How US Tariffs on Southeast Asia Could Impact China’s Regional Exports

President Trump is intensifying efforts to curb China’s transshipments through Southeast Asia by pushing countries in the region to agree to terms that make it more difficult for Chinese goods to be re-exported to the US with minimal processing. But how much of China’s exports to Southeast Asia are actually bound for the US, and how much reflects genuine regional demand? And what effect could tariffs and other trade barriers have on China’s growing exports to the region? In this article, we examine China’s deepening trade ties with Southeast Asia and assess the potential impact of Trump’s tariff strategy on regional trade dynamics.

During Donald Trump’s 2024 presidential campaign, he floated one of his signature policy ideas: a sweeping 10 percent tariff on all goods entering the US, and a punitive 60 percent tariff on imports from China. True to form, Trump once again placed China at the center of his protectionist agenda, citing the US’s large trade deficit and alleging unfair practices that, in his view, have hollowed out American manufacturing. 

Since returning to the office, however, Trump’s trade policy has proven even more aggressive than many had expected. On April 2—dubbed “Liberation Day”—the administration announced sweeping tariff hikes, with Southeast Asian countries bearing much of the brunt. Vietnam and Thailand, for instance, were hit with “reciprocal” tariff rates of 46 percent and 36 percent, respectively, higher than the initial 34 percent rate imposed on China. The move surprised many in the region, which had largely been a beneficiary of earlier rounds of US-China trade tensions. 

Although Trump subsequently reduced all tariffs to a flat 10 percent for a 90-day window—later extended to August 1—to allow time for bilateral negotiations, the structure of these talks has made the broader US strategy increasingly clear. Through trade deals with countries like Vietnam and prospective negotiations with Malaysia and Indonesia, the US is not only seeking preferential market access and lower import duties, but also embedding provisions designed to limit China’s ability to route exports through third countries. These include higher tariffs for transshipment and tighter rules of origin, measures that, in practice, serve to constrain China’s regional trade. 

In this article, we examine how Trump’s tariff policy is reshaping China’s export landscape in the region. Specifically, we assess how US protectionism, both direct and indirect, is affecting China’s trade with Southeast Asian economies, and what it means for the region’s role in global supply chains.

US trade deal negotiations with Southeast Asian countries 

On July 2, Trump announced that the US and Vietnam had reached a framework trade deal, the first Southeast Asian country to reach such an agreement. While details of the finalized deal have yet to be released, Trump stated that Vietnam would be subject to a 20 percent tariff – less than half of the 46 percent reciprocal tariff announced in early April – in exchange for “total access” to the Vietnamese market and a zero-tariff rate. However, the deal also includes a 40 percent tariff rate on transshipments, a move that is widely seen as targeting China. 

This trade deal provides an idea of the kinds of terms we are likely to see with other countries. While Vietnam was able to negotiate a 20 percent tariff rate for its direct exports to the US, the deal also included a 40 percent tariff rate on transshipment, in a move that is widely seen as targeting China.

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As no further details have been released on the deal yet, it remains unclear exactly which products will be affected by the tariffs and how, not to mention how rules of origin will be defined for the tariffs on transshipments. However, the announcement does provide a clear indication of the US’s strategy when it comes to trade with Southeast Asia, and shows that further deals with countries in the region are likely to include clauses that aim to hurt China. 

On July 15, Trump announced that the US had reached a trade deal with Indonesia, which will see the US cut tariffs on Indonesian imports to 19 percent – down from 32 percent – in return for zero duties on 99 percent of goods from the US, as well as removal of export restrictions on certain commodities to the US and a range of commercial deals. 

The 19 percent tariff is currently the second-lowest in Southeast Asia after Singapore, which, under normal circumstances, could see Indonesia become a hub for reexports. However, the Indonesian Minister of Trade stated that the country would prevent transshipments to preserve the trade deal with the US. 

In the joint statement released by the US and Indonesia on the deal released on July 22, there was no direct mention of such a tariff mechanism on transshipments. However, it states that “the United States and Indonesia will negotiate facilitative rules of origin that ensure that the benefits of the agreement accrue primarily to the United States and Indonesia”, suggesting that rules are being formulated to prevent transhipments.

In his announcement of the deal, Trump said that transshipments through Indonesia from a higher-tariff country would incur a tariff at the rate currently placed on the country of origin, in addition to the tariffs on Indonesian goods. This would mean any goods shipped from China to the US will be subject to both the tariff rate on China, currently starting at around 52.5 percent, and the 19 percent tariff on Indonesia.

