Strategic Rivalry between China and the United States is an important issue in the regional security, economy and diplomacy in Southeast Asia. The competition has been felt in different arenas, and these areas are military influence, trade policies, and technological development whereby states in Southeast Asia are planning across a spectrum of political areas. Of the most concern is that there is an escalation of militarization of the South China Sea. That consists of the aggressive policies of China and its assertions regarding its territorial command of the U.S. naval operation and its freedom of navigation (Yang, 2024). That is why, states that are members of the ASEAN (Association of southeast Asian Nations) are on high levels of security tensions. They are hedging in respect to their security relations with the U.S. and in the relationship to the Chinese in its economic connection.

Moreover, the trade war between the U.S. and China has caused the global supply chain to be interfered with and the economy of the Southeast Asian market is entwined in both markets. Vietnam, Malaysia and Indonesia have attempted to capitalize on the transformation to the trade landscape by setting themselves up as a substitute manufacturing destination where corporations are seeking to find an out of china diversification. However, the economic rebalancing to which these countries are also exposed will expose them to both risks of financial dependence on the other superpower as well as financial blackmail. The reaction of Southeast Asia to this competition has been strategic independence and collaboration among the regions (XinWei, 2023). Therefore, ASEAN centrality has enabled Indonesia to be neutral and an independent regional bloc that can be used to neutralize the great power confrontations. Simultaneously, the ASEAN has also played a significant role in the furtherance of the diplomacy between the U.S. and China and the directing it towards the multilateral discourse and economic alliances. The disagreement between the members of ASEAN on how to position themselves regarding China Belt and Road Initiative (BRI) and U.S. security commitments are some of the obstacles to a unified response (Pradana & Wawan, 2023).

The US and China have been increasing competition in Southeast Asia, a region of great economic, geostrategic, and diplomatic importance due to its role as an economic powerhouse, as a major sea lane, and as a convening power in the Association of Southeast Asian Nations (ASEAN). This has also produced increasing discussion about how Southeast Asian states have played in this competition and what that means for Washington, Beijing, and other interested actors. This has particularly important ramifications for how US policymakers consider progress on key regional priorities such as diversifying supply chains or securing the first island chain heading out to the South China Sea (Parameswaran, Southeast Asia and US-China Competition: Contours, Realities, and Implications for the Indo-Pacific, 2023. The USA is ASEAN's fourth largest goods trading partner and a major destination for American foreign investment. The Trump and Biden administrations released key strategic documents that highlight the central role that ASEAN plays in the regional architecture and devote more economic, diplomatic, and security resources to the region. The Biden administration's desire to counter China's influence is evident from the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF) and a comprehensive strategic partnership with ASEAN (Qiao-Franco, Karmazin, & Kolmaš, 2024).

The Sino-U.S technological rivalry, not to mention limitations to the exports of semiconductors to China, has affected the economic context of Southeast Asia, in a technological manner (Funke & Wende, 2022). Nevertheless, other firms such as Applied Materials, Lam Research, and KLA have increased their operations in Singapore and Malaysia to utilize the available semiconductor infrastructure in the region to avoid trade tariffs (Barbe & Hunt, 2022). This trend has thrown the region into the middle of the world technology supply chain. Conversely, penetration of investments and capital has also been an issue including inflation and high prices of property, particularly in Singapore.

The rising trade conflict between U.S. and China has led to colossal transformation in the production capitals in the world. To circumvent the US tariffs, many multinational corporations (MNCs) have taken the production facilities outside of China to the Southeast Asian nations. One such case was the way that Samsung thought about exhibiting screens in Vietnam in 2020 and it led to Vietnam becoming a top provider of display screens (Sheldon & Kwon, 2023). Nintendo transferred a small portion of its Video game console factory to Vietnam, and Sailun Tire also moved all its manufacturing to Thailand (Suh, 2022). FDI inflows and manufacturing jobs have been created in the region as a result of these relocations. However, the trade tensions between China and the United States have become much more intense, which has reshaped global manufacturing landscapes, notably for trade diversion and manufacturing relocation to Southeast Asia.

