is whether the United States and China can manage their competition without triggering a conflict that destroys the prosperity the region built.

I suspect the answer is: not without a lot more luck than history usually provides.