Economy 7 min read By Callum Montgomery
US tariffs hit Southeast Asian exporters that followed Washington's China-plus-one push
Washington's punitive tariffs hit its closest partners in Southeast Asia, undermine supply chain diversification and strengthen China's position in the region.
For years, Washington urged manufacturers to move their factories out of China and into friendly states in Southeast Asia. Now Trump's sweeping import tariffs are hitting precisely those countries and companies that followed this call. Instead of containing China, American trade policy is alienating regional partners, weakening supply chain diversification and reducing US influence over the trade decisions of the ASEAN bloc.
According to diplomat and political scientist Evan Feigenbaum, US policy is marked by a so-called reverse pivot. Washington, tied up by other crises, is showing restraint and withdrawal in Asia rather than decisive leadership. Tariffs are not the only burden: in April 2025, President Trump announced the so-called Liberation Day tariffs. In the months that followed, non-tariff trade barriers fell away in some ASEAN states, and some countries used the external pressure to carry out long-overdue reforms. Deals were concluded, including Boeing sales and, at least in prospect, liquefied natural gas contracts. In the short term, the coercion seemed to work.
In February, the US Supreme Court struck down much of the original tariff regime. The government then turned to substitute instruments: 150-day emergency measures under Section 122 of the Trade Act of 1974, as well as comprehensive investigations under Section 301 into forced labour, intellectual property violations and so-called overcapacity. However, the concerns over labour, intellectual property and overcapacity are at their core directed against China, not against Southeast Asia. Critics argue that Washington has replaced a coherent Southeast Asia policy with an improvised China policy, treating partners as collateral damage in order to show that China is not being specifically targeted.
The contradiction is most evident in the supply chains themselves. For nearly a decade, multinational corporations have been shifting capital and production out of China to Vietnam, Malaysia, India and the Philippines. This so-called China-plus-one strategy is meant to protect critical industries from geopolitical risks. Tariff policy undermines this goal. Export hubs in Southeast Asia suffer badly when Chinese firms illegally relabel goods, while subsidised Chinese overcapacity puts pressure on local producers. The reality, however, is above all a deep and legitimate integration of supply chains, not widespread circumvention. Deborah Elms, head of trade policy at the Hinrich Foundation, has pointed out that Washington itself created the incentives for alternative supply routes and is now punishing regional partners for using them.
According to this analysis, the tariffs also fail to achieve their stated aims. Higher costs and a shortage of skilled labour at home mean that production lines are not simply returning to the United States. The bilateral trade deficit with the Southeast Asian economies remains largely unchanged. Exporters in the region, US importers and consumers all bear the higher costs.
ASEAN states have long pursued a flexible hedging policy, balancing their relationships with China and the United States, as seen in Vietnam's so-called bamboo diplomacy. None of these states wants to be dominated by Beijing, which is why Washington would in principle be a natural partner. However, the more erratic and punitive US policy becomes, the more likely these countries are to seek security elsewhere. Canadian Prime Minister Mark Carney warned at the World Economic Forum in Davos in January that the weaponisation of economic instruments forces middle powers to cooperate: whoever is not at the table is on the menu. Coercive tactics had failed in Canada and would fail in Asia too.
Recently, the politically appointed US ambassador to Singapore, Anjani Sinha, caused a stir. He told business representatives that the president had instructed him to bring the money back, and that they should therefore double their investments in the United States. The demand did not go down well. Capital flows are not moving into the United States; they are shifting further towards Asia. The criticism is also directed at a break with a decades-long bipartisan tradition: since the Plaza Accord of 1985, American administrations have recognised that partners in the region prosper under predictable, rules-based conditions rather than under sheer coercion. In the view of critics, the transactional approach risks creating a lasting trust deficit that could harm American companies for a generation.
Following the US withdrawal from the Trans-Pacific Partnership and the shift to country-by-country negotiations, others are filling the space. ASEAN is building institutional networks that bypass Washington. Member states work with agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). According to the report, American companies have not forgotten the advantages of clear rules within a multilateral framework and are working closely with ASEAN negotiators on the ASEAN Digital Economy Framework Agreement (DEFA). It covers eleven states, almost 700 million consumers and an estimated digital market of two trillion dollars, and is intended to set standards for cross-border data governance, cybersecurity, digital identity and artificial intelligence. While Washington retreats behind tariffs and procedural disputes, Southeast Asia, with the participation of US companies, is writing the regulatory architecture of the years ahead.
Source: fortune.com
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