Trade diversion is the relocation of trade flows to a foreign country as a result of changes in trade policies associated with economic events. For example, increased tariffs on Chinese goods make exports of Chinese goods to the U.S. less competitive, making it less attractive for customers to buy products there. Thus, more market appealing to importers to get products from different markets. This shift has also helped Vietnam become a key beneficiary. Vietnam's total exports to the U.S. in 2024 amounted to $142.4 billion, or almost 30% of the country's GDP. The surge side is rather related to foreign multinationals relocating production from China to Vietnam to avoid tariffs. Several major corporations, including Samsung, Foxconn, Apple, Intel, and Nike, have set up manufacturing businesses in Vietnam, and the country has been further integrated into the global supply chains (Guarascio, 2025).

The trend is the push of manufacturing companies of one country to another in order to reduce the possibility of trade conflicts and exploit more favorable economic conditions. The trade war between China and the US has accelerated, and most of the Chinese factories have transferred their businesses to Southeast Asia. Malaysia, Vietnam and Cambodia have become the favors of countries since they are close to nations where labor is cheaper and trade agreements more favorable. Most of new initiatives of Chinese companies are, therefore, finding their way to Vietnam, almost in 30 percent. It is this change not to apply US tariffs and compete at a lower price in the international market (Lakshmi, 2025). None of this however comes easy. Changing location of production facilities is also posing serious costs and logistical challenges to the companies. The foreign investments influx also takes place very fast and may anger the locals as it may strain the local resources and unique infrastructure

Chinese strategic projects, including the Belt and Road Initiative (BRI) or the ASEAN-China Free trade area (ACFTA) have enhanced its economic relationships with the Southeast Asian regions. In 2010, the ACFTA was formed, which introduced one of the largest free trade zones on the planet, decreasing the tariff on a wide range of goods, and increasing the trade rate between China and the ASEAN states. As of 2015, the total merchandise trade of ASEAN with China added up to 346.5 billion, which makes ASEAN trade 15.2 percent with China. Naturally, takeovers may be required and they are useful in eliminating competition within the market. In 2023, China was ASEANs largest trading partner and had contributed nearly 975 billion bilateral trade with the region because of the high demand of raw materials, electronics, and manufactured goods. Further expansion of China with Southeast Asian economies by the Regional Comprehensive Economic Partnership (RCEP), a trade agreement that spans nearly all world economies, lowers tariffs and allows supply chain links to China. Furthermore, the Belt and Road Initiative (BRI) of China has enabled the development of trading connections through funding the costly infrastructures (ports, railways, highways), enhancement of the logistics of the region, and accessibility to the markets. However, when viewed through the perspective of the rising influence of China on trade, the economic rewards of augmented commerce with China have not been balanced such that certain Southeast Asian countries are making measures to spread trade associations to decrease over reliance on Chinese demand. There is also a high level of uncertainty with the geopolitical tensions including the South China Sea disputes, and the unending export of the U.S.-China trade rivalry might impact the future trade relations. Nevertheless, China remains a significant economic partner to Southeast Asia, which favors the trade of the region by investing in it, entering into policy agreements, and industrial relations.

The evolving nature of the U.S. foreign policy has led the Southeast Asian countries to review their security and economic policies. Other nations such as Australia, Japan, South Korea and India are improving their security levels in the region since they realize that any effort to counter the influence of China should be done collectively. This is a geopolitical setting that requires strategic burden-sharing by allies in order to ensure stability in the region. At present, the regional security and economic strategies in Southeast Asia depend on the strategic equilibrium between the world superpowers, particularly, China and the U.S., and regional alliances, such as ASEAN (Association of Southeast Asian Nations

The spatial structure of Southeast Asia is ethnically, religiously, and culturally diverse and complex, and alliances correlate directly to how insecurities and power disparities shape the region's stability. The United States has ratified formal defence treaties with the Philippines and Thailand, which allow them joint military exercises, defence dialogues, capacity building, and other activities that advance the relationship. The United States has also implemented multiple defence procurements to improve interoperability with the Royal Thai Armed Forces through collaborative training. Likewise, the U.S.-Philippines alliance that was strained after the South China Sea Taiwan Relations Act has, in recent years, come back to life.