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The joint statement did not mention any such mechanism, but it is possible further details will be released when the deal is finalized. While the logistics of such a mechanism are unclear, given the complex web of tariffs and trade agreements in the region, it suggests the US is considering various strategies for targeting Chinese exports and closing the re-export loophole. 

On July 22, following a visit by the Philippine President Ferdinand R. Marcos Jr., the US and the Philippines announced they had reached a trade deal that would lower the tariff on Philippine goods to the US to 19 percent – only slightly down from the previous 20 percent rate – in exchange for zero duties on US exports to the Philippines. Neither side has currently mentioned anything about curbs on or tariffs on transshipments. 

China has previously warned third countries from reaching deals with the US that discriminate against Chinese exporters. In April, the Chinese Ministry of Commerce said in a statement that China “firmly opposes any party reaching a deal at the expense of China’s interests”. 

Vietnam as a transshipment hub for Chinese goods 

It is difficult to ascertain how much of China’s exports to Vietnam are ultimately destined for the US, due to a lack of transparent re-export data, limited visibility into supply chain transformations, and the challenges of distinguishing genuine manufacturing from transshipment or minimal processing. In addition to transshipment, there has been a considerable amount of genuine relocation of manufacturing to the region due to a variety of push and pull factors, of which tariffs are only one. 

Nonetheless, the close correlation between a rise in Chinese exports to certain countries in Southeast Asia and exports from these countries to the US is a strong indication that they have become a transshipment hub for Chinese exporters seeking to circumvent US tariffs on China. 

This is especially true of Vietnam, which has seen by far the most dramatic rise in exports to the US among countries in the region, with the key turning point being the outset of the US-China trade war in 2018. Between 2018 and 2024, China’s exports to Vietnam grew at a CAGR of 18.7 percent. Over this same period, the US’s imports from Vietnam have grown at a CAGR of 15.7 percent.  

This correlation is also evident in the monthly trade data for top-traded products over the past 18 months. Chinese exports of electrical machinery and equipment to Vietnam—including items like integrated circuits, solar panel components, and computers—have surged since January 2024. 

In May 2025, exports in this category rose 53.5 percent year-on-year, with the sharpest monthly increase occurring in March 2025, when shipments jumped 36 percent from February – the month President Trump imposed the 20 percent “fentanyl tariffs” on Chinese goods. 

The rise of the US’s imports of these products from Vietnam over this period has been less dramatic, but still noticeable. From February to March 2025, the US’s imports of electrical equipment and machinery jumped by 15.7 percent. In May 2025, imports reached a high of US$4.8 billion, a year-on-year increase of 35 percent. 

It is, of course, not clear how much processing and assembly is conducted in Vietnam before products are shipped to the US, and how much is only minimally processed.

Chinese exports to other Southeast Asian countries 

China’s exports of key products to other Southeast Asian countries has also risen over the last decade, although at a slower rate. 

Thailand has followed a similar trajectory to Vietnam, with both Chinese exports to the country and US imports from it rising in parallel over the past decade, and accelerating significantly since 2020. Between 2018 and 2024, China’s exports to Thailand have risen at a CAGR of around 10.5 percent, while Thailand’s exports to the US have risen 10.4 percent over the same period. 

However, overall trade volumes remain much smaller. In 2024, the value of US imports from Thailand amounted to just 45 percent of that of imports from Vietnam, while Chinese exports to Thailand were only 53 percent the value of those to Vietnam.

Indonesia and Malaysia have not witnessed the same mirroring in imports from China and export to the US as Vietnam and Thailand. While Chinese exports to these two countries have grown considerably over the last decade, exports to the US have grown at a slower and more uneven rate, suggesting much of China’s exports to these countries are for use in domestic industries. 

Transshipment, reshoring, and the growth of the Southeast Asia market 

While transshipment is likely one of the factors behind the rise in China’s exports to Southeast Asia, particularly Vietnam, it is far from the only driver. Over the past decade, many companies have relocated production from China to the region—particularly for final assembly and labor-intensive manufacturing—with lower production costs serving as a primary pull factor. As China remains a dominant producer of intermediate goods essential to a wide range of industries, it is increasingly serving as an input supplier for Southeast Asian manufacturing hubs. This shift in regional supply chains has significantly contributed to the growth of Chinese exports to the region. 

The conclusion of the Regional Comprehensive Economic Partnership (RCEP) in 2022 has also unlocked considerable opportunities for regional trade, reducing tariffs and streamlining trade rules among its 15 member countries, which includes China and major Southeast Asia economies. By lowering trade barriers and improving customs procedures, RCEP has made it more cost-effective and efficient for Chinese exporters to access Southeast Asia markets, further fueling the growth of regional trade. 

