Southeast Asia in a Dilemma Amidst the China-United States Conflict

 

US President Donald Trump imposed tariffs on China during his first term. At that time, Vietnamese businessman Hao Le saw it as an opportunity. Because his company was competing with Chinese products. This time too, when Western countries have gradually imposed tariffs on Chinese products, hundreds of Asian companies like Hao Le's company are taking advantage of that opportunity.

Le's company is called SHDC Electronics. They export $2 million worth of components to the US every month. Of these, mobile and computer components are notable. However, if Trump imposes a 46 percent tariff on Vietnamese products, that revenue stream could be cut off. Although Trump has postponed this tariff plan until July.

Le says this is very bad news for his business. It will bring 'disaster' to his business.

Stating that it is not possible to sell his company's products in the domestic market, the businessman said, "We cannot compete with Chinese products. This is not only our problem. There are many domestic companies that are also struggling in the domestic market.’

After Trump imposed tariffs in 2016, the Southeast Asian market was flooded with cheap Chinese products. Those products were actually made for the United States. At that time, many local industries in Southeast Asia were damaged by not being able to compete with many Chinese products.

But this situation also created new opportunities for other businesses. Many companies got the opportunity to join the global supply chain. Many companies wanted to reduce their dependence on China. But now Trump himself is threatening to close those doors. He sees these opportunities as an unacceptable loophole.

This is a huge blow to fast-growing economies like Vietnam and Indonesia. These countries are demanding a share of important industries from chips to electric cars. But they are now caught in the conflict between the world’s two largest economies. China is their powerful neighbor and largest trading partner. And America is their main export market. The countries fear that the United States may want to make deals with them that will hurt China.

Last week, Chinese President Xi Jinping visited Vietnam, Malaysia and Cambodia. The trip was planned in advance. But its importance has increased in the recent situation. All three countries have given Xi a warm welcome. However, Trump sees it as a conspiracy to “danger” America.

International media reports have said that the White House will hold talks with smaller countries. Washington is said to be pressuring these countries to limit their transactions with Beijing. But the volume of trade between China and Southeast Asian countries is so large that it may be difficult for the United States to achieve this goal.

Official data shows that China earned a record $3.5 trillion from exports in 2024. 16 percent of this came from Southeast Asian countries and the region is China’s largest export market. Beijing has invested heavily in many projects in the region. China has built railway lines in Vietnam, dams in Cambodia and seaports in Malaysia. These are part of the country’s “Belt and Road” project. The aim is to strengthen strategic ties with foreign countries.

Malaysian Trade Minister Tengku Zafrul Aziz told the BBC, “We cannot choose between China and America. If something goes against our interests, we will defend ourselves.”

Southeast Asian governments have been shaken after Trump announced new huge tariffs. They have started talks to quickly deal with the situation. Trump spoke with Vietnamese leader Thu Lam by phone. He called it a “very productive” conversation. Thu Lam offered to remove all tariffs on American products.

The American market is important for Vietnam. Vietnam is becoming increasingly strong in the electronics industry. Companies such as Samsung, Intel and Foxconn have set up factories in the country. Taiwan-based company Foxconn makes iPhones for tech giant Apple.

Meanwhile, Thai officials have traveled to Washington. Their plan is to increase imports and investment from America. America is their biggest export market. So they want to avoid the 36 percent tariff. They fear that Trump could reintroduce the tariff at any time.

Thai Prime Minister Payanthan Shinawatra said, “We will tell America that Thailand is not just an exporter, we are their trusted ally and economic partner. America can count on us for the long term.”

Even if Trump imposes tariffs, the Southeast Asian alliance of countries, ASEAN, will not retaliate. They have decided not to retaliate against Trump’s tariffs. Instead, they will highlight their economic and political importance to America.

Tengku Zafrul Aziz told the BBC, “We understand America’s concerns. We need to show that ASEAN and especially Malaysia can be a bridge or a mediator for America.”

Southeast Asia’s economies are dependent on exports. They have played this role well. They have benefited from trade and investment between China and America. But Trump's suspended tariffs could disrupt that trend.

Consider Malaysia. In the past few years, chipmakers from the US and other countries have invested there. This surge in investment in Malaysia is because Washington has stopped selling advanced technology to China. Last year, China imported $18 billion worth of chips from Malaysia. These chips are used in the manufacture of electronic products in China, such as the iPhone. These products are usually exported to the US.

Trump has announced a 24 percent tariff on Malaysia. As a result, billions of dollars in exports to the US market could be stopped. But it does not end there.

Zafrul Aziz said, “If this situation persists, companies will think again about investing. This will affect not only the Malaysian economy, but also the global economy.”

Trump may also impose a 32 percent tariff on Indonesia. Indonesia has a lot of nickel. That is why the country wants to play a big role in the electric vehicle supply chain.

