Proposed US-China Tariff Cuts May Alter Southeast Asian Manufacturing Strategy

For years, Chinese manufacturers have viewed Southeast Asia as a way to reduce exposure to higher US duties on goods made in China. But a new round of tariff cuts proposed by Washington and Beijing could weaken that incentive for some products, potentially changing the economics of the strategy.

A White House statement did not elaborate on the exact tariff cut levels, but the changes – if implemented as outlined by Beijing – would effectively bring duties on most of these products to below 10 per cent, according to US official data. Some products could face zero duties, depending on the product category.

The picture is different for some Southeast Asian manufacturing hubs. Vietnam, Malaysia and Thailand, which have attracted Chinese investment in low-end consumer goods manufacturing over the past decade, continue to face additional US tariffs of between 10 and 12.5 per cent. Washington imposed the duties on 60 trading partners in July following a Section 301 investigation into alleged forced labour.