When the China-U.S. trade war first broke out in 2018, it prompted many Chinese exporters to use Southeast Asian countries as transshipment hubs. Goods manufactured in China were shipped to countries such as Vietnam, Malaysia, and Thailand, where they underwent minimal processing or were relabeled before being sent on to the United States, in order to evade high tariffs.
This strategy is reflected in the data: China’s exports to Southeast Asia and U.S. imports from Southeast Asia surged simultaneously. For example, between 2018 and 2024, China’s exports to Vietnam grew at an average annual rate of about 18.7 percent, while U.S. imports from Vietnam grew at an average annual rate of about 15.7 percent.
However, in recent years, this model has become increasingly restricted, as Southeast Asian governments and the United States have stepped up their crackdowns on tariff evasion practices. After Trump’s “Liberation Day” announcement, some of the trade arrangements reached between the United States and Southeast Asian countries began to include clauses aimed at preventing transshipment. For example, under the Indonesia-U.S. agreement, tariffs on Indonesian goods were reduced, but Indonesia was simultaneously required to prevent the transshipment of Chinese goods. The signal released by the U.S. side was that Chinese goods “detoured” through third countries would be subject to impose higher tariffs, thereby offsetting any advantages of “transshipment.”
Stricter enforcement, more complex rules of origin, and ASEAN countries’ own compliance efforts have together compelled Chinese enterprises to reconfigure their modes of operation in the region. As Chinese scholar Zhao Zhongxiu warned, shifting production capacity to Southeast Asia must involve adding substantial value locally in order to meet rules-of-origin requirements. If goods are merely “repackaged through Southeast Asia,” Zhao wrote, the United States is already prepared to block such “transshipment.”
In short, the era of “light processing and relabeling” via ASEAN is coming to an end, and this will force Chinese enterprises to adjust their strategies toward the Southeast Asian market in the aftermath of the tariff war.
Beyond Re-export: Southeast Asia as a Market and Distribution Center
Chinese enterprises are becoming increasingly aware that, rather than treating Southeast Asia merely as a transit stop, they should regard it as a key terminal market and a global distribution hub. Southeast Asia is a dynamic market of roughly 680 million people with rapid growth and rising incomes. More than 65 percent of ASEAN’s population is under the age of 40, and an expanding middle class is driving demand for consumer goods, automobiles, and digital services.
As Euromonitor International noted, “Southeast Asia is the largest and second-fastest growing export destination for Chinese goods… as U.S. tariffs on Chinese goods rise, the region has become a critical market for China’s exports.”
In the first eight months of 2025, China’s exports to ASEAN reached $434.1 billion, up about 14.7 percent year-on-year, while exports to the United States stood at $283.0 billion, down 15.5 percent year-on-year. As the U.S. and European markets become less accessible, ASEAN has become a vital outlet for Chinese exports.
At the same time, businesses are also making full use of the complementary advantages among Southeast Asian countries: for example, Malaysia’s electronics clusters, Thailand’s automotive supply chains, Singapore’s financial and logistics networks, and Indonesia’s resource endowments. Their ultimate goal is to build a resilient regional manufacturing and distribution network that radiates across Asia and reaches the global market.
Take electric vehicles (EVs) as an example: Chinese automakers have set up showrooms and even assembly lines in Thailand and Indonesia, aiming not only to produce and sell within ASEAN, but also to use this capacity as a base for exporting to other markets. In August 2025, BYD exported its Thailand-produced EVs to Europe for the first time. This indicates that Southeast Asia is now also serving as a free trade and production hub for Chinese enterprises, with goods produced in the region both advancing Chinese companies’ global strategies and helping them avoid the sharp cost increases resulting from the China-U.S. trade war.
In short, the era of tariff wars has accelerated the transformation of Chinese enterprises in Southeast Asia from being “transshippers” to becoming active market operators and supply chain investors. Southeast Asia is no longer seen merely as a pathway for evading tariffs, but rather as an important partner in the global strategies of Chinese enterprises. ASEAN is emerging in its own right as both a regional terminal market and a global production center.
The Dual Effects of the Tariff Wars on Chinese Firms’ Strategies
The U.S. tariffs also served as a catalyst for structural transformation, forcing Chinese enterprises to “move upward,” building their own brands and strengthening key technologies. As access to overseas markets and external technologies becomes more uncertain, companies are increasing their focus on domestic innovation and brand development to reduce dependence on Western partners and increase international competition. This stands in stark contrast to the past image of Chinese firms as primarily original equipment manufacturers.
For example, in the fast-moving consumer chain sector, Chinese newcomer Mixue has already surpassed McDonald’s in the number of global stores, driven by its aggressive expansion across Asia and beyond. Another brand, Chagee, grew from virtually no overseas presence to planning 1,300 stores abroad by 2027, with a focus on Southeast Asia.
