On Oct 28, 2025, during the 28th China-ASEAN Leaders' Meeting, China and ASEAN formally signed the China-ASEAN Free Trade Area 3.0 Upgrade Protocol (hereinafter "CAFTA 3.0"), marking a new phase in bilateral cooperation. The global trading system is currently undergoing accelerated fragmentation, experiencing its most profound structural transformation since the 2008 financial crisis, with three dominant trends emerging: fracturing rule systems, geoeconomic bloc formation, and accelerating supply chain restructuring.

On April 2, 2025, the Trump administration's "Liberation Day" tariffs accelerated the fragmentation of the global trade rule system, with ASEAN countries facing targeted strikes that increased their export costs by an average of one-fifth. Yet merely one month later, on May 21, 2025, China and ASEAN completed negotiations for CAFTA 3.0. This represents not a simple trade agreement upgrade, but East Asia's systematic response to trade fragmentation — answering unilateralism with institutional openness and providing an "East Asian solution" for building inclusive multilateral cooperation frameworks.

Trade wars as the new normal: How can East Asia break through?

Trade protectionism has evolved from temporary disruption into a long-term challenge. According to the OECD report released in September 2025, by the end of August, the US effective tariff rate had risen from approximately 2 percent in 2024 to 19.5 percent, reaching the highest level since 1933. Moreover, the Trump administration invoked the International Emergency Economic Powers Act (IEEPA), citing alleged national security threats, to systematically implement a weaponization of trade strategy. Beginning in April 2025, a uniform 25 percent tariff was imposed on automobile imports from major trading partners; from June, 50 percent tariffs were added on steel and aluminum products; and from August, 50 percent tariffs were imposed on copper products. The US has implemented differentiated tariff policies on ASEAN countries, with rates ranging from 10 percent to over 40 percent, creating varied impacts on ASEAN exports.

The US tariff policy has generated systemic shocks to East Asian economies, with impacts far exceeding those of conventional trade frictions. These shocks propagate through a transmission chain of "rising tariff costs → supply chain restructuring → declining growth expectations". Unlike the 2018-2020 trade war, the current wave of US tariffs inflicts broader and more structural damage, posing fundamental challenges to East Asia's export-oriented development model and regional value chain architecture.

Facing this "new predicament", East Asian economies are proactively reshaping regional economic cooperation. Compared to CAFTA 1.0's focus on goods trade liberalization and CAFTA 2.0's emphasis on services and investment facilitation, CAFTA 3.0 marks East Asian economic cooperation's entry into a new phase of rule integration and value chain reconstruction. The agreement upgrade covers nine major areas that systematically address non-traditional trade risks including technology blockades, standard barriers, and supply chain reorganization, building regional risk-resistance capacity. Through institutional rule upgrades and strategic resource coordination, CAFTA 3.0 is reconstructing East Asia's economic competitive advantages.

CAFTA 3.0's triple resilience for breaking the trade war impasse

Confronting rising global trade protectionism and supply chain restructuring pressures, CAFTA 3.0 provides a new paradigm for global economic governance through triple innovation in institutional resilience, economic resilience, and strategic resilience.

First, institutional resilience by adopting rule innovation to address structural changes. The CAFTA 3.0 upgrade encompasses nine major areas: five newly added fields including digital economy, green economy, supply chain connectivity, competition and consumer protection, and micro, small and medium-sized enterprises, alongside four upgraded existing areas covering customs procedures and trade facilitation, standards and technical regulations with conformity assessment procedures, sanitary and phytosanitary measures, and economic and technical cooperation. CAFTA 3.0 is the first among global free trade agreements to incorporate supply chain cooperation as a dedicated chapter with high-level joint commitments. This represents a significant innovation in developing countries leading the formulation of high-standard economic and trade rules.

Second, economic resilience by establishing risk-resistant networks through market integration. To begin with, accelerating the formation of a regional large market. Through specific measures such as advancing the application of customs "Single Window", deepening smart customs construction, and implementing mutual recognition of electronic authentication, CAFTA 3.0 can effectively reduce trade costs and improve customs clearance efficiency. Building on this foundation, the mutual recognition mechanism for standards further breaks down regional market barriers: enterprises can operate across regions without repeated certification, and long-standing technical barriers in key industries such as new energy vehicles and electronic products are systematically eliminated. Building on this, promoting the formation of an institutionalized supply chain resilience network.