The threats that have been considered real in the Indo-Pacific region have motivated the local powers to increase their defense expenditures. Firstly, Japan is augmenting its defence budget by enhancing its missile defence equipment and procurement of the modern fighter jets in order to counter the threats in its neighbourhood. India, which has border conflicts with China, is also ramping up its defence spending on modernisation of the forces and to increase the presence of the navy in the Indian Ocean. Anarchy in the Australian strategy has also predetermined the high level of defense expenditures that included the acquisition of nuclear submarines as a part of the AUKUS partnership with the US and the UK to enhance its deterrence posture. The Japan-India-Australia trilateral cooperation under the initiatives like the Japan-India quad is aimed at ensuring that the Indo-Pacific is free and open. There is also joint military training, mutual defense and technological sharing to level the growing power of China by these countries. Such alliances are the important proactive actions toward the provision of the region with order and international law. Briefly, the Chinese and the United States strategic behaviour have a great impact on the security issues in Southeast Asia.

As the analysis shows, China is militarising the South China Sea through the deployment of its naval assets, air defence, as well as advanced missiles, which has augmented its military presence in the area. Artificial islands are being built to convert atolls and the reefs into military bases. The important locations like Fiery Cross Reef, Subi Reef and Mischief Reef have military facilities such as runways, radars and missile launching sites. These military installations certainly aid China's endeavours to project military power and control vital maritime routes. (Asia Maritime Transparency Initiative, 2024). To meet China's aggressiveness, the United States increased Freedom of Navigation Operations (FONOP) by patrolling contested waters more frequently to challenge China's claims. The United States Navy has deployed carrier strike groups and increased joint exercises with allies, the Philippines, Japan and Australia. Also, Washington expanded military basing agreements with the Philippines beyond the EDCA framework for more aggressive operational leeway in targeting Chinese maritime activities. Even with diplomacy, China continues to menace foreign ships, including Philippine Coast Guard vessels in the contested waters. Contemporary confrontations among superpowers have incited the potential risks of military accidents, which have led ASEAN members to maximise dialogue while simultaneously amping up their deterrence capabilities in the region.

ASEAN is known to remain neutral in the context of rivalry among world powers and places more emphasis on dialogue, regional cooperation, and non-alignment. This region uses "the ASEAN Way", which values non-interference and consensus-based decision making. ASEAN continues to work as a diplomatic platform where various actors like China and the U.S. are engaged, irrespective of the internal disparities inside the organisation. International relations regarding ASEAN have become considerably more complicated. Internal changes add levels of discord to pre-existing divisions - especially in the relationships between China, the US, and ASEAN as interdependence supersedes intrastate tensions. ASEAN is utilised as a ground to contest influence, which serves as a detriment to the member states of ASEAN, as evident during the period of China's Community of Shared Future or the US's Free and Open Indo-Pacific, in which there was almost no concern for the bloc.

The Philippines has rapidly pivoted to the US for closer military cooperation under the presidency of Ferdinand Marcos Jr. The Philippines has also aided Japan and Australia in military exercises and has increased their counter-aggression against Chinese activities in the South China Sea. Moreover, the Philippines under Marcos Jr. has provided greater access to military bases through the Enhanced Defence Cooperation Agreement (EDCA). Vietnam has been coveting external military alliances but completed a Comprehensive Strategic Partnership with the United States in 2023. Vietnam has also increased its purchase of military equipment from the US and Europe to try to strengthen and modernise its armed forces to offset China's military presence in the South China Sea.

Cambodia, the closest ally to China in the region, has been active in hosting Chinese-sponsored infrastructure projects and increasing the footprint of China's military at the Ream Naval Base, which poses a security threat to the region. Laos has an uncontrolled dependence on China. Laos has been actively integrating into the Chinese Belt and Road Initiative and especially participates in high-speed rail projects that connect Laos to the Chinese economy. Furthermore, the Myanmar coup in 2021, the military junta has increasingly relied upon China for diplomatic and economic assistance, which includes receiving weapons, investments in infrastructure, and political support in the UN (TUNG, 2023).

There are different states in Southeast Asia which make themselves neutral, Indonesia is the largest economy within ASEAN, and adopted a middle ground by actively participating in military exercises with China and the United States while also engaging in economic relations. Indonesia has also acted as a powerful mediator in regional problems, including the crisis in Myanmar. Furthermore, Malaysia still trades with China and maintains some security commitments with the West. Malaysia has opposed Chinese sea aggression but has opted to stay away from confrontation with America in the wider geopolitical competition. Lastly, Thailand, a US treaty ally but deeply economically integrated with China, Thailand remains strategically on the fence, trying to be friendly with both superpowers (Southgate, 2021).