Cambodia is facing the highest tariffs. They could be subject to a 49 percent tariff. Cambodia is considered an ally of China. Cambodia is one of the poorest countries in the region. But the country has made great progress as a transit hub. Chinese companies that want to avoid American tariffs are using Cambodia as part of friendshoring. 90 percent of Cambodia’s garment factories are owned or operated by Chinese people. These factories mainly export clothes to the United States.

Doris Liu, an economist at the Institute for Democracy and Economic Affairs in Malaysia, said Trump has suspended the tariffs. But “the damage has been done!” She said it is a warning to the region. It is not just about reducing dependence on America. Overreliance on any single trading partner must also be reduced. This requires balance.

In these uncertain times, Xi Jinping is sending a strong message. He says, “Let’s join hands. Resist America’s ‘bullying.’ But it will not be easy. Because Beijing also has trade disputes with Southeast Asian countries.

Indonesian businesswoman Isma Savitri is worried. Trump has imposed a 145 percent tariff on China. She says this means that Chinese products will now go to other markets. Isma believes that this will increase competition between local businesses and Chinese rivals. Because they too can no longer send products to America.

Isma owns a clothing brand called Hellopop. "Small businesses like ours are under a lot of pressure. We are struggling to survive because of very cheap Chinese products," she says.

A popular pair of Hellopop pajamas costs $7.10. That's 119,000 Indonesian rupiah. Isma says she has seen pajamas of the same design from China being sold for about half the price.

Nguyen Khac Giang, a researcher at the ISEAS Yusuf-Ishaq Institute in Singapore, said Southeast Asia is very close to China. The trade system here is open. The market is also growing rapidly. So it has become a ‘dumping ground’ for Chinese products.

In his words, ‘Politically, many countries do not want to get involved in a conflict with China. This increases their vulnerability’.

Chinese products are cheap, so buyers are happy. Clothes, shoes, phones – everything is cheap. But thousands of local businesses cannot compete with these low prices. A research institute in Thailand says that over a hundred factories have closed in the country every month in the last two years.

At the same time, about 250,000 textile workers in Indonesia have lost their jobs. Trade associations there say that about 60 garment factories have closed. Sritex was the largest textile factory in the region. It has also closed.

Mujiati, a man who worked at Sritex for 30 years, lost his job last February. He told the BBC, ‘When we see on the news, the market is flooded with imported products. It is destroying our country’s market.

Mujiati, 50, is still looking for work. “Maybe we were just unlucky,” he said. “Who can we complain to? There is no one.”

Governments in Southeast Asia have adopted protectionist policies. They are taking action as local businesses seek help to protect themselves from the impact of Chinese goods. Last year, Indonesia considered imposing a 200 percent tariff on some Chinese goods. It closed down a popular e-commerce site, Temu, which was popular with Chinese businesses.

Thailand has stepped up surveillance of imported goods. It has imposed an additional tax on goods priced below 1,500 Thai baht (about $45). Vietnam has imposed tariffs on Chinese steel products twice this year. After Trump announced new tariffs, news came that Vietnam was going to tighten up. The restrictions would apply to Chinese goods sent to the United States via their country.

One of the aims of Xi’s visit was to allay fears among Southeast Asian countries. “China has a concern,” David Rennie, former Beijing bureau chief of The Economist, told the BBC. “If we send American-made products to other countries, those trading partners will be upset. They might turn their backs on China.” He added, “If a flood of Chinese goods floods these markets, kills jobs—that would be a big problem for China. It would cause them diplomatic and geopolitical headaches.”

The region’s relationship with China has not always been easy. Countries other than Laos, Cambodia and war-torn Myanmar are wary of China’s ambitions. Disputes over the South China Sea have soured relations with the Philippines. Countries like Vietnam and Malaysia also have similar problems. But so far, trade has been balanced in this area. Experts say that could now change.

“Previously, Southeast Asia had to think about whether it would upset China. Now the situation is more complicated.’

China’s loss could also bring gains for Southeast Asia. Vietnam’s Hao Le is seeing an opportunity again. He says American buyers are now looking for new suppliers outside of China. The search has increased a lot. “It used to take months to change suppliers. Now it takes days,” he says.

Malaysia has huge rubber plantations. They are the world’s largest producer of medical rubber gloves. They control about half the market for rubber gloves. They are ready to capture even bigger markets from their main rival, China.

Un Kim Hong, president of the Malaysian Rubber Glove Manufacturers Association, said that the region’s products have a 10 percent baseline tariff. This is the same as most countries in the world. This is definitely bad news.

However, Un Kim Hong said, “Malaysia will benefit even if Trump’s suspended tariffs are reintroduced. Customers will be willing to pay an additional 24 percent tariff for Malaysian gloves. Because we have to pay 145 percent duty on Chinese gloves.

“We are not exactly dancing with joy,” he said. “But it could be good for our producers. Producers in Thailand, Vietnam and Cambodia could also benefit.”