Trump's Tariffs Leave China's Neighbours with an Impossible Choice

 When former US President Donald Trump imposed sweeping tariffs on Chinese imports during his first term, businesses across Southeast Asia saw a window of opportunity. Among them was Vietnamese entrepreneur Hao Le, whose electronics company SHDC quickly filled the gap left by restricted Chinese exports to the West.

Based in the growing industrial hub of Hai Duong, SHDC now exports around $2 million worth of phone and computer accessories to the US every month. But the success story may be short-lived. A proposed 46% tariff on Vietnamese goods, expected to be decided by July, threatens to cripple his business.

“That would be catastrophic,” Le says. “We cannot compete with Chinese products in our own market, let alone globally. And this is not just our challenge—many Vietnamese firms are facing the same uphill battle.”

Opportunity Turned Obstacle

Trump’s first wave of tariffs in 2016 redirected a flood of cheap Chinese goods toward Southeast Asia, undercutting local manufacturers but also creating opportunities for others to tap into global supply chains looking to diversify away from China.

Now, under what’s being dubbed “Trump 2.0,” the US is cracking down on what it sees as a loophole—goods rerouted through China’s neighbors. The new tariffs threaten to shut Southeast Asia out of the very supply chains it had only just joined.

Countries like Vietnam and Indonesia, eager to become manufacturing hubs for everything from semiconductors to electric vehicles, are stuck between two global giants: China, their largest trading partner, and the US, a key export market.

Chinese President Xi Jinping’s diplomatic visits this week to Vietnam, Malaysia, and Cambodia underscore the stakes. Trump, meanwhile, sees the warm reception of Xi as further evidence that the region is "conspiring to screw" the US.

A Regional Balancing Act

With high stakes on both sides, Southeast Asian governments are scrambling to protect their interests. In a recent call with Trump, Vietnamese leader To Lam reportedly offered to scrap tariffs on American goods to maintain strong trade ties.

Vietnam has become a critical node in the global electronics supply chain, hosting major factories for companies like Samsung, Intel, and Foxconn. For its part, Thailand has dispatched officials to Washington with proposals aimed at avoiding the 36% tariffs the US is considering. 

"Thailand is not just an exporter but also a long-term ally and economic partner of the US," Prime Minister Paetongtarn Shinawatra said ahead of talks.

Malaysia’s trade minister, Tengku Zafrul Aziz, echoed similar concerns: “We can't choose, and we will never choose [between China and the US]. But if something goes against our interest, we will protect ourselves.”

The Association of Southeast Asian Nations (ASEAN) has opted for diplomacy, emphasizing its strategic value to the US rather than retaliating against tariffs. "We understand the concerns of the US,” Zafrul said. “That's why we need to show that ASEAN, especially Malaysia, can be that bridge.”

Tariffs Threaten Investment and Jobs

For countries like Malaysia, Indonesia, and Cambodia, the proposed US tariffs could threaten billions in trade and foreign investment.

Malaysia, a key player in semiconductor manufacturing, exported $18 billion in chips to China last year. Many of these are used in electronics like iPhones, ultimately destined for US consumers. A 24% US tariff could sever this vital trade artery.

“If this continues, companies will have to rethink their investment commitments,” Zafrul warned. “This will have a global impact.”

Indonesia, facing a proposed 32% tariff, is home to massive nickel reserves and has ambitions to dominate the EV supply chain. Cambodia, seen as a trans-shipment hub for Chinese goods, faces the highest proposed tariff—49%. Ninety percent of its garment factories, many Chinese-owned, export to the US.

Unintended Consequences

While some Southeast Asian firms initially benefitted from the US-China trade war, many are now reeling from its unintended fallout. Trump’s 145% tariff on Chinese goods has prompted a surge in ultra-cheap Chinese exports to the region, overwhelming local markets.

In Indonesia, sleepwear business owner Isma Savitri says she's being undercut by Chinese imports that sell for half the price of her locally made designs.

"We are struggling to survive," she says. "Small businesses like us are feeling the squeeze."

The economic toll is becoming clear. In Thailand, over 100 factories have closed each month for two years. In Indonesia, 250,000 textile workers have lost their jobs, according to trade associations. Even Sritex, once Southeast Asia's largest textile manufacturer, has shut down.

“We can’t compete,” says Mujiati, a 50-year-old who lost her job after three decades at Sritex. “There’s no one to complain to.”

A Fragile Silver Lining

Still, some see opportunity in crisis. Malaysian rubber glove manufacturers, who already control half of the global market, could benefit from higher tariffs on Chinese competitors.

“Even with a 24% tariff, we’re more competitive than China with their 145% rate,” says Oon Kim Hung, head of Malaysia’s Rubber Glove Manufacturers Association. “It’s not ideal, but it may boost regional producers.”

In Vietnam, Hao Le confirms a sharp uptick in interest from US buyers looking to pivot from China. “Before, it took months to secure new clients. Now, deals are happening within days.”

Conclusion

As Trump’s tariff policy casts a long shadow over global trade, Southeast Asia finds itself in an increasingly untenable position—courted by both China and the US, but unable to afford offending either.

“This is a wake-up call,” says economist Doris Liew. “The region needs to diversify and reduce its reliance on any single partner. Otherwise, it risks being collateral damage in a geopolitical showdown.