Europe Struggles to Compete with China and US in Southeast Asia Trade

Europe is intensifying its efforts to gain a foothold in Southeast Asia, but the region's deep economic ties with China and the United States make it an uphill battle. European leaders are proposing new alliances as tensions rise between Washington and Beijing, but the reality is that Europe lags behind in trade, influence, and presence.

Recent events, such as China's military presence in the Paracel Islands and the impending deadline for US tariff breaks, have created a small window for Europe to position itself as a third option. However, without substantial trade numbers and economic ties, Europe's appeal remains limited.

At the 2025 Shangri-La Dialogue, French President Emmanuel Macron called for deeper cooperation between Europe and the Indo-Pacific, highlighting the threats posed by China's military posturing and Russia's war in Ukraine. Macron aims to present Europe as a stable partner, but the region is not convinced without concrete economic benefits.

Europe's interest in Southeast Asia includes selling arms and tapping into the region's natural resources to support its green and digital transition. However, experts like Bob Herrera-Lim, managing director at Teneo, emphasize that economic ties are the foundation of relationships in Southeast Asia. While Europe has signed deals with Singapore and Vietnam, broader talks on a EU-ASEAN free trade agreement have stalled for years.

In terms of trade, China and the United States dominate Southeast Asia's trade lanes. China has been the region's top trading partner since 2009, with total trade reaching $982.3 billion in 2024. The United States followed with $476.8 billion, while Europe managed only $299.7 billion. Europe's trade machine appears slow and scattered compared to China's fast and massive trade operations.

Despite growing tensions, Beijing continues to meet Southeast Asia's needs, making it difficult for Europe to compete. However, some analysts argue that Europe offers stable partnerships that do not rely on power plays. Europe's value proposition includes reliable partnerships in areas like energy security, green infrastructure, and digital governance.

Southeast Asia could benefit from diversifying its options and reducing dependence on the two superpowers. More partners would raise the cost for China if it tried to escalate disputes. However, Europe lacks the hard military power that China and the United States possess, making its influence more diplomatic than economic.

In summary, Europe's efforts to gain a stronger presence in Southeast Asia face significant challenges due to the region's deep economic ties with China and the United States. Without better trade offers, faster deals, and deeper ties, Europe risks remaining a sidelined guest in the region's economic landscape.