August 20, 2025
JAKARTA – Southeast Asia’s export-driven economies are bracing for renewed uncertainty stemming from the United States’ trade war with China, as Washington cracks down not just on goods made in China but also those made elsewhere with significant Chinese input.
Beijing is the main target of the duty on transshipments, which will apply to all redirected Chinese goods, irrespective of the country they are shipped to the US from, but Southeast Asia could face much of the fallout because of the region’s supply chains are highly integrated with Chinese manufacturers, experts say.
There were no clear guidelines from US Customs and Border Protection (USCBP) on what is considered transshipment, Martin Schaefermeier, a US trade lawyer at Cassidy Levy Kent, said on Aug. 12 during an online webinar titled ASEAN Tariff Finder.
US President Donald Trump’s executive order currently states that, if the CBP “determines an article has been transshipped to evade applicable duties under section 2 of this order,” it will face a 40 percent penalty tariff with no option for fines to be reduced.
US Commerce Secretary Howard Lutnick told Fox Business on Aug. 7 that the levy could apply to goods containing more than 30 percent third-country content.
Country of origin typically depends on the product: for electronics, it is where the printed circuit board is made; for machinery and motors, it is the stator; and for tables, the tabletop, making compliance a complex exercise.
Companies will now need to conduct due diligence on supply chains with a “level of scrutiny that didn’t exist before,” Schaefermeier emphasized, warning that US authorities disregard foreign-issued origin certificates, even from chambers of commerce or government bodies.
While altering the declared origin to avoid tariffs is illegal, the Trump administration applied the term loosely to justify tougher local content rules and higher tariffs, said Priyanka Kishore, principal economist at information portal Asia Decoded in Singapore.
Tighter thresholds could raise effective tariff rates and increase costs for exporters, with most companies unlikely to absorb the added burden.
“The impact would eventually fall on US consumers, whose demand would adjust to higher prices and, in turn, weigh on the region’s exports,” Kishore told The Jakarta Post on Friday.
A 70-percent local content threshold, effectively the flip side of the third-country limit, would hit some of Southeast Asia’s biggest US exports, including computers, peripherals, video game consoles and smartphones, which are largely assembled in the region from Chinese components.
Such measures risk weakening Southeast Asia’s role as an alternative hub, Kishore noted, just as Chinese manufacturers had been expanding into the region under their “China Plus One” strategy.
Vietnam had agreed to a 40 percent transshipment tariff in a framework deal reached with the US in May.
Indonesia, meanwhile, said it opposed transshipment. Coordinating Economy Minister Airlangga Hartarto told journalists on July 24 that Indonesia’s rules of origin clause with the US was “almost the same” as Vietnam’s but stressed that “there is no transshipment in Indonesia.”
He added that the two countries were discussing rules of origin and the extent to which a “third-party vendor” could be involved to be eligible for the lower tariff rates offered to Indonesian exports entering the US market.
“That’s why we need to agree on the scope, on how far and how broad third-party vendor involvement can be. This is still under discussion [between Indonesia and the US],” Airlangga said.
Yusuf Rendi Manilet, a researcher at the Jakarta-based Center of Reform on Economics (CORE), told the Post on Thursday that the transshipment issue would pile pressure on exporters at a time when Indonesia already trails regional peers because of high logistics and labor costs, even after its reciprocal tariff rate was reduced to 19 percent, the ASEAN average.
CORE estimates that Indonesia’s exports to the US could drop by US$9.2 billion under Trump’s reciprocal tariff and bilateral deal, with garments taking the steepest hit at $2.1 billion, followed by other manufactured goods at $1.5 billion and leather products at $1.3 billion.
Overall, Southeast Asia’s largest economy is projected to see its US-bound exports contract by 2.65 percent, worse than expected declines in Malaysia, the Philippines and Thailand.
Electronics, Indonesia’s largest US-bound export category, are especially vulnerable to a stricter reading of transshipment rules, as more than half of the sector’s supply chains are linked to Chinese manufacturers, Yusuf pointed out.
To avoid falling further behind, “the government must push to revisi the reciprocal tariff talks, clarify details of the trade deal including transshipment rules and secure preferential trade terms to stay competitive,” Yusuf said.
ASEAN trade update
Southeast Asian nations have agreed to upgrade their regional free trade pact, slashing more nontariff barriers and adding dispute mediation to boost economic resilience against rising global protectionism.
The ASEAN Trade in Goods Agreement (ATIGA), which had already removed tariffs on 98.6 percent of intra-bloc trade since its launch in 1992, would further liberalize more tariff lines, facilitate trade in remanufactured goods and add rules on environmental standards, crisis response and supply chain links.
To help businesses adapt, ASEAN updated its tariff finder tool, an online platform offering real-time data on preferential tariffs and global trade shifts, which is “critical for competitiveness,” said ASEAN Economic Community (AEC) deputy secretary-general Satvinder Singh on Tuesday.
“Major economies, such as the United States, have increasingly resorted to unpredictable tariff measures […] creating a much more complex, uncertain environment for our businesses,” Singh said.
“Where the rest of the world is becoming more protectionist, we have been working to make our region even stronger,” he added.