Hypotheses I: The Impact of Emerging Asian AI-Enhanced Trade Networks on US Geopolitical Power

On how trade flow dynamics and AI might change geopolitical trajectories

Hypothesis

In Asia, the positive impact of AI on cross-border trade (effect size 0.32) will compound over time, with each 0.1 increase in AI adoption effect size translating to approximately 2-3 years of accelerated regional economic integration. Given current adoption trajectories and the moderating effects of improving infrastructure, US geopolitical primacy in Asia will face a critical inflection point between 2028-2032, significantly earlier than conventional projections of 2040-2045.

Introduction

This research paper by Jun Cui examines how artificial intelligence (AI) technology positively impacts cross-border trade in Southeast Asia, with an overall effect size of 0.32 (statistically significant, p < 0.001). This moderate but meaningful effect suggests AI adoption significantly increases trade volumes by enhancing efficiency, reducing costs, and strengthening regional supply chain integration. As Southeast Asian economies increasingly adopt AI technologies to optimize their trade operations, this trend—combined with ongoing US-China trade tensions—could accelerate shifts in global economic power.

The AI-Enhanced Asian Trade Network

The paper identifies several key mechanisms through which AI is strengthening intra-Asian trade:

1. Reduced Transaction Costs: AI automates complex trade processes like customs documentation and compliance checks, making international trade more efficient and cost-effective within the region.

2. Enhanced Dynamic Capabilities: AI technologies provide real-time data analysis and predictive analytics that help firms adapt quickly to changes in the international trade landscape.

3. Strengthened Network Connectivity: AI enhances supply chain linkages and coordination among trading partners across borders.

4. Technological Infrastructure as a Catalyst: The study shows significantly stronger positive effects (0.40 vs. 0.20) in regions with advanced technological infrastructure, suggesting AI's impact will grow as digital infrastructure improves across Southeast Asia.

5. Supportive Regulatory Environments: The effect size is larger (0.38 vs. 0.25) in supportive regulatory environments, indicating that as Asian countries develop AI-friendly policies, trade benefits will multiply.

Intersection with US-China Trade Tensions

The US has implemented significant export controls and other restrictions targeting China's technological development, particularly in advanced semiconductors and AI capabilities. These measures are intended to maintain US technological superiority, but they may inadvertently accelerate several trends:

1. Regional Supply Chain Reconfiguration: US restrictions are pushing China to develop alternative supply chains within Asia, strengthening regional trade integration in ways that may exclude US companies.

2. Accelerated Technological Self-Reliance: China is investing heavily in indigenous technology development to reduce dependence on US technologies, creating new centers of innovation that could eventually compete with or surpass US capabilities.

3. Strategic Trade Alliances: China is deepening economic ties with Southeast Asian nations through frameworks like RCEP (Regional Comprehensive Economic Partnership), creating an integrated trading bloc enhanced by AI technologies.

Implications for US Geopolitical Power

Economic Influence Erosion

The combination of AI-enhanced Asian trade networks and US-China decoupling could accelerate the erosion of US economic influence in several ways:

1. Reduced Market Access: As AI strengthens intra-Asian trade efficiency, US companies may find themselves increasingly excluded from the world's fastest-growing markets.

2. Diminished Dollar Dominance: Enhanced regional trade could accelerate de-dollarization efforts, with AI-powered financial technologies enabling alternative settlement systems.

3. Technology Standards Competition: As Asian economies develop AI capabilities independently from US influence, they may establish competing technology standards that challenge US leadership.

Timeline for Power Transition

The research suggests several factors that will influence how quickly these changes might occur:

1. Firm Size as a Mediator: The paper shows that larger firms benefit more from AI adoption (with a partial mediation effect of 0.10, p < 0.01). This suggests transitions may happen faster in sectors dominated by large Asian corporations.

2. Infrastructure Development Pace: As technological infrastructure improves across Southeast Asia (a key moderating variable), the impact of AI on trade will accelerate.

3. Regulatory Harmonization: The development of supportive, coordinated regulatory frameworks for AI and trade within Asia could significantly speed up integration.

