by Lloyd's List
26 June 2025 (Lloyd's List) - THE cat-and-mouse game between the US and China over trade will be a key shaper of future shipping routes.
Under the Trump administration, the supply chain fight between the world’s largest consumer and producer nations has spilled beyond their borders, especially into Southeast Asia countries near China.
Entities residing in China invested $195bn overseas in 2024, about the same as 2023 but up one-third from the average between 2018 and 2020, according to an April report by the Asian Development Bank. This foreign direct investment was directed particularly at Association of Southeast Asian Nations’ economies, which saw a 15% rise in the first half of last year.
“This largely reflected attempts by both China and foreign investors to mitigate risks from rising trade barriers targeting Chinese goods in the US,” said ADB.
Now, Washington is cracking down on alleged “re-exports” to dodge its tariffs, from Chinese T-shirts relabelled “Made in Vietnam”, to Chinese furniture spray-painted and packaged in Cambodia, or Chinese electronics simply assembled in Malaysia.
It’s hard to precisely quantify such trade often lacking transparency. But US officials can hardly dismiss suspicious customs data.
Chinese government figures show its exports to the US dropped nearly 10% year on year in the first five months this year in dollar terms under elevated levies. Its shipments to ASEAN countries, meanwhile, rose 12.2%, including jumps of 20.9% to Thailand, 18.8% to Vietnam and 16.8% to Indonesia.
At the height of the trade war in April, China’s exports to the US plunged 21% while those to ASEAN countries and India grew by more than 20%.
Trade flows were mirrored in shipping volumes. Intra-Asia box trade — encompassing Greater China, North Asia and Southeast Asia — rose 10.4% year on year that month, according to Container Trade Statistics.
Meanwhile, America’s trade deficit with ASEAN countries has climbed steeply. Vietnam, for example, saw its surplus with the US hit $12.2bn in May, up 42% year on year and 17% from April, official data showed.
“It’s hard to dismiss these figures as coincidence,” said Jayendu Krishna, head of Drewry Maritime Advisors. “We’ve seen some Southeast Asian ports grow throughput about 15% year to date, so there are many dots to connect.”
The White House has clearly drawn its conclusions, first imposing so-called “reciprocal tariffs” essentially based on countries’ trade surplus with America, then making reduced China supply chain dependence a key condition in trade talks with them.
Vietnam is a prime example, facing 46% US duties after a July 9 deadline if no deal emerges. Hanoi is already cracking down on Chinese goods relabelling, but the US reportedly wants more in the ongoing negotiation, including Vietnamese factories using less Chinese materials, components and technology, posing a serious challenge.
The expected compromise is lower tariffs still plus appropriately reduced Chinese content in Vietnam’s manufacturing sector.
A Nomura report this month said the US may impose average tariffs of 15.5% on Southeast Asia to curb the transhipments, with Vietnam and Thailand facing 24.3% and 20%, respectively.
At least short-term, such reduced exports from China to emerging manufacturing economies will likely spur more volatility in cargo demand. Impacts could concentrate in export-oriented industries to the US with heavy Chinese supply chain reliance, such as computers, home appliances, textiles and machinery.
“Intra-Asia demand has already softened, likely related to the recent clampdown on re-exports,“ said Du Yu, head of Drewry China.
Du noted that after the end of the Covid-19 pandemic, container throughput at large northern Chinese ports has significantly outperformed that of the southern ports.
“This is because intermediate goods and parts from heavy industrial bases in the country's north have been shipped to Southeast Asia for assembly and final processing rather to factories in Southern China,” she explained.
“Yes, there will be fallout,” said an executive at a container carrier specialising in intra-Asia trade, who agreed such concerns exist.
But he believes the long-term outlook remains positive. “Intra-regional trade will keep growing, plus China firms will only accelerate overseas production localisation.”
That depends on the trade negotiations, though.
The ADB report warned slowed regional growth if the postponed reciprocal US tariffs fully take effect under a worst-case scenario. Under its estimates, developing Asian economic growth, excluding China, will slow 0.2 percentage points in 2025 and 0.8 points in 2026. China would see successive 0.4 and 0.9 point declines. The US own growth drops 1.0 and 0.6 points.
“These impacts are mainly driven by a global trade slowdown, which translates into weaker business and consumer sentiment, lower aggregate demand, and reduced economic activity,” the bank said.
Regardless of the near-term tariff war’s outcome, however, potential casualties are working on their long-term contingency plans.
Cash-rich Chinese firms will continue overseas investment and expansion amid stalled domestic demand, with ASEAN remaining a key target region, Krishna argued. “But it will probably be more diversified based on where tariffs are friendlier.”
Beyond ASEAN, China’s exports have seen brisk growth to destinations led by Africa (18.9%) and India (15.1%) in the first five months.
Available data from CST shows that Asia to sub-Saharan Africa trade volumes surged 29% year on year in April, following a 21% increase in March.
“For our industry, Southeast Asia is no longer the top option for outgoing Chinese factories,” said Robin Xing, who owns a garment export business in Shanghai. “Rising tariffs and wages have made the overall cost advantage less obvious.”
Xing said many Chinese apparel makers now favour Africa, particularly Egypt, Kenya and Ethiopia, where many still only see a source of Chinese oil and mineral imports.
“For Africa to become a new manufacturing hub in the next five to 10 years shouldn’t surprise anyone,” he added.
For instance, Egypt only faces 10% US duties. According to the country’s garment council, ready-made clothing exports grew 22% annually in the first four months this year to top $1bn. America was the largest buyer at $384m, up 11%.
Besides prompting the hunt for alternative manufacturing bases, Trump’s tariff blitz also hastens efforts to develop consumer markets beyond the US too.
“It’s a big world, and we are looking for partners and supporting enterprises to enter new markets,” Vietnam’s Deputy Prime Minister Nguyen Hoa Binh told his parliament last week, when reporting on tariff negotiations with the US.
Chinese manufacturers, as Washington’s prime target, have been forced to quicken the pace.
John Liu, founder of Chinese e-commerce logistics firm Cross-link, said his company recently launched Brazil services to help domestic online sellers ship products there.
“The biggest challenge for our Chinese clients is customs clearance as you need expertise in complex local tax system and Portuguese. But we solved this.”
Liu’s company, also in traditional freight forwarding, handles over 20,000 teu annually to the US and about half that to South America.
“I think South America has great potential, especially now with the US tariff threat, offering more options.”
