In 2018, Southeast Asia attracted manufacturers there to avoid new tariffs on Chinese goods, which was one of the biggest benefits of US President Donald Trump’s trade war with China.
With the expansion of the “China Plus One” supply chain concept, it gained from investments, tax revenues, and technology transfers.
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As Trump’s second trade war drags on and the world’s two economic powers squeeze it, Southeast Asia finds itself in a completely different situation seven years later. Its export-focused economy is threatened by new US tariffs, and Chinese goods are also on the rise in China as a substitute for US exports.
Despite the economic strain, it is now trying to find a way forward, according to Jayant Menon, a senior fellow at the Singaporean ISEAS-Yusof Ishak Institute.
Southeast Asia has been attempting to strike a balance between the US and China by walking the tightrope. He claimed that “Both are significant economic partners.”
The Association of Southeast Asian Nations (ASEAN), a regional bloc of 10 nations plus East Timor, has China as its largest trading partner. Although the US is the country’s fourth-largest trade partner, regional security is a major priority for it.
Since Trump’s return to the White House earlier this year with the promise to reduce the US trade deficit by imposing tariffs on most of its partners, the region’s relationship with the US has been under significant strain.
Trump’s “liberation day” tariffs, which increased duties of 49 percent on Cambodia, 48 percent on Laos, and 46 percent on Vietnam, hit Southeast Asia hard in April. Initial tariffs of 36 and 17 percent were applied to both US military allies, including Thailand and the Philippines.
Most ASEAN nations’ regional tariffs have since decreased to 10 to 20%, but they are still at a high of 40% for Myanmar and Laos, despite negotiations with Trump. Steel, aluminum, and auto parts are still subject to additional tariffs. The White House announced an additional 40% tariff on alleged “transshipments” in the middle of July.
As Beijing and Washington continue to negotiate a separate tariff agreement, the term refers to goods that are shipped through the region to avoid tariffs, in this case, pre-existing tariffs on Chinese goods.
According to Nick Marro, the Economist Intelligence Unit’s lead analyst for global trade, the transshipment tariff has placed the China Plus One production model in Washington’s “crosshairs.”
He said, “It’s a risk, especially now that you have a 40 percent tariff on transshipments, which seems to be aimed at emerging markets,” in the right direction.
In light of this, the Asian Development Bank revised its Southeast Asian growth forecast from 4 to 5. 4 percentage points higher 3 percent, citing the development of a “new global trade environment, shaped by tariffs and updated trade agreements”. The growth forecast from ADB is also 4. 3% .
However, the increase in Chinese exports to Southeast Asia compliques the situation. The trend started before Trump’s White House visit, but it has grown faster since then.
Exports to ASEAN increased by 12% to $ 586 billion in a year over year in 2024, according to Chinese customs data. With an increase of 14 percent in Chinese exports to the region, the trend is expected to continue in 2025. 7 percent, hitting $487. 5 billion in the year’s first nine months. 2025 saw an increase in overall trade volume of 8 percent. 6 percent and hit $776. 7 billion dollars in September.
Chinese exports to the US have been declining in contrast. Between January and September 2025, they reached a 16-year low of $ 317 billion. Compared to the same period, Chinese customs data shows a 9 percent increase. China’s overall trade volume has decreased by 15 percent. Compared to $ 425 annually, 6 percent. Using the same data, 8 billion is reported.
Experts claim that two factors may be responsible for this parallel trend, but just customer data alone cannot explain the causes of these parallel trends.
Chinese manufacturers may be moving their products through Southeast Asia, according to experts told Al Jazeera.
Exports from China to Southeast Asia have increased in tandem with exports from that region. This indicates to you that some of this trade is being slowed down, according to ISEAS’s Menon.
ASEAN exported $352. US goods and services were worth $1. 13 in 2024. Compared to the same time last year, the US Trade Representative’s data showed a 3 percent increase.
Additionally, just before Trump started his first trade war, the figure was nearly twice as much as ASEAN’s US exports in 2017. According to the USTR, ASEAN exported $ 192 billion worth of goods and services to the US in that year.
However, as they look for new customers to replace the US, Chinese companies are shipping finished goods to Southeast Asia as the final destination.
No precise information is available about the volume exported and the volume that is then re-exported. Although the majority of exports appear to be made by the supply chain, according to the survey, Southeast Asian nations are now consuming more of the exports, Menon said.
According to a survey of more than 300 businesses in the Asia-Pacific that are exporting to the US and 30 US importers conducted by New York-based consultancy GLG in July, 66 percent of Chinese exporters said they were looking for markets outside the US because the country has developed into a “challenging and less predictable trade partner”.
According to the report, which was written by Menon, 83 percent of respondents said they were considering the European Union as an alternative, followed by another 71% who cited ASEAN as a potential market.
The increase in Chinese goods is also making some local industries nervous, according to the EIU’s Marro, while consumers in Southeast Asia may welcome more products on e-commerce platforms like Shein, Temu, Alibaba, Lazada, and Shoppee.
Due to the dollar’s depreciation and the Chinese renminbi, China’s exports are now more competitive this year. However, China also has a longstanding problem of producing more than it needs. Due to the country’s post-pandemic economic slowdown and decline in domestic demand, the problem needs to be addressed.
Some exporters have been accused of “dumping” or purposefully undermining local markets in countries like Vietnam, Thailand, and Indonesia while others have searched for new markets abroad.
In recent months, there has been a significant increase in concern among various governments over a potential flood of Chinese goods into particular markets. This doesn’t necessarily apply to things like electric cars or phones. Marro said that it can also include items like textiles or clothing, as well as commodities like steel.
There is a very real chance that distortions in China’s economy will also impact Southeast Asia, he added.
According to Chris Beddor, deputy director of China Research at the Beijing-based Gavekal Dragonomics, whether exports are “dumping” is largely dependent on the circumstances.
A politically and economically expensive move that could lead to tariffs or trade disputes on both sides can lead to dumping in another nation. Many nations are unwilling to take the risk that China poses, he said.
Because of the rerouted supply chains, many ASEAN nations, to be honest, lack a lot of motivation to blame China for dumping. They want a taste of the action, he told Al Jazeera.
It resembles Southeast Asia’s strategy for dealing with the US much. Regional leaders sat down to talk with the White House one-on-one rather than as a group, much as Trump prefers, rather than oppose Trump’s tariffs.
However, according to Ian Chong, a political scientist at the National University of Singapore, this strategy may have a long-term impact on Southeast Asia.
As a result of ASEAN’s passive “not choosing sides,” says one member. They believed Washington and Beijing could always court them, or that they could have some side assistance, he said. That optimism omitted the possibility that both sides might be in control. Because these have been made for them elsewhere, they might not need to make any decisions. ”
Menon of ISEAS expressed concern that the future holds the possibility of more trouble. Even if a deal is reached between the US and China regarding tariffs, the notoriously eccentric Trump may still change his mind.