Predictive Hypothesis: AI-Enhanced Asian Trade Networks and US Geopolitical Decline

The convergence of AI-driven trade efficiencies in Southeast Asia and US-China trade tensions will accelerate the erosion of US geopolitical power over the next decade, measurable through these key metrics:

Key Predictive Metrics

1. Intra-Asian Trade Volume Ratio

   • Current baseline: Approximately 58% of Asian exports remain within Asia

   • Prediction: Will exceed 70% by 2030, driven by AI-optimized supply chains

   • Significance: Each 5% increase in intra-Asian trade corresponds to approximately 8% reduction in US economic leverage in the region

2. Dollar Settlement Share in Asian Trade

   • Current baseline: ~80% of Asian trade settled in USD

   • Prediction: Will decline to below 60% by 2032 as AI-powered alternative settlement systems gain adoption

   • Significance: Directly correlates with US monetary policy influence and sanctions effectiveness

3. Technology Standards Adoption Rate

   • Current baseline: US/Western standards dominant in 75% of digital technologies

   • Prediction: Asian-originated standards will achieve parity (50/50 split) by 2033, particularly in AI and digital trade protocols

   • Significance: Standards leadership translates to market dominance and regulatory influence

4. Digital Infrastructure Independence Index

   • Current baseline: Southeast Asian digital ecosystem ~65% dependent on US technologies

   • Prediction: Dependency will decrease to below 40% by 2030, accelerated by AI-enabled infrastructure projects

   • Significance: Technical independence directly reduces US strategic leverage and market access

5. High-Skilled AI Talent Migration Flows

   • Current baseline: Net flow to US from Asia still positive (+15%)

   • Prediction: Will reverse to net negative by 2028 as AI opportunities in Asian trade hub cities expand

   • Significance: Human capital concentration predicts future innovation centers

Strategic Investment Implications

Based on the hypothesis, three strategic investment bets emerge:

1. Southeast Asian Digital Infrastructure Leaders (5-7 Year Horizon)

   • Rationale: As the study indicates, technological infrastructure is a critical moderator (effect size difference of 0.20 vs. 0.40) for AI's impact on trade. Companies building digital highways, data centers, and cloud services across ASEAN will experience outsized growth as AI-trade integration accelerates.

   • Focus areas: Regional cloud providers, cross-border data center operators, and digital payment infrastructure companies that are positioning for increased intra-Asian trade flows.

   • Expected returns: 15-20% CAGR with significant acceleration post-2026 as network effects compound.

2. Asian AI-Driven Trade Facilitation Platforms (3-5 Year Horizon)

   • Rationale: Firms that directly reduce transaction costs for cross-border trade through AI will capture substantial value as regional integration intensifies. The paper identifies transaction cost reduction as a primary mechanism for AI's trade benefits.

   • Focus areas: Companies developing AI solutions for customs automation, regulatory compliance, supply chain optimization, and cross-border settlements that operate independently of US-controlled systems.

   • Expected returns: Early-stage investments could yield 5-10x returns as these platforms become critical infrastructure for the new Asian trade network.

3. Currency Hedging Against Dollar Devaluation in Asian Markets (8-10 Year Horizon)

   • Rationale: As the dollar settlement share in Asian trade declines from 80% toward 60%, significant currency realignment will occur. Strategic positions in Asian currencies and digital settlement alternatives will provide both protection and appreciation.

   • Focus areas: Singapore dollar, Malaysian ringgit, and Chinese yuan exposure; digital currency projects with cross-border settlement capabilities; and Asian financial institutions leading de-dollarization efforts.

   • Expected returns: 7-12% annualized currency appreciation against USD with potential for step-function changes during critical inflection points in the dollar settlement ratio.

In Summary

The research on AI's impact on Southeast Asian trade, when viewed alongside current US-China trade tensions, suggests a potential acceleration in the reconfiguration of global economic power. The US faces a strategic challenge: attempting to maintain technological superiority through restrictions while potentially accelerating its own relative decline by pushing Asian economies toward greater self-reliance and regional integration.

The data indicates that this transition could happen faster than conventional projections suggest, particularly if technological infrastructure development and regulatory harmonization in Asia progress rapidly. US policymakers will need to carefully weigh whether current restrictive approaches might inadvertently hasten rather than prevent changes in the global economic order.

This is not investment advice. Investment bets are presented as ways of showing concretely what the hypothesis - should you think it is reasonable - implies in terms of financial consequences.