Limiting transshipments by Chinese firms has become a key objective of the Trump administration. Recently, the US has increased pressure on Southeast Asian countries to cooperate in these efforts. However, due to enforcement challenges and the region’s economic dependence on China, meaningful progress is likely to remain elusive.
Key takeaways:
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Chinese companies have long transshipped goods through third countries to avoid high US tariffs, a practice that the Trump administration is seeking to crack down on.
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Identifying transshipments and enforcing value-added rules for tariff purposes is difficult, especially for developing countries with weaker regulatory regimes.
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Southeast Asian countries have significant economic dependencies on China, making them reluctant to crack down on transshipments by Chinese firms.
GoerTek is a Chinese company that manufactures electronic components for products largely destined for Western markets, most notably assembling Apple’s AirPods. In 2019, following a rise in US tariffs on Chinese goods imposed during the first Trump administration, GoerTek announced it would shift part of its manufacturing to Vietnam. By labeling its products as “Made in Vietnam,” the company could benefit from a more favorable US tariff regime.
This is a prime example of transshipment, the practice of routing exports through a third country to avoid tariffs imposed by the country of final destination. Chinese companies have long used this tactic to skirt trade restrictions. Firms like GoerTek have increasingly relied on transshipment to reach the US market and circumvent the high tariffs imposed on Chinese goods in recent years.
In recent months, the Trump administration has intensified efforts to crack down on this practice. Limiting transshipments helps improve tariff enforcement and boosts revenue collection on imports from China. It also forms part of a broader strategy to economically contain China by discouraging US trade partners from deepening their reliance on Chinese supply chains.
Several Southeast Asian countries that were hit hardest by the new Liberation Day tariffs in April—namely, Vietnam, Cambodia, and Laos—are known hubs for Chinese transshipment. Behind closed doors, the US has been pressuring these governments to reduce overall trade with China and take stronger action against transshipment practices.
The US-Vietnam deal announced on July 2 reflects this agenda. It sets tariffs at 20% on most goods from Vietnam but doubles the rate for goods identified as having been transshipped from third countries. The deal underscores the Trump administration’s long-term commitment to limiting Chinese transshipments. According to US estimates, as much as 40% of Vietnamese exports to the US result from transshipment.
These developments must be understood in the context of rapidly expanding trade between China, the US, and Southeast Asia. Since 2010, overall trade between China and Southeast Asia has more than doubled. In 2024 alone, China’s exports to ASEAN countries grew by roughly 12%. Meanwhile, Southeast Asian trade with (and especially exports to) the US has also risen steadily. This increase is not, in itself, proof of transshipment. However, it helps explain why the issue has gained urgency among US policymakers.
Concerns have been particularly acute in strategic sectors. For instance, solar panel components from Vietnam, Malaysia, and Cambodia have faced tariffs as high as 3,500%, a clear sign of US alarm over alleged Chinese dumping and transshipment in key industries.
Transshipments are difficult to identify, let alone stop
Trying to curb China’s transshipment will be challenging since identifying transshipments is notoriously complex. Regulators typically rely on calculating the value-added share of a product—that is, the proportion of its total value created in a specific country through manufacturing or assembly. Yet, given the intricacy of modern global supply chains, verifying these value-added shares is both costly and difficult. Many products consist of dozens or even hundreds of components, making it extremely difficult to trace their true origins. This is especially problematic in developing countries, where regulatory enforcement capacities are often limited.
Establishing intent is another challenge. For instance, GoerTek has portrayed its expansion into Vietnam as part of a broader supply chain diversification strategy, rather than a tactic to circumvent tariffs. Differentiating between such strategic business decisions and deliberate transshipment is essential to avoid penalizing companies that are genuinely seeking to reduce costs or improve supply chain resilience. Reflecting these complications, even Washington’s definition of transshipment has been ambiguous and has evolved over time.
Beyond enforcement challenges, Southeast Asian countries face a broader geopolitical dilemma. Those identified as transshipment hubs are often the same countries with close economic ties to China. In terms of trade, most Southeast Asian economies rely more heavily on China than on the US. China is also, by far, the largest investor in the region’s manufacturing sector. This economic dependence makes it unlikely that these countries will aggressively clamp down on Chinese transshipment practices. Doing so could risk straining broader bilateral ties or driving away Chinese investment, an outcome many of these governments are keen to avoid.
Implications for US-Southeast Asia ties
This does not mean that Southeast Asian countries lack an interest in maintaining strong relations with the United States. For countries like Vietnam, the US is the largest final consumer of their exports. Moreover, due to historical tensions and experiences with Chinese expansionism, many nations in the region view a close security relationship with the US as a critical counterbalance to China’s growing influence.
One might assume these countries could reduce their reliance on the US to escape this strategic dilemma. However, few viable alternatives currently exist, either economically or in terms of security.
In 2023, total US consumer spending reached approximately $19 trillion, compared to around $9.5 trillion in the EU and $7 trillion in China. For export-oriented, manufacturing-heavy economies, replacing the US market as a primary destination for goods is extremely difficult.
On the security front, no other power can currently match the US in providing credible deterrence against China’s expansionary activities, particularly in the South China Sea. Although regional concerns over the durability of US commitment have grown, Southeast Asian countries, including Vietnam, see no near-term substitute for American security guarantees.
These structural realities will shape US relations with key Southeast Asian players in the immediate future. The Trump administration is likely to continue pressing for concrete measures to limit Chinese transshipments. Countries such as Vietnam, Cambodia, and Laos may signal agreement in principle during negotiations, motivated by a desire to avoid steep US tariffs and deflect the administration’s more aggressive trade actions. However, their willingness and capacity to enforce such commitments will be constrained by their interest in preserving stable ties with China.
As a result, relations are likely to remain politically fraught, with periodic flare-ups and tariff volatility on the horizon.
