Global Risk Indexes (08-02-2025)

Global 97 (-1 ▼)
MENA 98 ( —)
APAC 97 ( —)
Europe 97 ( —)
Africa 96 ( —)
AMERs 98 ( —)
Markets 98 (-1 ▼)
Mei Ling, Asia Pacific region analyst at Worldwise Analytica

Mei Ling

Empowering minds, shaping decisions: Insights from the heart of geopolitics

Asia-Pacific Under Pressure: U.S.-China Trade War Escalates, North Korea's Nuclear Standoff, and Indonesia's Fiscal Shakeup

The Asia-Pacific region is facing mounting instability as trade disputes, military threats, and domestic policy shifts converge to create a rapidly evolving geopolitical landscape. With Washington tightening its economic pressure on China and Taiwan, regional actors are adapting to shifting economic and security paradigms.

U.S.-China Trade War: Taiwan Braces for Semiconductor Tariffs

As part of President Trump's broader trade war strategy, Taiwan is preparing for potential tariffs on its semiconductor industry. Given Taiwan's central role in the global chip supply chain, any U.S. tariffs on Taiwanese semiconductors could significantly disrupt global technology markets. Taipei has dispatched senior officials to Washington in an attempt to secure exemptions, but with the Trump administration determined to rebalance trade in America's favor, Taiwan may be forced to make economic concessions, such as increasing imports of U.S. energy.

In response, Taiwan's export strategy is shifting, with reports of preemptive orders before Trump's inauguration driving a temporary boost in export figures. However, Taiwan remains vulnerable to broader geopolitical maneuvering, as Beijing continues to exert economic and diplomatic pressure on Taipei.

North Korea Declares Nuclear Weapons Are 'Combat-Ready'

North Korea has escalated its rhetoric, declaring that its nuclear weapons are not for negotiation but are explicitly for wartime use. This statement follows renewed calls from the U.S. and Japan for Pyongyang to denuclearize. The timing of North Korea's declaration suggests an attempt to leverage its nuclear arsenal as a deterrence mechanism against growing U.S.-Japan-South Korea military coordination.

Pyongyang's stance signals a potential return to brinkmanship, with a high likelihood of further missile tests or military provocations in the coming weeks. If North Korea resumes missile launches near Japan or South Korea, Washington may be forced to re-evaluate its engagement strategy with Pyongyang.

Indonesia's Budget Cuts: A Fiscal Gamble

President Prabowo Subianto's government has ordered $19 billion in budget cuts to fund his election promises, particularly his ambitious free school meals program. The decision has triggered concerns over economic stability, as key infrastructure spending, including road maintenance and public works, faces deep cuts.

While some economists argue that budgetary discipline could benefit Indonesia's economy in the long term, others warn that abrupt cuts could slow economic growth and weaken investor confidence. The hospitality and tourism sectors are particularly at risk, as government spending on travel and conferences is being reduced.

Australia's AUKUS Payment and Indo-Pacific Security Commitments

Australia has made its first $500 million payment under the AUKUS nuclear submarine deal, reaffirming its commitment to long-term security cooperation with the U.S. and the U.K. The payment underscores Canberra's determination to modernize its defense forces amid rising Chinese assertiveness in the Indo-Pacific.

In parallel, Australia is investing heavily in defense infrastructure, with plans to upgrade northern military bases and enhance its naval presence. These moves indicate that Australia is not only deepening its security partnership with Washington but also reinforcing its strategic deterrence capabilities in the region.

Thailand's Economic Strategy and Investment in Semiconductors

Amid the global restructuring of semiconductor supply chains, Thailand is moving to position itself as a new hub for the industry. With President Trump's trade war disrupting U.S.-China technology cooperation, Bangkok is drafting policies to attract semiconductor manufacturers looking to relocate from China.

Thailand's strategic shift could have long-term implications, particularly if it succeeds in securing investments from major chipmakers. However, the country must navigate complex trade dynamics as it seeks to balance economic ties with both Washington and Beijing.

Conclusion: A Region in Transition

The Asia-Pacific remains in a state of flux as economic realignments, security tensions, and political decisions create new risks and opportunities. With Taiwan's semiconductor sector under scrutiny, North Korea's nuclear rhetoric escalating, and key regional players recalibrating their economic and defense strategies, the region is entering a critical phase where strategic missteps could have lasting consequences.

Geopolitical Risk Assessment for the Asia Pacific
(08-02-2025)

The Asia-Pacific region is undergoing significant geopolitical realignments as trade disputes, security confrontations, and domestic policy shifts create new uncertainties. The U.S.-China trade war is deepening, with Taiwan bracing for potential tariffs on semiconductors. North Korea's explicit declaration of its nuclear weapons as 'combat-ready' further destabilizes the regional security architecture. Meanwhile, the economic impact of Indonesia's budget cuts, Thailand's strategic investment moves, and Australia's financial commitments to AUKUS are reshaping the region's economic and security landscape. With multiple risk factors converging, the potential for diplomatic miscalculations and economic disruptions remains high.

Geopolitical Risk Index

Developments to Follow for the Asia Pacific (See All Global)

Previous Briefings

See all previous briefings