S-E Asia's Transshipments a Target as US Takes Aim at China Trade

Some analysts believe the goal is to wean the region away from Chinese supply chains

- Ovais Subhani

US President Donald Trump is dragging South-east Asian countries deeper into his trade war with China, insisting they crack down harder on Chinese exporters allegedly using them to dodge his tariffs, analysts said.

After complaining for years, the Trump administration has finally zeroed in on the region's transshipment trade – a logistics strategy to facilitate the efficient movement of goods through strategically located hubs.

The US, however, deems a sizeable portion of the goods that are transshipped via South-east Asia in general, and Vietnam, Indonesia and Malaysia in particular, as part of an illicit tariff evasion scheme.

Some analysts believe the ultimate goal of the focus on transshipment is an attempt to reshape South-east Asia's trade dynamics and wean the region away from Chinese supply chains.

The US formalized that aim in its preliminary trade deal with Vietnam announced on July 2.

Vietnam, which emerged as a key alternative manufacturing hub after the start of the US-China trade war in 2018, agreed earlier in July to a deal framework that cuts planned US tariffs to 20 per cent from the 46 per cent level threatened in April when Mr Trump launched his reciprocal tariff policy.

But goods that the Trump administration deems to be illegally transshipped through Vietnam will be subject to a 40 per cent levy.

Days later, the US also made similar deals with Indonesia and the Philippines.

While the details of these deals are still sketchy, Vietnam, Indonesia and Malaysia have publicly vowed to address concerns over the misuse of their territories as transshipment hubs to circumvent US export curbs and tariffs.

Singapore, the region's largest transshipment hub, has so far not attracted any public comments from the US on the subject.