Finally, Southeast Asia is growing as a consumption market in its own right, with several economies seeing an expanding middle class, rising incomes, and increased demand for consumer goods, electronics, and automobiles. This structural shift is driving greater imports from China—not just of industrial components, but also of finished goods—underscoring that the surge in Chinese exports to the region reflects broader economic integration. 

Possible impact of US tariffs and trade barriers on China’s exports to Southeast Asia 

Tariff on goods transshipped through Vietnam 

The most immediate impact on Chinese exports will be the additional 40 percent tariff on transshipped goods agreed to in the trade deal between the US and Vietnam. Given the size of China’s exports to Vietnam and the strong likelihood that many of these goods are re-exported to the US, the potential impact on China’s exports to Vietnam is vast.

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However, despite the clear intent of preventing Chinese reexports, it is unclear how the transshipment tariff can be implemented in practice. Determining the precise country of origin of goods is inherently complex, especially in a region with deeply integrated supply chains like Southeast Asia. The regional trade architecture further complicates enforcement: under frameworks such as the RCEP and the upgraded China-ASEAN (CAFTA), rules of origin are designed to facilitate cross-border production networks, often allowing partial content from multiple countries to qualify for preferential treatment. 

This complexity makes it difficult to distinguish between genuine Vietnamese products and those merely passing through Vietnam with minimal transformation. For example, finished products assembled in Vietnam using a high proportion of Chinese components may legally claim Vietnamese origin under current RCEP rules, which allow for significant input from member countries without losing preferential status. Consequently, applying a punitive 40 percent tariff on such goods would require more stringent and potentially controversial rules of origin enforcement, demanding greater transparency and coordination between customs authorities. 

Moreover, Vietnam and other Southeast Asian countries are unlikely to welcome measures that might undermine their growing export industries or complicate compliance with regional trade agreements. This tension suggests that while the US. may pursue aggressive tariff policies to restrict transshipment, practical hurdles in administration and diplomacy may limit their effectiveness or slow their rollout. 

Tariffs on solar products 

On April 25, 2025, the US Department of Commerce (DoC) announced final determinations in anti-dumping (AD) and countervailing duty (CVD) investigations targeting solar cell imports from Cambodia, Malaysia, Thailand, and Vietnam. The investigation, initiated in May 2024 under the Biden administration, concluded that Chinese solar companies operating in these countries were both dumping products in the US market and receiving unfair subsidies from the Chinese government. Tariff rates vary widely: some firms, such as Jinko Solar in Malaysia, face combined duties of around 42 percent, while others, such as those in Cambodia, face duties exceeding 3,400 percent.

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These findings build on a long-standing US effort to restrict Chinese solar products. Initial tariffs imposed in 2012 sharply curtailed direct shipments from China. In response, Chinese manufacturers shifted production to Southeast Asia, which quickly became a major export base. By 2023, the US imported $11.9 billion worth of solar cells from Cambodia, Malaysia, Thailand, and Vietnam, much of it produced by Chinese-linked firms. 

If the International Trade Commission (ITC) affirms the DoC’s findings in June, the new tariffs will effectively close this export route. This could have a significant impact on China’s solar-related exports to Southeast Asia, particularly of intermediate inputs like wafers, cells, and polysilicon. As demand for Chinese solar components from Southeast Asia assemblers shrinks, China’s upstream exports to the region may also decline. 

More broadly, the decision signals a tightening of US scrutiny on indirect trade flows involving Chinese firms. It adds pressure to the Chinese export model in Southeast Asia, where production has increasingly been geared toward the US market. The new tariffs are likely to disrupt existing supply chains, drive up compliance costs, and force Chinese solar manufacturers to either localize production further or explore alternative markets. 

Tariffs on steel and aluminum 

On June 4, 2025, the US sharply escalated its trade restrictions by raising tariffs on all imported steel and aluminum products to 50 percent, doubling the rate imposed just months earlier in February. Although China remains the world’s top producer of both metals, its direct exposure to the US market is limited due to long-standing Section 301 tariffs from the Trump administration’s first term, reducing direct exports to the US. However, the broader effects of the new measures are likely to reverberate through Southeast Asia, where Chinese materials play a crucial role in manufacturing supply chains for goods ultimately exported to the United States. 

