It is against this backdrop that IPEF emerged. The Biden administration wanted to demonstrate that the United States could still offer a positive economic agenda in Asia without reopening the highly polarized domestic debate on free trade agreements. Officials therefore designed IPEF as an executive-branch framework that would not require congressional approval because it does not alter U.S. tariff schedules. The framework allows partners to opt in to one or more of the four pillars, rather than requiring all members to sign up to a single comprehensive treaty. This modular design was intended to create flexibility, accommodate different levels of ambition and make it politically easier for governments with diverse domestic constraints to participate.

Each pillar corresponds to a cluster of policy areas. The trade pillar, sometimes described by U.S. officials as a “connected economy”, covers issues such as digital-trade rules, data flows and localization, labor and environmental standards, good regulatory practices and agricultural trade. The supply-chain pillar, labelled “resilient economy”, aims to create mechanisms for early warning, information-sharing and joint crisis responses in critical sectors such as semiconductors, medical goods and key minerals. The clean-economy pillar focuses on decarbonization, renewable energy, green infrastructure and standards for emerging technologies such as hydrogen. Finally, the fair-economy pillar targets corruption, tax evasion and money-laundering, seeking to enhance transparency and domestic resource mobilization.

Following the launch in May 2022, ministers and senior officials from the fourteen economies held a series of negotiating rounds and ministerial meetings in cities such as Brisbane, Singapore and Detroit. Early ministerial in 2022 produced joint statements clarifying the scope of each pillar and confirming that partners had reached “consensus to move forward” on text-based negotiations. By mid-2023, substantial progress had been reported on the supply-chain pillar: negotiators converged on an agreement to establish an IPEF Supply Chain Council, an Emergency Communications Network and a Labor Rights Advisory Board, with the aim of coordinating responses to future disruptions and promoting investment in critical sectors.

A major milestone came in November 2023 at the IPEF ministerial meetings in San Francisco, where the fourteen partners signed the IPEF Supply Chain Agreement and announced the substantial conclusion of negotiations on the Clean Economy and Fair Economy agreements, as well as an overarching IPEF Agreement designed to provide institutional structure and ministerial-level governance. The supply-chain accord subsequently entered into force on 24 February 2024 after a sufficient number of partners completed their domestic procedures, becoming the first legally binding agreement under the IPEF umbrella. Work then shifted to implementation: participating states began designating national focal points, mapping critical sectors and developing cooperative projects to increase diversification and resilience.

By contrast, negotiations under the trade pillar proved more contentious. Several partners, including some ASEAN members and India, voiced concern about the potential intrusiveness of proposed digital-trade and labor provisions, while U.S. domestic debates complicated the administration’s ability to offer firm commitments. In late 2023, U.S. trade officials signaled that certain controversial elements of the digital-trade text would be reconsidered, slowing progress. As a result, by mid-2025 the trade pillar remained the least advanced, with no final agreement yet concluded. This asymmetry – binding agreements on supply chains, clean economy and fair economy, alongside an incomplete trade pillar – has become a defining characteristic of IPEF’s early trajectory.

From an economic perspective, IPEF’s potential lies less in tariff liberalization and more in regulatory cooperation, standard-setting and targeted sectoral initiatives. The fourteen partners together generate around 40 per cent of global GDP and a large share of world trade, which means that common rules adopted under IPEF could shape practices well beyond the group itself.  For instance, if a critical mass of members aligns on standards for cross-border data flows or on due-diligence requirements in clean-energy supply chains, multinational firms may choose to adopt those standards globally in order to operate efficiently across markets.

At the same time, IPEF’s structural limitations are evident. Because it does not grant preferential market access, it cannot directly deliver the classic gains from trade that arise when tariffs are reduced and firms reallocate production in response to lower trade costs. Exporters in partner countries do not obtain new tariff preferences for their goods, and sensitive agricultural sectors remain protected. Without these benefits, governments may find it harder to justify politically sensitive reforms or compliance costs associated with new standards. In addition, the executive-agreement nature of IPEF raises questions about durability: a future U.S. administration less committed to multilateral cooperation could in principle scale back engagement or reinterpret commitments without going through a formal treaty-withdrawal process.

For many Asian partners, especially lower- and middle-income economies, the absence of market-access incentives is particularly salient. Previous regional agreements, such as the ASEAN Free Trade Area or the Regional Comprehensive Economic Partnership (RCEP), offered clear and quantifiable tariff reductions, which made it easier to mobilize domestic support. By contrast, the benefits of IPEF are more diffuse and long-term, relating to improved regulatory predictability, better information on supply-chain risks, and access to capacity-building and financing under the clean-economy pillar. While these benefits can be significant – for example, helping a country attract investment into renewable energy or semiconductor packaging – they are harder to communicate to domestic stakeholders in a simple narrative.

