Context:

• As tensions rise under Donald Trump's revitalised administration, China and Russia are stepping up their efforts to undermine US-led alliances in Eurasia through economic, diplomatic, and regional initiatives.  
• This is a watershed moment in world geopolitics, as the idea of mitra-bhedam—strategic separation of allies—is clearly manifesting.

Strategic Realignment in Eurasia and US Alliances

Post-War Alliance Structures Under Strain:

• The US-led alliance system, which was founded after WWII, is under major stress and realignment as a result of domestic and external geopolitical developments.
• Russia and China are using dissent inside US allies to undercut Washington's influence in Europe and Asia.

Panchatantra's Mitra-Bhedam Analogy:

• The current geopolitical maneuvers reflect a modern parallel to Panchatantra’s Mitra-Bhedam (breaking of friendships), where adversaries exploit divisions among allies to gain strategic advantage.
• Both Russia and China are using strategic diplomacy to create wedges between the US and its traditional allies.

Trump Administration's Hostile Policies:

• Former President Donald Trump’s rhetoric of “free-riding” military partners and economic protectionism (notably tariffs) led to increased friction with key allies.
• These policies have been perceived as unilateral and transactional, eroding mutual trust within alliances such as NATO and with Asian strategic partners.

European Strategic Shift:

• European dissatisfaction with US policies on issues such as Ukraine, troop deployments, and tariff regimes has resulted in some European countries tilting towards China.
• China has positioned itself as a champion of multilateralism, with President Xi Jinping urging European cooperation to resist US unilateralism.

Russia's Strategic Leverage in Europe:

• Vladimir Putin sees a unique window of opportunity under the Trump administration to improve US-Russia ties, potentially isolating Europe from Washington.
• Russia aims to capitalize on intra-alliance tensions, especially in the wake of Trump's threats to withdraw US troops from Europe and his controversial proposal to purchase Greenland from Denmark.

China’s Economic Diplomacy in Europe:

• Despite US warnings about aligning with China, European leaders continue engaging with Beijing, driven by trade interests and a $340 billion trade imbalance.
• China advocates for globalization and economic cooperation, branding US actions as “unilateral bullying.”

China’s Regional Diplomacy in Asia:

• China has been strengthening ties with Southeast Asian countries such as Vietnam, Cambodia, and Malaysia, often seen as part of a counterbalance to US Indo-Pacific strategies.
• Xi Jinping’s visits reflect a strategic push to consolidate regional influence amidst tensions with Washington.

Engagement with US Allies in Asia-Pacific:

• China is also working to improve diplomatic ties with traditional US allies like Japan, South Korea, Australia, and New Zealand.
• This move aims to dilute the US-led coalition in the Indo-Pacific, emphasizing shared economic interests and regional stability.

Neighborhood Diplomacy as a Priority:

• China’s leadership has prioritized “neighborhood diplomacy”, with Xi Jinping emphasizing the importance of cooperation and shelving of differences.
• This approach is designed to create a buffer zone of supportive states in the face of US strategic containment efforts.

Broader Implications for US Foreign Policy:

• The erosion of US alliance structures weakens Washington’s ability to project global influence.
• If adversaries like Russia and China successfully divide US alliances, it could reshape global power dynamics, particularly in Eurasia and the Indo-Pacific.

China’s Economic Diplomacy and Regional Trade Imbalances

Strategic Economic Engagement

China has been pursuing neighbourhood diplomacy through high-level visits to countries such as Vietnam, Cambodia, and Malaysia, aiming to reinforce regional partnerships amid escalating US-China strategic competition in the Indo-Pacific.

Vietnam Visit and ASEAN Outreach

President Xi Jinping warned against the dangers of trade conflicts and underlined the need of more robust economic cooperation during a recent official visit to Vietnam. But bilateral trade numbers expose persistent deficits that go counter to rhetoric.

Trade Deficits with Southeast Asia:

• China's trade surplus with Vietnam in 2024 climbed to an unheard-of $85 billion. Comprising 10 Southeast Asian countries, the ASEAN organisation also reported a total trade imbalance with China of $200 billion.  
• This notable imbalance begs questions about China's will to follow fair trade policies and market openness.

Contrasting Trade Relationships with the U.S.:

• Vietnam's $120 billion trade surplus with the US shows how much it depends on American markets.
• With a $200 billion trade surplus with the United States, ASEAN as a whole shows that economic reliance on U.S. commerce remains robust even as links to China grow.
• India likewise shows a similar trend: a $45 billion surplus with the United States but a $100 billion trade imbalance with China.

China’s Limitations in Global Economic Leadership:

• China's actions show a discrepancy between diplomatic narratives and trade reality, although its attempts to project itself as a world leader in economy.
• Chronic trade imbalances that disproportionately benefit China make slogans like "a community of common destiny" and regional win-win cooperation dubious.

Geoeconomic Considerations in Southeast Asia:

• Many Southeast Asian nations, while benefiting from Chinese investments and supply chains, are equally cautious of overdependence on Beijing.
• The growing inclination towards balancing China’s influence is evident in regional trade strategies that emphasize continued engagement with the United States and diversification of economic partners.

US Trade Appeal in Asia:

• Despite criticism by former U.S. President Donald Trump—who accused China and Vietnam of “exploiting” U.S. markets—most Asian economies remain eager to preserve access to U.S. markets due to their high consumer demand and transparent trading norms.
• Asian trade ministers are aggressively looking for fresh bilateral and multilateral trade deals with Washington, therefore underlining the ongoing centrality of U.S. economic ties.

Indo-Pacific Dynamics and Diplomatic Counterbalance:

• As the United States advances its Indo-Pacific strategy, China responds by intensifying regional diplomatic overtures, including reviving trilateral talks with Japan and South Korea.
• These initiatives aim to “shelve differences” and build strategic trust, especially in the face of shifting geopolitical alignments.

India-China Economic Pattern:

• Trade dynamics of India mirror the more general regional trend. India shows the strategic balancing act many Asian countries are negotiating with a big trade deficit vis-à-versity China and a rising trade surplus with the U.S.

Question of Market Openness:

• The large and persistent trade deficits faced by China’s neighbors cast doubt on its claims of economic openness.
• A more open Chinese market, characterized by lower barriers, fair competition, and reciprocal trade access—could contribute significantly to correcting the current global trade imbalances.

American Caution Before Choosing China as Ally During a U.S. event, Treasury Secretary Scott Bessent took aim at Spanish PM Pedro Sánchez's proposal for a closer alliance between the EU and China in response to U.S. tariffs, comparing it to Europe "cutting [its] own throat."

Trade Dynamics and Competitive Economic Hubs

• US vs. China: Market Access Reality Check: Despite China's rhetoric against "unilateral bullying," Southeast Asian countries and India rely largely on US markets due to favourable trade balances.
• Structural trade imbalances: India has a $100 billion deficit with China but a $45 billion surplus with the United States, highlighting the economic asymmetry that challenges a tilt to China.
• Asia’s Cautious Calculus: While Asian economies are fearful of US protectionism, they are lined up in Washington to win trade accords, demonstrating America's continued economic dominance.

Conclusion

China and Russia may be trying to weaken U.S. alliances, but most of Eurasia still has strong economic and strategic links to the US. The United States remains the region's major partner, and China's outreach is making progress, but trade imbalances and geopolitical worries will keep it from overtaking the U.S.

Practice Questions: Evaluate the possible ramifications of China's strategic alliances with U.S. allies on the future of multilateral trade agreements and global economic governance.