The agreement explicitly commits to facilitating the free flow of critical products and services, improving supply chain resource allocation efficiency, and coordinating responses to supply chain disruptions. Equally important, providing institutionalized support for micro, small and medium-sized enterprises (MSMEs). MSMEs form the important foundation of regional economic resilience. CAFTA 3.0 establishes a dedicated chapter on MSMEs, helping them integrate into regional value chains through information sharing, financing support, and digital transformation. This inclusive growth model provides a broader and more solid foundation for regional economic resilience.

Third, strategic resilience by fostering resilient networks via inclusive cooperation. ASEAN Secretary-General Kao Kim Hourn mentioned that global trade stands at a critical crossroads, necessitating the promotion of "open, fair, and rules-based" global trade to counter protectionist waves, with all parties firmly supporting openness and inclusiveness while continuously advancing regional economic integration. Unlike the rigidity of Western trade agreements, CAFTA 3.0 embodies the philosophy of inclusive development, emphasizing flexibility and progressive cooperation approaches. This institutional design of a "resilient network" rather than an "exclusive alliance" provides new support for the global multilateral trading system. As Chinese Commerce Minister Wang Wentao noted, China is willing to work with ASEAN to jointly maintain stable and smooth operation of global industrial and supply chains, making greater contributions to bilateral development.

The future has arrived: CAFTA 3.0 restructuring global economic governance

CAFTA 3.0's significance extends far beyond a regional trade agreement — it represents East Asia's historic restructuring of the global economic governance system.

First, developing countries are transitioning from "rule takers" to "rule creators". For decades, global trade rules were designed and dominated by the US and Europe, with developing countries as passive recipients. CAFTA 3.0 marks the first-time developing country groups have led the formulation of digital economy rule systems, the first elevation of supply chain resilience to institutional arrangements, and the first achievement of regional mutual recognition of developing country green standards.

Second, CAFTA 3.0 pioneers a new paradigm of regional cooperation. It offers developing countries diverse choices — each economy maintains autonomy while forming network effects through bilateral and multilateral arrangements. Amid global trade protectionism, China and ASEAN choose to jointly "expand their circle of friends", providing new support for the global multilateral trading system.

Finally, CAFTA 3.0 heralds the arrival of Asia's "collaborative development" century. If the 20th century's "flying geese model" represented Japan-led vertical division of labor, then CAFTA 3.0 represents the establishment of the 21st century's "collaborative development model", pioneering a multi-centered, networked development approach. China-ASEAN trade volume has grown from less than $8 billion in 1991 to nearly $1 trillion in 2024, with intermediate goods trade rising to 52 percent by 2024, indicating not simple "raw material export-product import" patterns but deep industrial chain integration.

Looking forward, China and ASEAN will leverage digital economy, green economy, and supply chains as three key drivers, elevating cooperation from quantitative to qualitative advancement while upgrading toward "multilateral networks". First, constructing new regional digital governance rules. Under the CAFTA 3.0 framework, this involves promoting mutual recognition of cross-border data flow rules with RCEP, advancing regional digital infrastructure connectivity, and building a regional digital ecosystem that is "digitally driven, multi-party governed, and risk-controllable". Second, establishing regional low-carbon transition benchmarks through carbon footprint regional mutual recognition systems, implementing unified carbon labels for key products including photovoltaics, new energy vehicles, and energy storage batteries, making regional emission reduction achievements tradable and transferable. Third, building risk-resistant regional cooperation networks. Anchored by CAFTA 3.0's supply chain connectivity provisions, this establishes a full-cycle resilience mechanism encompassing "risk early warning—substitution capability—regional coordination". The resulting "prevention-buffering-recovery" closed loops ensure that regional supply chains maintain functional continuity and dynamic adaptive capacity even under external shocks. Fourth, providing support for the global multilateral trading system. Through institutional linkages, mechanism coordination, and capacity building, strengthen the rule complementarity between CAFTA 3.0 and RCEP, enhancing the overall level of institutional openness in the region. Building on this foundation, invite Gulf states and Latin American economies to participate in Asian supply chain construction.

Looking back through history, each period of globalization adjustment has been accompanied by the rise of regionalization. The Great Depression of the 1930s spawned regional trade blocs; today's trade fragmentation is similarly reshaping the global economic landscape. CAFTA 3.0 tells the world: cooperation remains the optimal solution for addressing uncertainty. Resilience is not about isolated self-protection but about enhancing collective risk resistance through deep cooperation.

Liu Jingye is an assistant researcher at Institute of Chinese Borderland Studies, Chinese Academy of Social Sciences. Zhai Kun is senior research fellow of the Institute of International and Strategic Studies and deputy director of the Institute of Area Studies at Peking University.

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