Among the four pillars, the supply-chain agreement is the most concrete outcome so far and illustrates how IPEF seeks to translate high-level political goals into operational mechanisms. The COVID-19 pandemic and the subsequent disruptions to shipping, semiconductors and medical supplies highlighted the vulnerability of concentrated supply chains. Governments and firms alike experienced shortages and price spikes, prompting calls for diversification and “de-risking” away from excessive reliance on any single country.  In response, IPEF partners negotiated a supply-chain accord that commits them to cooperate in identifying critical sectors, sharing information about potential disruptions and jointly responding to crises.

In practical terms, the agreement establishes an IPEF Supply Chain Council comprising representatives from each member, tasked with coordinating assessments of risks and opportunities in key industries. It also creates a Crisis Response Network, through which partners can rapidly share information and coordinate policy measures – such as export-license waivers, regulatory flexibilities or re-routing of shipments – in the event of a major disruption. A related Labor Rights Advisory Board brings together governments, employers and workers to address labor issues in supply chains, including health-and-safety conditions and forced-labor risks. Components of the agreement encourage members to promote investment in “critical sectors” through incentives, financing and streamlined procedures.

For example, Japanese and American officials have pointed to semiconductors, batteries and critical minerals as sectors where IPEF cooperation could support new investment projects in Southeast Asia and India. By pooling information about demand forecasts, infrastructure gaps and regulatory barriers, the Supply Chain Council can help identify where new facilities – such as battery plants or rare-earth processing centers – might be commercially viable and strategically desirable. Although the agreement stops short of mandating specific investment targets, it provides a forum where such projects can be discussed and where international financial institutions can be invited to participate.

The clean-economy pillar reflects the increasing centrality of climate and energy transitions in economic diplomacy. Under this pillar, IPEF partners have committed in principle to accelerate the deployment of renewable energy, improve energy efficiency and support decarbonization in heavy-emitting sectors. The agreements envisage cooperation on standards for hydrogen and ammonia, the development of carbon-measurement and reporting frameworks, and the mobilization of public and private finance for green infrastructure.

For emerging economies in Southeast Asia and the Pacific, participation in this pillar offers access to technical assistance, capacity-building programs and potentially concessional finance for projects ranging from grid upgrades to electric-vehicle charging networks. Some members have already referenced IPEF when announcing national decarbonization initiatives: discussions have taken place about using the framework to support “just energy transition” partnerships that move countries away from coal while providing safeguards for affected workers and communities. At the same time, there is concern among some partners that climate-related standards could function as non-tariff barriers if they are designed without adequate flexibility or support, potentially constraining development paths.

The fair-economy pillar seeks to strengthen the integrity of economic systems by tackling corruption, improving tax transparency and enhancing cooperation against money-laundering. Many IPEF partners have struggled with illicit financial flows, tax base erosion and challenges in enforcing anti-corruption laws. Under this pillar, partners aim to exchange best practices, support capacity-building for tax administrations and anti-corruption agencies, and implement commitments aligned with existing international standards such as those developed by the OECD and the Financial Action Task Force.

Although these issues may appear more technical than high-profile trade negotiations, they are crucial for long-term development and for the credibility of the framework. Effective anti-corruption measures can improve the investment climate, while better tax collection can provide resources for infrastructure and social policies. IPEF provides an additional platform through which governments can benchmark their reforms, signal commitment to good governance and seek assistance for implementing complex regulatory changes. However, the effectiveness of this pillar will depend on how far governments are willing to pursue politically sensitive investigations and reforms at home.

Beyond its economic content, IPEF is widely interpreted as part of the broader strategic competition between the United States and China. U.S. officials rarely mention China explicitly in official IPEF documents, yet the initiative is clearly designed to offer an alternative model of economic cooperation that is more closely aligned with U.S. values and interests. By convening a group of economies that includes many key allies and partners, Washington aims to shape rules on digital trade, sustainable infrastructure and supply-chain security in ways that reduce dependence on Chinese technology and critical inputs.

For participating Asian states, the strategic calculus is more nuanced. Many governments seek to maintain strong economic ties with both the United States and China, and they are wary of being drawn into rigid blocs. Several IPEF members are simultaneously part of RCEP, which includes China, and some are negotiating or implementing projects under China’s Belt and Road Initiative. Their decision to join IPEF therefore reflects a hedging strategy: engaging with U.S.-led rule-making while avoiding an explicit alignment against China. ASEAN governments in particular have stressed that they do not view IPEF as an “anti-China alliance” but rather as one of multiple overlapping frameworks in a complex regional architecture.

