April 3, 2025, a container ship is docked at the Port of Bangkok, Thailand (Reuters)

The trade war by US President Trump has brought new uncertainties to export-oriented economies in Southeast Asia, as the Trump administration is cracking down on goods exported through third countries to circumvent US tariffs on Chinese goods.

According to an executive order issued by Trump last week, if the US Customs and Border Protection determines that an imported good into the US is a "transit good," it will face a 40% punitive tariff, fines, and any applicable origin country tariffs.

This tariff will take effect this Thursday, while Trump will also impose tariffs ranging from 10% to 41% on specific countries.

Although China is the main target of this new transit tax, the tax still applies to all transit goods regardless of their country of origin. Trade experts say Southeast Asia may suffer a greater impact because its supply chains are highly integrated with Chinese manufacturers.

Professor Puan Atim, associate professor at the School of Business, Universiti Kebangsaan Malaysia, said the impact would depend on how the Trump administration defines transit goods, which is currently unclear.

Atim told Al Jazeera: "If Washington insists on a narrow interpretation - targeting only goods imported from China, then lightly processed or rebranded before being exported to the US, the economic impact on ASEAN could be limited."

She added: "However, if a broader and more punitive interpretation is adopted - where any product containing a large amount of Chinese components is considered non-compliant, it could lead to an economic disaster for countries such as Vietnam, Indonesia, Cambodia, and Malaysia."

What are the consequences of Trump's new tariff measures? [English video]

For years, Chinese manufacturers have been steadily expanding into Southeast Asia, part of their "China + 1" strategy.

This strategy helped Chinese companies avoid US tariffs, use local cheap labor, and diversify their supply chains - a concern during the pandemic lockdowns.

According to data provided by ASEAN, direct investment from China to the ten ASEAN countries increased from 7.1 billion USD to 19.3 billion USD between 2020 and 2024.

Data from the Carnegie Endowment for International Peace showed that China's exports to Southeast Asian countries rose from 385 billion USD to 587 billion USD during the same period.

The surge in Chinese exports made Southeast Asia a target for the Trump administration.

"Companies need to import intermediate products from China to produce goods destined for the US, but due to the involvement of enterprises in illegal transshipment in the region, the Trump administration strongly believes that ASEAN is the main channel for transshipment," said Priyanka Kishor, chief economist based in Singapore at Asia Decoded, told Al Jazeera.

A key trade case that sparked Washington's anger focused on the solar cell industry.

After years of investigation, the US Department of Commerce announced in April this year that it would impose tariffs as high as 3,500% on Southeast Asian manufacturers suspected of illegally exporting Chinese goods.

Kishor said the current situation in Southeast Asia is very "difficult": it must appease the US - the region's largest export market - while not alienating China.

China has also declared that it will "take strong countermeasures against countries that reach trade agreements detrimental to its interests."

In May this year, Malaysia announced it would no longer allow non-governmental organizations like chambers of commerce to issue certificates of origin to ensure the integrity of its exports.

Vietnam also agreed to impose a 40% transit tariff in a framework agreement reached with the US in May this year, while Indonesia's Minister of Trade Budi Setiadi recently stated that his country opposes the transit tax.

Steve Oken, founder and CEO of APAC consulting company in Singapore, said that although Southeast Asian governments are trying to appease the US, transit tariffs may still bring significant compliance issues to the private sector.

How the US treats products composed of parts from multiple countries will be a pressing issue.

US tariffs usually have a certain deterrent effect. Oken said that tariffs are determined based on where a product undergoes a "substantial transformation." However, if the Trump administration imposes tariffs simply because a product contains a small amount of Chinese components, the compliance and enforcement would be extremely difficult.

Oken told Al Jazeera journalists: "You must conduct supply chain investigations that you have never done before."

He also said these changes "may redefine trade."

July 9, 2025, a truck passes through the container yard at the Jakarta International Container Terminal in Tanjung Priok Port, Jakarta, Indonesia (AP)

Richard Laub, CEO and co-founder of global procurement service provider Longyuan, said that in the context of the Trump administration imposing tariffs on Southeast Asian economies to weaken the competitive advantage of the "China + 1" strategy, a strict interpretation of transshipment might further weaken the attractiveness of Southeast Asia.

According to the latest tariff policy by Trump, Singapore's rate is 10%, while Malaysia, Thailand, Cambodia, Vietnam, and Indonesia have rates of 19% or 20%, lower than the 30% rate imposed on China under the latest tariff framework set by the White House.

Trump's transit tariffs may weaken this advantage.

"Many of China's supply strategies have always been to establish facilities abroad with limited content and value, increasing these facilities basically for transshipment. I suspect this practice will come to a halt," Laub told Al Jazeera.

A consultant based in Washington D.C., who provides advice on Chinese trade and supply chain issues for businesses, also observed similar phenomena, but this harms American exporters.

The anonymous consultant told Al Jazeera reporters: "We see multinational companies around the world, especially those serving the Chinese market in the US, intensifying efforts to build localized supply chains for the Chinese market."

The consultant said that industries relying on foreign raw materials such as steel (which are subject to separate tariffs) found manufacturing costs in the US too high, so they began moving manufacturing out of the US.

He pointed out, "This is a bad outcome, contrary to the intention of the Trump administration."

Nick Marro, chief economist for Asia at the Economist Intelligence Unit, said that despite the uncertainty, the direction of US policy is undoubtedly unfavorable for Southeast Asia.

"Clearly, the US is concerned about transshipment," Marro told Al Jazeera reporters.

"Clearly, the US is taking action to combat transshipment. Therefore, we are now seeing investors, companies, and governments that have bet on projects like 'China + 1' re-evaluate their positions, and this is a factor that investors must consider in their strategic planning."

Sources: Al Jazeera

Original: https://www.toutiao.com/article/7535645670254854656/

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