China's exports to Southeast Asia increase due to US tariffs
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A recent Citigroup report shows that Chinese exports to several Southeast Asian nations have hit record levels as firms shift shipments to avoid rising US tariffs. This raises concerns about the impact on local industries in countries like Vietnam, Thailand, and Indonesia. China’s push into Southeast Asian markets comes after a steep drop in its direct exports to the United States. Johanna Chua, head of emerging-markets economic research at Citigroup, noted in the Tuesday report that higher US duties have prompted exporters to reroute goods through nearby countries. As a result, shipments to Indonesia, Malaysia, Thailand, and Vietnam all reached their highest monthly totals on record. In Indonesia, the surge has been especially apparent in textiles, where imports from China climbed to a new peak. Local garment makers, already reeling from weak demand, have laid off thousands of workers this year. Cheaper Chinese fabrics and clothing now flood markets, putting additional strain on an industry that has struggled to compete on price. Since early 2023, overall Chinese export prices have been on a downward trend, and textile prices have fallen even faster. Meanwhile, exports to the US plunged by just over a third in May, the sharpest drop since February 2020, after Washington slapped on steeper levies amid an ongoing trade dispute. China may have dodged US tariffs by exporting via middle countries Citigroup’s report also highlights a “significant increase in correlation” between the rise in Southeast Asian imports from China and those countries’ own exports to the US. That pattern suggests some of the goods may simply be transshipped, sent to a third country before onward shipment to America, to dodge higher tariffs. US officials have focused on this practice in talks with Vietnam and Thailand, both of which have agreed to tighten rules around certificates of origin. As…