China’s exports of articles of iron and steel to key Southeast Asia countries illustrate this deepening integration. From 2013 to 2024, exports to Indonesia grew from approximately US$1.4 billion to US$3.7 billion; to Malaysia from US$1.4 billion to over US$3.2 billion; to Thailand from US$960 million to nearly US$3.5 billion; and to Vietnam from US$1.1 billion to US$3.7 billion. This steady growth underscores Southeast Asia’s increasing reliance on Chinese steel products as inputs for manufacturing, especially in sectors like machinery, electronics, and household appliances. 

Compounding the impact, in June, the US Department of Commerce’s Bureau of Industry and Security (BIS) announced that the 50 percent tariff would also apply to steel-derivative household appliances—such as refrigerators, washing machines, dryers, and dishwashers. These appliances are now widely produced in countries like Vietnam, Thailand, and Malaysia, using Chinese-sourced steel.

Though the tariffs do not explicitly target Chinese-origin steel, their structure ensures that Chinese exporters are indirectly hit. If Southeast Asia-based firms use Chinese steel in the manufacture of appliances bound for the US, the steel component alone becomes subject to the 50 percent tariff, undermining the cost advantages of relocating production outside of China.

The implications for Chinese exports are significant. As Southeast Asia manufacturers face higher costs and tighter margins in supplying the US market, demand for Chinese steel and aluminum inputs may decline. Over time, the tariffs could incentivize manufacturers to reduce the steel content of affected products altogether, accelerating a shift toward alternative materials or redesigned components, further decreasing demand for the product. 

Structurally, these tariffs threaten to disrupt the integration of Southeast Asia into China-centered production networks. While Southeast Asia continues to offer low labor costs and access to fast-growing markets, rising compliance burdens and the risk of US trade penalties may prompt firms to reevaluate sourcing, investment, and design strategies. For China, even with minimal direct exposure to the US. steel market, the second-order effects of the new tariffs could weaken its industrial export model by undercutting the regional demand for its upstream industries. 

Curbing transshipments to the US through Indonesia and Malaysia 

The US is actively pursuing bilateral trade deals across Southeast Asia, and a central feature of these agreements appears to be clauses targeting the transshipment of Chinese goods. 

Countries such as Indonesia and Malaysia have signaled willingness to tighten their own trade and customs regimes in order to secure favorable tariff terms with Washington.

In May 2025, Malaysia’s Ministry of Investment, Trade and Industry announced that it would become the sole issuer of all Non-Preferential Certificates of Origin (NPCOs) for shipments to the US, effectively centralizing and tightening oversight of origin documentation in anticipation of trade negotiations with the US. Meanwhile, as mentioned above, Indonesia has signaled its willingness to restrict the re-export of Chinese goods as part of its bid to reach a trade agreement with the US.

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While these moves mark a significant shift in tone, the immediate impact on China’s current exports to Southeast Asia is likely to be limited. Unlike Vietnam and Thailand, Malaysia and Indonesia do not appear to be major hubs for the transshipment of Chinese goods to the US. China’s exports to these two countries, although substantial, are more closely tied to domestic infrastructure development and regional manufacturing rather than final assembly for US export markets. 

However, the broader implications could be more significant over time. By tightening origin rules and preemptively aligning with US enforcement priorities, these countries may limit their attractiveness as future reexport routes for Chinese firms seeking to bypass high US tariffs. In that sense, the tightening of transshipment rules could constrain China’s flexibility in adjusting its export strategies, especially in sectors where it had considered shifting supply chains to Southeast Asia in response to trade pressure. 

As in the case of Vietnam, implementation will not be straightforward due to the complexity of determining the country of origin under regional trade frameworks. 

The upshot: Accelerated reshoring with China as a key input supplier 

Taken together, the sweeping tariffs, transshipment restrictions, and bilateral trade deals across Southeast Asia make clear that limiting China’s indirect access to the US market through third countries has become a central pillar of Trump’s trade policy. Yet rather than severing China from global supply chains, these measures are more likely to accelerate a geographic restructuring of trade, in which China will remain firmly embedded as a core supplier of intermediate goods. 

As US tariffs incentivize the relocation of final assembly, China’s role as a dominant provider of industrial inputs from critical minerals to electronic components is likely to remain indispensable. This is particularly true for Southeast Asia’s growing manufacturing industries, which will have few better alternatives to China for the supply of key materials and products, reflected in the sharp rise of Chinese exports to the region. 

In this context, full decoupling appears unlikely. Instead, the global production system is becoming increasingly fragmented, with China supplying key components and other regions, including Southeast Asia, performing final assembly for US-bound exports.

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