China recently reported a record trade surplus of $1.1 trillion, suggesting that it has successfully navigated U.S. tariff policies aimed at curbing its export strength. Despite trade tensions initiated during President Donald Trump’s administration, China’s manufacturing sector has thrived by leveraging secondary manufacturing markets, particularly in Southeast Asia.
Data indicates that Chinese companies have increasingly relocated manufacturing to countries such as Vietnam, Thailand, and Malaysia to mitigate the effects of tariffs imposed starting in 2018. This strategy has resulted in increased trade flows, with Southeast Asian countries seeing up to a 20% rise in imports of Chinese goods year-over-year, according to logistics experts.
A report from supply chain management firm Exiger highlights that a significant portion of goods exported from China is rerouted through these countries for assembly before reaching the U.S. market. For instance, Vietnam accounted for 80% of shipments to the U.S. from companies wholly owned by Chinese entities in 2024.
The increasing trade flows have contributed to an expanding U.S. trade deficit, which nearly doubled to $56.8 billion, with the deficit with China decreasing slightly by $1 billion to $13.9 billion. The U.S. trade deal with Vietnam has included measures to address this rerouting, but tracking the origin of products remains complex.
Concerns have arisen regarding labor practices associated with this rerouted manufacturing. Exiger’s analysis indicates the potential use of forced labor in both China and Southeast Asian markets, undermining labor conditions and contributing to economic risks in these regions.
In light of these developments, China’s efforts to circumvent tariffs and optimize its supply chains have raised challenges for U.S. enforcement agencies. Despite U.S. tariffs generating significant revenue, experts suggest that China’s manufacturing dominance may be increasingly bolstered through these circumventive practices.
Overall, while U.S. efforts aimed at limiting China’s economic strength are ongoing, it appears that China has adapted its strategies effectively, maintaining its competitive edge in global manufacturing.
Source: Reported based on publicly available information from www.cnbc.com.
