Southeast Asia — once the biggest beneficiary of Donald Trump’s 2018 trade war — now finds itself under renewed strain from the very policies that once propelled its growth.
As Trump returns to the White House and rekindles his economic confrontation with China, ASEAN economies are once again caught in the crossfire.
From Beneficiary to Collateral Damage
The region’s earlier boom under the China Plus One strategy transformed its industrial landscape. Multinationals shifted production from China to Vietnam, Thailand, and Malaysia to sidestep US tariffs, fuelling a wave of factory construction, jobs, and foreign investment.
Seven years later, that tailwind has turned into a headwind. Trump’s new tariffs — dubbed “liberation day duties” — struck hard in April, with initial rates of up to 49 percent on Cambodia, 48 percent on Laos, and 46 percent on Vietnam. Even allies like Thailand and the Philippines were not spared.
While most rates have since eased to the 10–20 percent range after bilateral negotiations, Myanmar and Laos remain heavily exposed, facing 40 percent tariffs. The message from Washington is unmistakable: transshipments, or goods rerouted through ASEAN to mask Chinese origin, will no longer be tolerated.
A Region Under Pressure
“Both the US and China are vital economic partners, but Southeast Asia is finding the balancing act increasingly untenable,” observed Jayant Menon, senior fellow at Singapore’s ISEAS–Yusof Ishak Institute.
The new tariffs are squeezing an export-driven region that has already been absorbing a flood of cheaper Chinese goods. With domestic demand in China slowing and its manufacturing overcapacity surging, ASEAN markets have become a convenient destination for everything from textiles and steel to electric vehicles.
According to Chinese customs data, exports to ASEAN rose 12 percent in 2024 to US$586 billion and were up nearly 15 percent in the first nine months of 2025. At the same time, Chinese shipments to the US have fallen by almost 17 percent year-on-year.
The “Transshipment” Dilemma
Washington’s latest move — a 40 percent tariff on goods deemed to be Chinese transshipments — has thrown a shadow over the region’s complex trade web. The measure, analysts argue, directly targets Southeast Asia’s integration into China’s manufacturing ecosystem.
Nick Marro of the Economist Intelligence Unit told Al Jazeera that “the China Plus One model is now squarely in Washington’s crosshairs,” warning that many emerging markets could see their export competitiveness undermined.
Data from the US Trade Representative underscores the paradox: ASEAN’s exports to the US hit US$352 billion in 2024, nearly double their pre-trade-war value in 2017. Much of this growth, experts say, reflects goods that are partly produced or assembled in China before final export through the region.
Chinese Overcapacity and Regional Anxiety
The growing inflow of Chinese products is stirring unease among ASEAN manufacturers. Depreciation of the renminbi has made Chinese goods even cheaper abroad, compounding fears of market distortion.
“We’re seeing growing anxiety about a potential flood of Chinese goods,” Marro noted, citing sectors from smartphones to steel and apparel. “This doesn’t restrict itself to high-tech items. It’s affecting traditional manufacturing too.”
Governments have so far refrained from launching anti-dumping investigations against Beijing, wary of disrupting supply chains or alienating a key investor. “They want a slice of the action,” said Gavekal Dragonomics’ Chris Beddor, noting that many ASEAN nations have quietly accepted rerouted Chinese supply chains as a short-term advantage.
Growth Forecasts Trimmed, Uncertainty Deepens
The Asian Development Bank recently lowered its 2025 growth forecast for Southeast Asia from 4.7 to 4.3 percent, citing “a new global trade environment defined by tariffs and bilateral deals.” The projection for 2026 remains at the same level — a signal that regional headwinds may persist.
While ASEAN’s governments continue to negotiate tariff exemptions individually, experts caution that fragmented diplomacy risks weakening their collective leverage. “This is the result of ASEAN’s passive ‘not choosing sides’,” argued Ian Chong of the National University of Singapore. “They may end up squeezed by both Washington and Beijing.”
Between Resilience and Realignment
Despite the uncertainty, ASEAN remains indispensable to global manufacturing. Its young workforce, geographic proximity to China, and expanding trade agreements — including the Regional Comprehensive Economic Partnership (RCEP) — continue to attract investors seeking resilience.
However, the challenge is shifting from opportunity to endurance. As Trump doubles down on tariffs and China redirects its excess production southward, Southeast Asia is learning that the same globalisation that once lifted its fortunes can quickly turn punitive.
In a world defined by economic nationalism and strategic rivalry, the region’s next chapter may depend less on balancing two giants — and more on how it defines its own collective economic identity.
