Taipei, Taiwan – Southeast Asia’s export-driven economies are facing new uncertainty from United States President Donald Trump’s trade war, as his administration cracks down on exports directed through third countries to avoid his tariffs on China.
Under an executive order issued by Trump last week, goods imported into the US face a punitive 40 percent tariff, plus penalties and any applicable country-of-origin duties, if US Customs and Border Protection determines they have been “transshipped”.
The tariff is set to go into effect on Thursday, along with Trump’s latest country-specific tariffs ranging from 10 to 41 percent.
While China is the main target of the new tax on transshipments, which applies to all redirected goods irrespective of country of origin, Southeast Asia could suffer much of the fallout because of the region’s highly integrated supply chains with Chinese manufacturers, trade experts say.
The fallout will depend on exactly how the Trump administration defines transshipments, which is still unclear, said Puan Yatim, an associate professor at Universiti Kebangsaan Malaysia’s Graduate School of Business.
“If Washington maintains a narrow interpretation – targeting only those goods that are imported from China, minimally processed or relabeled and then re-exported to the US – the economic impact on ASEAN may be limited,” Yatim told Al Jazeera, referring to the Southeast Asian regional bloc.
“However, a broader and more punitive interpretation – where goods with any significant Chinese input are also deemed in violation – could prove economically devastating for countries like Vietnam, Indonesia, Cambodia, and Malaysia,” she added.
Chinese manufacturers have for years been steadily expanding into Southeast Asia as part of a strategy known as “China Plus One”.
The strategy has helped Chinese firms avoid US tariffs, exploit cheaper labour, and diversify their supply chains – a particular concern during China’s COVID-19 lockdowns.
From 2020 to 2024, Chinese foreign direct investment into the 10 ASEAN nations grew from $7.1bn to $19.3bn, according to ASEAN data.
During the same period, exports from China to Southeast Asia rose from $385bn to $587bn, according to the Carnegie Endowment for International Peace.
The surge in Chinese exports, including goods illegally mislabeled to conceal their origin in some cases, has placed Southeast Asia in the Trump administration’s crosshairs.
“[Companies] need intermediate imports from China to create products which get shipped to the US, but because companies have been embroiled in illegal transshipments in the region, there’s a huge bias in the Trump administration that ASEAN is the predominant channel,” Priyanka Kishore, principal economist at Asia Decoded in Singapore, told Al Jazeera.
A key example of trade that invoked Washington’s ire centred on the solar cell industry.
Following a years-long investigation, the US Department of Commerce in April announced tariffs of up to 3,500 percent on Southeast Asian manufacturers alleged to have illicitly exported Chinese goods.
Southeast Asia is now in a “sticky situation” where it must appe