China’s official response to IPEF has been critical. Chinese commentators have characterized the initiative as an attempt to “decouple” economies from China or to create exclusive circles that fragment regional integration. At the same time, Beijing has its own economic diplomacy tools, including RCEP, bilateral free trade agreements and applications to join CPTPP and the Digital Economy Partnership Agreement. The interplay between these competing or overlapping initiatives will shape the future pattern of economic governance in the Indo-Pacific. If IPEF succeeds in setting influential standards, it could nudge firms and governments toward rules that differ from those preferred by China; if it stalls, China-centric arrangements may gain relative weight.

Implementation of IPEF commitments will depend heavily on domestic politics in each member state, especially in the United States. Because the framework does not provide new market access, some U.S. legislators and interest groups question whether it offers sufficient benefits to justify concessions on labor, environment or digital-trade rules. Conversely, labor unions and civil-society organizations worry that parts of the digital-trade agenda could limit governments’ ability to regulate big technology firms. These debates constrain the administration’s room for maneuver and have already contributed to the slowdown in the trade pillar.

Partner governments face their own constraints. India, for instance, opted out of the trade pillar entirely, citing concerns about premature commitments on agriculture, data and services that might limit policy space for development. Several Southeast Asian states are cautious about binding themselves to high-standard disciplines that exceed existing World Trade Organization obligations if no additional market access is on offer. Smaller economies are also concerned about administrative burdens: implementing complex provisions on supply-chain mapping, data governance or anti-corruption requires technical expertise and resources that may be scarce. Addressing these concerns will require sustained capacity-building support and flexibility in implementation timelines.

Another challenge is coordination with existing agreements. Many IPEF members are already part of RCEP, CPTPP or a dense network of bilateral FTAs. The risk of overlapping and sometimes inconsistent rules is real, particularly in areas such as digital trade, data localization and environmental standards. Governments must ensure that IPEF commitments are compatible with their pre-existing obligations and that businesses can navigate the regulatory landscape without excessive compliance costs. To the extent that IPEF can be aligned with or used to reinforce multilateral rules, it could contribute positively to the global trading system; if it produces fragmentation, its net effect could be more ambiguous.

Looking ahead, the trajectory of IPEF will be shaped by three interrelated factors: the completion (or not) of the trade pillar; the depth and visibility of concrete projects under the supply-chain and clean-economy pillars; and the political durability of the framework in the United States and other key partners. If negotiators can eventually conclude a trade-pillar agreement that balances high standards with sufficient flexibility, IPEF will have a more coherent institutional structure and a clearer narrative for stakeholders. Conversely, a prolonged impasse could reinforce perceptions that IPEF is an incomplete experiment.

On the implementation side, the most promising path to demonstrating value lies in concrete, high-profile projects. For example, if IPEF coordination helps prevent or rapidly mitigate a future supply-chain crisis – perhaps by reallocating semiconductor production or medical supplies during a shock – governments will be able to point to tangible benefits. Similarly, if clean-economy cooperation leads to visible investments in renewable energy or green infrastructure in developing members, the framework’s legitimacy will grow. These outcomes require not only political will but also sustained financing, technical expertise and coordination among multiple agencies.

Finally, the question of political durability looms large. Because IPEF rests on executive authority in the United States, shifts in domestic politics – elections, changes in congressional priorities or broader swings in attitudes towards globalization – could affect the level of engagement and the resources devoted to the framework. Partner governments are aware of this risk, particularly in light of the abrupt U.S. withdrawal from TPP in 2017. For IPEF to become a stable pillar of Indo-Pacific economic governance, it will need to demonstrate benefits that are recognized across party lines and by a broad range of stakeholders, making it politically costly for future leaders to abandon.

The Indo-Pacific Economic Framework represents an important, if experimental, attempt to re-anchor U.S. economic engagement in Asia without relying on traditional free trade agreements. It responds to genuine challenges revealed in recent years: fragile supply chains, the urgency of climate action, the growing salience of digital-economy rules and persistent concerns about corruption and tax avoidance. By bringing together fourteen economies that collectively account for a large share of global output and trade, IPEF has the potential to shape standards and practices across multiple domains.

Yet the framework’s unconventional design – no tariff liberalization, modular participation and executive-agreement status – also exposes it to significant limitations and risks. Economic benefits are less visible and more long-term; domestic political support may therefore be fragile. Many partners continue to balance IPEF against other regional arrangements, and China remains a central economic actor that cannot be ignored. In this sense, IPEF should be seen less as a finished regime and more as a process: a contested, evolving platform through which states experiment with new forms of cooperation in a rapidly changing Indo-Pacific. Whether it ultimately emerges as a cornerstone of regional economic order or as a transitional initiative will depend on negotiation outcomes, implementation efforts and the wider trajectory of great-power relations in the years ahead.

By Wentong Li