As the US tariff policy targets trade deficits with many Asian partners in 2025, media focus is concentrated on how trade flows will be diverted away from Asia. However, greater attention should be paid to how investor unease could also destabilize Asia's financial system and trigger chain reactions across regional markets.

Emerging markets in Asia are particularly vulnerable to global headwinds. The open nature of Asian economies makes them susceptible to rapid capital outflows, dependent on the US dollar, and subject to the trends of a changing global order. The most striking example of such a shock was likely the 1997 Asian Financial Crisis, when swift capital flight and sharp currency devaluations destabilized the region. Many Asian nations turned to the International Monetary Fund (IMF) for assistance, which attached strict conditions of fiscal austerity and monetary tightening. These measures are widely believed to have hampered economic growth, worsening the crisis and plunging Asia into a recession that lasted over a year.

The concept of an Asian Monetary Fund (AMF) was initially proposed by Japan as the region sought alternatives to the IMF for crisis response. This organization was designed to consolidate regional financial stability by providing emergency lending, facilitating currency swap arrangements, and pooling regional currencies to address balance of payments crises.

The United States and the IMF opposed the idea, claiming an Asian fund would undermine the IMF's role in the region. The real reasons, however, were geopolitical: the US was skeptical of a parallel institution it could not oversee.

Despite long-standing regional disappointment with the existing Western-dominated financial architecture, the scope for other regional initiatives has been limited by factors including intra-regional competition and a reluctance to undermine relations with the US and the IMF.

Due to differences across Asia in economic size, types of political systems, attitudes towards free markets, and the importance placed on national sovereignty, countries have been hesitant to commit to binding regional agreements. Consequently, most Asian central banks have engaged in self-insurance by accumulating foreign exchange reserves to provide dollar liquidity and guard against speculative attacks on their currencies.

Yet, the very factors that have hindered cooperation could also be Asia's strength. As Asian economies have grown significantly and China's influence on the world stage has increased, the balance of power is tilting eastward, making now the optimal time to revitalize the AMF.

Despite Western opposition, the AMF should be the way forward for building a regional safety net. It could coordinate macroeconomic policy responses during crises and provide emergency loans to distressed nations, much like the IMF. It could oversee regional cooperation and foster mutual understanding of national interests.

Most importantly, it could function as an institution created by Asia, for Asia, free from the influence of an IMF that has historically failed to adequately represent the region. Malaysia has called more than once for the establishment of an AMF to strengthen the region's economic independence.

Some may argue that the AMF would further fragment the global financial architecture, as it represents a shift towards regionalism that weakens the IMF's unique role as lender of last resort. Parallel regional institutions could divert resources from the IMF and dilute its authority to enforce policy reforms during crises.

While resources could indeed become fragmented, the AMF would expand the global capacity to respond to financial crises and convene Asian policymakers to devise innovative solutions for strengthening regional financial safety nets.

Furthermore, the region needs a platform to serve its own interests. In the realm of development banks, regional banks like the Asian Development Bank and the African Development Bank cooperate effectively with the World Bank. Overlapping mandates do not necessarily lead to conflict as long as there is a shared ultimate goal.

The path ahead is not smooth. As geopolitical tensions intensify in a multipolar world order, regional solidarity is not idealism but self-preservation. With turbulence becoming the new normal, Asian governments are racing to overcome inherent divisions and establish the AMF before the next crisis hits. The blueprint exists; what Asia needs is the determination to implement it.