Southeast Asian nations are grappling with significant economic challenges as U.S. tariffs on Chinese goods reshape the regional trade landscape. Countries such as Vietnam and Thailand are extremely reliant on the U.S. market. They find themselves at a critical juncture as they balance their relationships with the United States and China. The Association of Southeast Asian Nations (ASEAN) has already ruled out a backlash against these tariffs. Rather, they are simply making an economic and political argument for their importance to the U.S.
Vietnam has positioned itself as a manufacturing hub for major companies, including Samsung, Intel, and Foxconn, which have set up operations in the country. This gradual shift represents a tremendous opportunity for Vietnam to benefit from China’s trade losses. 2024 was a spectacular year for China, with all-time high exports of $3.5 trillion. Specifically, 16% of these battery exports were directed to Southeast Asia, underlining the region’s vital importance to the larger global supply chain.
Thailand is currently experiencing the impact of acute economic pressure. In fact, in the last two years we easily lost over 100 factories each month. That unpredictability has caused a lot of these workers to lose hope for their futures. Mujiati, for instance, was fired after 30 years of service to Sritex, a small textile factory with conditions that were once good. The textile sector has had a difficult time competing against low-cost foreign imports adding to the economic devastation.
There is opportunity out there According to many companies, these changes pose great opportunities despite the challenges. Le’s SHDC Electronics registers over $2 million in monthly sales of phone and computer accessories to the U.S. Perhaps surprisingly, the report paints a picture of great opportunities for innovation, capacity-building, and improvement — even amid this turmoil.
The threat of tariffs looms large. As a result, Thailand now faces an incredible 36% tariff on its exports to the U.S. Such a scenario would have dire implications for the future of its manufacturing base.
“We can’t choose, and we will never choose [between China and the U.S.],” said Malaysia’s Trade Minister Tengku Zafrul Aziz.
Few nations across the region are experiencing this sentiment as acutely as Haiti. Now, they are scrambling to keep their economic relationships with China and the U.S. in equilibrium. While some view the tariffs as a wake-up call to diversify trade partnerships, others fear that emerging businesses could be stifled by increased competition from Chinese products.
It’s a formidable challenge—even for the well-known sleepwear brand Helopopy. Its pyjamas retail for $7.10, but even that price is hard pressed to compete with the very low price of ultra-cheap Chinese imports. Owner Isma Savitri shared her worries about small businesses being pushed out of an ever more cut-throat scene.
“Small businesses like us feel squeezed. We are struggling to survive against an onslaught of ultra-cheap Chinese products,” said Isma Savitri.
As regional leaders continue to work through these challenges, many experts argue that this moment has the potential to be a true turning point. Doris Liew is an economist at Malaysia’s Institute for Democracy and Economic Affairs. She’s convinced that the time has come for Southeast Asia to address its dangerous overreliance on one trade partner.
“This serves as a wake-up call for the region, not only to reduce reliance on the U.S., but also to re-balance overdependence on any single trade and export partner,” Liew stated.
This dramatic change in the market landscape makes the need to pivot to a new paradigm all the more critical.
“In the past, U.S. buyers would take months to switch suppliers. Today, such decisions are made within days,” said Hao Le.
In a collective show of diplomacy and restraint, ASEAN has togetherly ruled out retaliation to U.S. tariffs. Instead, member states are more concerned with shoring up their economic ties with the United States. Malaysian officials are keen to stress that ASEAN can play an important role as a crucial connector between China and the U.S. They are dedicated to ensuring strong regional trade connections.
“We understand the concerns of the U.S. That’s why we need to show that actually we, ASEAN, especially Malaysia, can be that bridge,” emphasized Tengku Zafrul Aziz.
Thai Prime Minister Paetongtarn Shinawatra militantly echoed this sentiment. She emphasized that Thailand continues to be a major export powerhouse and a reliable strategic partner of the United States.
“We will tell the U.S. government that Thailand is not only an exporter but also an ally and economic partner that the U.S. can rely on in the long term,” said Prime Minister Shinawatra.
As ASEAN countries work to mold a winning position from this, they face the realization of the Basel Defense Trump’s tariffs have already unleashed. David Rennie, former Beijing bureau chief for the Economist newspaper, recently commented on the geopolitical ramifications for China.
“That’s a massive diplomatic and geopolitical headache for the Chinese leadership,” Rennie noted.
The changing trade landscape — laden with both challenges and opportunities Southeast Asia — is a big factor. While the region may stand to gain from China’s losses in exports, it must navigate its own economic vulnerabilities amidst rising tensions between global powers.
Oon Kim Hung, president of the Malaysian Rubber Glove Manufacturers Association, summed it up.
“We’re not exactly jumping with joy, but this may well benefit our manufacturers, as well as those in Thailand, Vietnam and Cambodia,” he stated.