September 15, 2025
TOKYO – The United States has pressured Southeast Asian nations to control transshipped exports of goods, primarily originating in China, in relation to their tariff negotiations with the administration of U.S. President Donald Trump.
Southeast Asian nations have long expanded exports by attracting foreign companies, but now face the need to upgrade their own industrial capacity amid the destabilization of the global trade order triggered by Trump’s tariffs.
Allegations of transshipped Chinese exports, raised by the United States, started amid tit-for-tat tariff hikes during a U.S.-China trade war under the first Trump administration. To evade U.S. tariffs, Chinese companies began establishing production bases in Association of Southeast Asian Nations member countries such as Vietnam and Thailand around 2020, turning them into its export hubs for the U.S. market. Southeast Asian countries welcomed the influx of Chinese companies, with Thailand offering incentives such as five-year corporate tax exemptions or reductions.
Chinese investment targeting production and sales markets in ASEAN countries has surged annually, posing a threat to Japanese companies. Electric vehicle manufacturers like BYD Co. are emblematic of this trend.
Meanwhile, devious exporters trying to dodge tariffs with fake country of origin labels — far from a legitimate economic activity — have become a problem, with Washington determining that Southeast Asia is a transit hub. Tactics for mislabeling include the following: labeling Chinese products as Vietnamese and reexporting them from Vietnam; transshipping containers from China in Vietnam; and performing minimal processing in Thailand on nearly finished products from China and then reexporting them as Thai-made goods.
The figures for Vietnam’s imports from China and the United States’ imports from Vietnam have been following similar trends. This has fueled dissatisfaction and distrust in Washington, particularly as Vietnam ranks third among the countries with which the United States has its largest trade deficits. Thailand, Malaysia and Indonesia also rank high on the list.
In April, White House trade adviser Peter Navarro said on a U.S. TV program, “It’s the nontariff cheating [by Vietnam] that matters,” citing Chinese products being routed through Vietnam as an example.
In the latest tariff negotiations, the United States and China escalated their confrontation by threatening extremely high tariffs on each other at one point, making the talks difficult. Against this backdrop of frustration, the Trump administration is urging countries to shun China. The U.S. government has stated that Vietnam, which agreed to a 20% tariff rate, will face a 40% tariff if transshipment is discovered.
The United States also intends to set stricter rules for determining the country of origin for trade goods. According to Thai media, the U.S. government is pushing to require a minimum of 60% of a finished product’s value to originate from within Thailand for it to qualify as “made in Thailand.”
Typical free trade agreement rules require around 40% local content, and Thailand is seeking a 40% threshold. If the United States does not compromise, businesses will have to raise the proportion of Thai content in the process of producing U.S.-bound products, and that could affect supply chains and costs.
It is clear that the United States aims to exclude China from global supply chains by imposing high tariffs on transshipment and stricter rules on recognizing country of origin. It will likely demand other ASEAN countries take similar measures. The definition of “transshipment” is not clear at the moment, and one trade official said, “It could be broadly defined, such as considering it transshipment if a certain percentage of Chinese parts are used in the production process.”
Under World Trade Organization rules, anti-dumping duties can be imposed on unfairly cheap imports, and the United States and the European Union are strengthening their monitoring for that purpose. The U.S. Commerce Department determined that five Chinese solar panel companies were shipping their products through four Southeast Asian countries.
In Japan, the government is working on the creation of a system to prevent transshipped exports at the request of business entities such as the Japan Iron and Steel Federation.
After the recent tariff negotiations, Thailand expanded its monitoring targets for transshipped exports, while Vietnam established measures to strengthen inspections against false labeling of origin. But in this game of cat-and-mouse, international coordination among such countries and regions as the United States, Europe and Japan is essential to enhance the effectiveness.
Illegal exports are criminal acts that undermine the global trade order. ASEAN countries should reaffirm their duty and responsibility to uphold fair trade, keeping in mind the lessons learned from the tariff negotiations.
ASEAN nations need to develop their own industries
ASEAN member nations have achieved economic growth by attracting foreign companies’ production bases, thereby expanding trade and employment opportunities. However, they have been unable to adequately nurture their own homegrown industries.
ASEAN countries need to strengthen their economic structures so as not to fall into the so-called middle-income trap, a situation in which a developing nation that became a middle-income one by taking advantage of low wages to achieve high growth gradually stagnates or declines as it loses that advantage, among other aspects.
For Thailand, the biggest obstacle is its unstable political situation. The administration led by former Prime Minister Thaksin Shinawatra, who took office in 2001 — when the country was still feeling the effects of the Asian financial crisis — put the economy on a growth trajectory through a policy to expand domestic demand, dubbed Thaksinomics, plus a “Detroit of Asia” initiative aiming to make Thailand a hub for the automotive industry.
However, intensified conflicts over vested interests and other issues between conservatives and pro-Thaksin forces led to Thaksin’s ouster in a military coup in 2006. Another coup occurred in 2014, and the army temporarily assumed control over politics.
In such political times, which could be called two lost decades, structural reforms have been postponed and politics have drifted toward populism. With a declining birthrate and aging population, Thailand’s growth rate has notably shrunk compared to other major ASEAN nations.
Vietnam-U.S. trade relations were normalized after a bilateral free trade pact went into effect in 2001, a quarter-century after the end of the Vietnam War. Few foreign companies had their bases in Vietnam until that time, but improved export conditions to the United States prompted Japanese firm Canon Inc. to build a factory near Hanoi, sparking other Japanese companies to rush to establish operations in Vietnam.
Samsung Electronics Co. of South Korea has also established numerous manufacturing bases in Vietnam. With many suppliers for U.S. companies such as Apple Inc. and Nike, Inc., Vietnam has become a hub for the supply chains of the United States and China.
However, the rapid concentration of foreign companies has pushed Vietnam’s exports to account for about 80% of the country’s gross domestic product. Among major ASEAN countries, this matches the high levels seen in Singapore and Malaysia.
World Bank analysis shows that foreign companies account for 73% of Vietnam’s exports, creating an economic structure highly susceptible to global economic trends and the movements of foreign companies. Vietnam needs to implement policies to expand domestic demand.