Besides China and America, other world powers are competing over the Southeast Asia region geopolitically, such as Japan, which has emerged as a key factor in regional peace and security by deepening defence relations with the Philippines and increasing maritime security aid to the ASEAN countries. Japan is also constructively countering China's BRI by investing in infrastructure development in off-BRI countries (Wang, 2023). India has strengthened relations with ASEAN by conducting naval exercises with Indonesia and Vietnam and by increasing defense exports to the region as part of its Act East Policy. The construction of AUKUS with the US and UK has increased Australia's defense commitments. It has also advanced relations with ASEAN countries by increasing security cooperation (Mishra, 2024).

A strategically important region in Southeast Asia is a region of growing economic dynamism, vital trade routes and a central role in global security dynamics, and one that has profound implications for its geopolitical competition between the rising dragon of China and the superpower of the United States. Though Southeast Asian nations, especially those in the Association of Southeast Asian Nations, are in an awkward position with economic dependencies, security concerns, and diplomatic engagements, they are also caught in the crosshairs of the rivalry between the two great powers for influence (Azimov & Erkayev, 2025). ASEAN member states have played a mixed regional response to this great power rivalry as a way of protecting their interests through varying strategies of hedging, bandwagoning, and balancing. This has brought countries like Cambodia and Laos closer to China, based on their receiving heavy economic aid and infrastructure projects, while others like Vietnam and Indonesia have opted for a less dependent and more independent, assertive policy that calls for order based on rules in maritime disputes (TUNG, 2023). Changes in political leadership in the Philippines have occurred between adopting China based on economic gains and maintaining its security links with the U.S. At the same time, Singapore has had a pragmatic approach of pushing for regional stability and open trade and fostering strong economic links with both powers (Castro, 2024).

Security cooperation in the region in the South China Sea should also transform since it is pegged on the need to minimize the militarization in the region and deal with the threat of the spill over of the conflict into the wider Indo-Pacific activity. The risks and securing the region may be mitigated through enhancing the multilateral institutions such as the ASEAN Defense Ministers Meeting (ADMM) and the negotiations ASEAN has on the Code of Conduct with China (Diva, Suwito, and Yanto, 2024). Institutional structures will need to be enhanced, internal cleavages will be handled and regional security frameworks will have to be proactively shaped to maintain Southeast Asia as a peace, stability and economic prosperity zone. An uphill task awaits the ASEAN in the Sino-US confrontation, yet there is also a prospect of leveraging its centrality in the region to forge a wide range of partnerships and reaffirm its centrality in forging the Indo-Pacific order.

The rivalry between the United States and China as a strategic economic rivalry through the prism of the Power Transition Theory (PTT) can assist in disclosing the contours of the global politics of the 21^st century. The presidency of Donald Trump was an utter violation of the US foreign economic policy and multilateral customs. His approach was based on unilateralism, protectionism and frontal assault. The extensive use and application of tariffs, the commencement of a trade war, withdrawing of international trade agreements, and the use of the words directly criticizing Chinese trade strategies were signs of the new era of economic nationalism. One of the key findings of this article is the notion that, despite the fact that Trump and Biden were the representatives of the contrasting rhetoric and policies, they both behaved within the limits of the same strategic necessity, which consisted in keeping China at the level of an aspiring great power. The bipartisan agreement emphasizes the structural nature of the competition between the United States and China and assures the relevance of the Power Transition Theory to the contemporary economic competition. The only difference that exists is that of the extent of inter-global cooperation, ideological wrapping of the competition, and the level of systemic changes which each administration was willing to risk. In the end, this study finds that the economic competition between the U.S. and China is not a bilateral problem only- it is a structural change in the international order. As China approaches equality with the U.S., we can probably expect the struggle to increase on economic, technological and ideological levels. But open fight is not a necessary outcome. The character and outcome of this competition will greatly rely on how the two powers will deal with interdependence, compete under institutional regulations as well as control the narrative of legitimacy, governance and cooperation around the world. The strategic economic competition between the United States and China is the most significant power rivalry of the 21st century