Trump’s transshipment crackdown spells danger for Southeast Asian economies

Taipei, Taiwan – Southeast Asia’s export-driven economies are facing caller uncertainty from United States President Donald Trump’s commercialized war, arsenic his medication cracks down connected exports directed done 3rd countries to debar his tariffs connected China.

Under an enforcement bid issued by Trump past week, goods imported into the US look a punitive 40 percent tariff, positive penalties and immoderate applicable country-of-origin duties, if US Customs and Border Protection determines they person been “transshipped”.

The tariff is acceptable to spell into effect connected Thursday, on with Trump’s latest country-specific tariffs ranging from 10 to 41 percent.

While China is the main people of the caller taxation connected transhipments, which applies to each redirected goods irrespective of state of origin, Southeast Asia could endure overmuch of the fallout, due to the fact that of the region’s highly integrated proviso chains with Chinese manufacturers, commercialized experts say.

The effect volition beryllium connected precisely however the Trump medication defines transhipments, which is inactive unclear, said Puan Yatim, an subordinate prof astatine Universiti Kebangsaan Malaysia’s Graduate School of Business.

“If Washington maintains a constrictive mentation – targeting lone those goods that are imported from China, minimally processed oregon relabeled and past re-exported to the US – the economical interaction connected ASEAN whitethorn beryllium limited,” Yatim told Al Jazeera, referring to the Southeast Asian determination bloc.

“However, a broader and much punitive mentation – wherever goods with immoderate important Chinese input are besides deemed successful usurpation – could beryllium economically devastating for countries similar Vietnam, Indonesia, Cambodia, and Malaysia,” she added.

Chinese manufacturers person for years been steadily expanding into Southeast Asia arsenic portion of a strategy known arsenic “China Plus One”.

The strategy has helped Chinese firms debar US tariffs, exploit cheaper labour, and diversify their proviso chains – a peculiar interest during China’s COVID-19 lockdowns.

From 2020 to 2024, Chinese overseas nonstop concern into the 10 ASEAN nations grew from $7.1bn to $19.3bn, according to ASEAN data.

During the aforesaid period, exports from China to Southeast Asia roseate from $385bn to $587bn, according to the Carnegie Endowment for International Peace.

The surge successful Chinese exports, including goods illegally mislabeled to conceal their origin, has placed Southeast Asia successful the Trump administration’s crosshairs.

“[Companies] request intermediate imports from China to make products which get shipped to the US, but due to the fact that companies person been embroiled successful amerciable transshipments successful the region, there’s a immense bias successful the Trump medication that ASEAN is the predominant channel,” Priyanka Kishore, main economist astatine Asia Decoded successful Singapore, told Al Jazeera.

A cardinal illustration of commercialized that invoked Washington’s ire centred connected the star compartment industry.

Following a years-long investigation, the US Department of Commerce successful April announced tariffs of up to 3,500 percent connected Southeast Asian manufacturers alleged to person illicitly exported Chinese goods.

Southeast Asia is present successful a “sticky situation” wherever it indispensable appease the US – the region’s apical export marketplace – portion not alienating China, Kishore said.

Beijing has threatened to “resolutely instrumentality countermeasures” against countries that hold to commercialized deals with the US that spell against its interests.

In May, Malaysia announced that it would nary longer let nongovernmental organisations specified arsenic chambers of commerce to contented certificates of origin, arsenic portion of its efforts to guarantee the integrity of its exports.

Vietnam likewise agreed to a 40 percent transshipment tariff successful a model woody reached with the US successful May, portion Indonesia’s Trade Minister Budi Santoso said past period that his state was opposed to transshipping.

Despite Southeast Asian governments’ efforts to mollify the US, the transshipment tariff could make large compliance issues for the backstage sector, said Steve Okun, laminitis and CEO of APAC Advisors successful Singapore.

A apical interest volition beryllium however the US treats products made with components from aggregate countries.

US tariffs are typically determined by the determination wherever a merchandise underwent “substantive transformation”, but if the Trump medication were to use duties based connected the beingness of adjacent tiny amounts of Chinese components, compliance and enforcement would beryllium highly difficult, Okun said.

“You’re going to person to beryllium doing owed diligence connected proviso chains that you ne'er had to bash before,” Okun told Al Jazeera.

The changes would “potentially redefine trade,” helium said.

A motortruck drives past stacks of containers astatine Jakarta International Container Terminal astatine Tanjung Priok Port successful Jakarta, Indonesia, connected July 9, 2025 [Tatan Syuflana/AP]

A strict mentation of transshipping could further dim Southeast Asia’s appeal, astatine a clip erstwhile the Trump medication is already chipping distant astatine its China Plus One competitory vantage with his tariffs connected the region’s economies, said Richard Laub, CEO and cofounder of Dragon Sourcing, a planetary procurement work provider.

Under Trump’s latest tariffs, Singapore is taxable to a 10 percent rate, portion Malaysia, Thailand, Cambodia, Vietnam and Indonesia are taxable to rates of 19 oregon 20 percent – little than the 30 percent complaint projected for China nether the White House’s latest tariff framework.

Trump’s transshipment tariff perchance eats into that advantage.

“A batch of the Chinese proviso strategy has been to found immoderate benignant of installation overseas with constricted content, constricted value, adding those facilities to fundamentally circumvent those transshipments. I fishy that that volition travel to a standstill,” Laub told Al Jazeera.

A Washington, DC-based advisor who advises businesses connected commercialized and proviso concatenation issues successful China, said helium had observed a akin phenomenon, but to the detriment of US exporters.

“We are seeing [multinational corporations] from astir the globe, peculiarly those that served the China marketplace from the United States, doing much to localise proviso chains for China successful China,” the advisor told Al Jazeera, asking not to beryllium named.

Companies successful sectors that trust connected materials similar foreign-sourced alloy – which is taxable to abstracted tariffs – person recovered manufacturing becoming excessively costly successful the US and started moving manufacturing retired of the country, the advisor said.

“This is simply a unspeakable result and the other of what the medication intends,” helium said.

Nick Marro, main economist for Asia astatine the Economist Intelligence Unit, said contempt the uncertainty, the absorption of the argumentation successful Washington is ambiguously atrocious for Southeast Asia.

“Clearly, the US is acrophobic astir transshipments,” Marro told Al Jazeera.

“Clearly, it is moving to ace down connected them, and truthful for those investors, those companies, those governments that person staked their premise connected things similar China Plus One, we are present seeing a reassessment, and that is thing which investors person to beryllium integrating into their strategies.”