Anker Innovations, a leading Chinese consumer electronics accessories brand, stated that changes in the external environment have “further strengthened our determination to focus on R&D, user experience, and product innovation.” In 2025, Anker doubled down on investment in new products, brand marketing, and a flexible global supply chain. The company noted that although tariffs and policy volatility may squeeze short-term profits, its “strategic buffer” – built on compliance, agile supply chain management, and brand equity – has significantly enhanced its resilience.
Behind this lies the conscious effort of Chinese enterprises to take control of their own products and intellectual property, rather than relying indefinitely on external technologies or brands. Confronted with U.S. restrictions on advanced semiconductors and telecommunications equipment since 2018, Chinese tech firms have poured real money into R&D, developing their own chips, systems, and integrated solutions. Under the banner of the “sci-tech self-strengthening” policy, both the state and private capital have significantly increased investment in tackling “chokepoint” technologies.
By 2025, this approach has begun to yield results: China’s dependence on imports of high-tech products is declining. Since 2020, the growth rate of imports of electronics and high-tech goods has slowed markedly, with some categories even turning negative, indicating that domestic substitution is taking root.
Broader Consequences and Outlook
Trump’s global tariff war has brought China and Southeast Asia into closer cooperation. On the one hand, China views ASEAN as a critical market and production partner amid tightening access to U.S. and European markets; on the other hand, ASEAN countries need investment and export channels. This directly gave rise to an institutional upgrade in cooperation.
In May 2025, China and ASEAN concluded negotiations on the Free Trade Area 3.0 (ACFTA 3.0), with the new text incorporating fresh chapters on the digital economy, green development, and supply chain connectivity. At the same time, some Chinese scholars have advocated elevating the cooperation framework to a “China–ASEAN Common Market,” in order to deepen industrial and supply chain integration under the new circumstances.
The institutional cooperation between China and ASEAN is not only top-down; enterprises’ risk-avoidance mentality will also deepen cooperation between the two sides from the bottom up. Therefore, the tariff war has drawn China and ASEAN closer economically, reduced dependence on Western markets, and laid the institutional and industrial foundations for long-term cooperation.
However, it is also worth noting that closer economic cooperation inevitably produces certain negative externalities. At the societal level, in several ASEAN countries, concerns have been rising over excessive dependence on China or the “oversized share” of Chinese enterprises, which in turn has triggered political pushback.
Indonesia, for example, has attracted substantial Chinese investment in its nickel and steel industries, but this has also led to incidents linked to labor safety, environmental damage, and the distribution of benefits. In January 2023, a Chinese-controlled nickel smelter in Sulawesi experienced violent clashes over wage and safety disputes, resulting in the deaths of one Indonesian and one Chinese worker and the burning of facilities. Eventually, 500 security personnel were deployed to restore order. The incident prompted intensive interactions between the Chinese embassy in Indonesia and multiple Indonesian government agencies.
This illustrates how economic frictions such as labor disputes, environmental controversies, and perceived imbalances in benefits to local communities can spill over into anti-China sentiment and even become diplomatic challenges. Some scholars caution that although Chinese investment can stimulate growth, mismanagement may lead to problems: large Chinese enterprises, in fields such as EVs, digital infrastructure, and green technologies, could suppress local firms, while concerns about insufficient skills transfer and limited industrial spillovers accumulate. In countries highly dependent on Chinese capital, such as Cambodia and Laos, debates over debt and political influence also tend to flare up periodically.
In the era of the tariff war, the line between trade policy and geopolitics has grown increasingly blurred, with Southeast Asia standing at the forefront of great power rivalry. In bilateral negotiations, the United States has exerted pressure on countries such as Vietnam, Malaysia, and Indonesia, demanding investigations into re-exported Chinese goods. This is forcing ASEAN states to walk a tightrope in the contest between major powers. Beijing, for its part, has explicitly stated that it would “never accept” third-country agreements “at the expense of China’s interests.” Although the wording was not specific, tools at the intersection of economics and politics – such as reducing imports or tightening investment – could all be brought into play.
All of this reminds regional states that what were once technical trade issues now carry a geopolitical undertone. From 5G infrastructure to critical ports, China-U.S. competition is visible across Southeast Asia. Should any country lean “too heavily” toward one side economically, it may face public censure from the other, or even be forced to pay a more tangible “price.”
The latest escalation of the trade war has not created new trends out of thin air, but has accelerated those already underway. The post-tariff landscape has forced Chinese enterprises to fundamentally reposition Southeast Asia within their global strategies. The region is no longer seen merely as a convenient channel for tariff evasion, but as a growing market, a manufacturing base, and a distribution hub. This transformation is driving deeper economic integration between China and ASEAN, while also introducing new complexities ranging from local economic pressures to heightened geopolitical sensitivities.
Chinese enterprises that embrace localized production, invest in branding and technology, and actively collaborate with regional partners are the most likely to stand out under this new paradigm. By contrast, those that fail to adapt may find themselves squeezed by tariff barriers or by intensifying competition within ASEAN itself.