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President of the United States

South-East Asia Caught in Crossfire of US-China Trade War

Strategic Insights

— 1 min read

As the US and China attempt to navigate a tentative truce in their trade war, countries in south-east Asia are facing mounting pressure to crack down on trans-shipment, a practice where Chinese goods are routed through the region to avoid punitive tariffs. With the region's trade surplus with the US continuing to grow, countries like Vietnam, Indonesia, and Thailand are caught between their economic ties with China and the US.

Key Takeaways:

  • Trans-shipment has emerged as a critical issue in US-China trade talks, with the US demanding that countries in south-east Asia clamp down on the practice to secure relief from tariffs.
  • Vietnam, Indonesia, and Thailand have been singled out by the US for allowing trans-shipment, and have vowed to increase scrutiny of the practice.
  • Chinese exports to south-east Asia jumped 21% in April, with the sharpest rises going to Vietnam, Indonesia, and Thailand, reflecting Chinese companies channelling US-bound goods through third countries.
  • The US has threatened to impose 46% tariffs on Vietnam and other countries that fail to address the issue, with the current tariffs remaining at 10% until July.
  • Governments in the region are wary of taking direct action against Chinese companies due to their economic ties with China.
  • Countries in south-east Asia will have to balance their economic interests with their relationships with the US and China, and may have to make choices between their two major trade partners.

Statistics:

  • Chinese exports to south-east Asia increased 21% in April, according to Chinese customs data.
  • China's exports to the US declined by about the same amount, 21%, in April.
  • Vietnam, Indonesia, and Thailand saw the sharpest rises in Chinese exports, reflecting Chinese companies channelling US-bound goods through third countries.
  • The US has threatened to impose 46% tariffs on Vietnam and 30% tariffs on China for 90 days.
  • South-east Asia's trade surplus with the US continues to grow, with Vietnam emerging as a manufacturing powerhouse in recent years.

Sources:

  • Sharon Seah, co-ordinator of the Asean studies centre at Singapore's Iseas-Yusof Ishak Institute
  • Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi
  • Deborah Elms, head of trade policy at the Hinrich Foundation
  • Chinese customs data, as reported by the FT
  • Department of Commerce, US Government
  • CNBC Asia

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