Caught in the Crossfire: Tariffs Between the USA and China Affecting ASEAN Nations

By: Avinash Zhi Yong Suriar

Illustration by Craig Stevens

In recent months, it’s no surprise to many that the global tariffs imposed by the Trump administration have changed how we view trade policies as a tool of power. On April 2nd, Trump issued an international statement that the US will implement “reciprocal tariffs” on almost every country. This has led to major effects on world trade, negatively impacting many countries.

What Are Tariffs?

Tariffs are taxes on products or services imported from other countries to make them more expensive. For example, America is placing heavy tariffs on China, including on shirts. This means that when shirts made in China are imported to the US, they become more expensive to American consumers, discouraging people from buying them. 

Why is the US doing this? In Trump’s own words, it’s because America has been “looted, pillaged, raped and plundered” by other nations for decades. He has been intentionally vague throughout his speeches, but it’s clear that he and the White House believe that because US goods have had tariffs placed on them by other countries, they deserve similar punishment as retaliation.

The original Liberation Day tariffs. (Credit: The White House)

However, this logic has been debunked by economists and found to be extremely faulty. As it turns out, there were massive mistakes in the equation used to calculate the average tariffs charged to the US by other countries, which led to the calculation of overly large tariffs and equally absurd reciprocal tariffs, nicknamed “Liberation Day tariffs”. China was slapped with an astronomical 145% tariff, more than doubling the price of all Chinese goods in the US. A week later, on April 9th, Trump announced that the tariffs for most countries would be temporarily reduced to 10% for the next 3 months. However, he made a clear exception to this ceasefire; China, which was sitting at a tariff rate of 145%, was lowered to 30%; it was clear Trump wasn’t going to let China off the hook. 

The main reason stated for this is that China is the main culprit in capturing the US market and thus limiting the country’s industrial growth, but it wouldn’t be too much of a stretch to assume that this was made as a power move by the US, considering the two superpowers’ long-standing rivalry.

In particular, Trump’s targeting of China has led to large-scale impacts for many smaller regions, including home—here in Malaysia—and the wider ASEAN region. Indeed, many Southeast Asian countries are suffering at the hands of both the direct US tariffs in addition to the knock-on effects of China losing a significant portion of its exports.

Collateral Damage

Thailand is the largest automobile manufacturer in Southeast Asia, whose value has reached approximately 12.67 billion dollars as of March 2025. Despite the industry being of significance and value to the MEDC (More Economically Developed Country), the sector has been facing increasing troubles. In 2012, during the height of the car manufacturing industry, Thailand produced about 2.4 million vehicles. That figure has since dwindled to 1.4 million cars as of last year, a decline of just over 40% in the previous dozen years. 

This was marked by automobile manufacturing giants like Subaru and Suzuki exiting the Thai car industry, along with Nissan closing 7 of its production plants in April, leading to the loss of about 11,000 jobs. Nissan cited reasons for the closures as their revenue has plummeted by 88% since April last year and was further exacerbated by the recent Trump tariffs.

Additionally, Thailand exports more to the US than any other country, making it just one of many countries suffering from export revenue losses. Now, the Thai government is desperate to reach an agreement with the US, and pledges to reduce trade surplus with America—when they export more than they import—are underway, as that is the main factor still being used to calculate tariffs.

The newly opened BYD Factory in Rayong, Thailand. (Credit: Chalinee Thirasupa, Reuters)

It’s not all bad, however; major Chinese EV (electric vehicle) manufacturer, BYD has opened its first production plant in Rayong, the car manufacturing hub of Thailand. The factory is supposedly capable of producing up to 150,000 vehicles a year and will provide approximately 10 thousand jobs. Yes, this could help cushion the job losses in the Thai car market; but for the Chinese, automation is the name of the game. It may only be years before human labour is progressively replaced with machinery, as in mainland China.

However, while Thailand is managing somewhat decently with the setbacks, the textile industry in Indonesia has almost completely collapsed. Sritex used to be the largest textile company in Indonesia, employing around 50,000 workers to produce a variety of fabrics. But in October 2024, the textile giant filed for bankruptcy, along with 36-50 other companies. In total, almost 800,000 workers have been affected. 250,000 have been laid off, others are on unpaid leave and some have had their work hours drastically cut.

That’s not the worst of it. The Trump tariffs are also strongly discouraging Chinese exports to the US, so Southeast Asia is about to, according to former Indonesian trade minister Mari Pangestu, “be hit by a tsunami of cheap Chinese goods flooding its markets.” In other words, the exports that were supposed to go to the US are now being redirected to areas of geographical proximity to China.

Indonesia, with its textiles industry playing a crucial role in its economy, now also has to fend off intense competition from richer Chinese competitors capable of producing at greater efficiency. The Chairman of the APSyFI, a textile producers association in Indonesia, said the country “cannot compete” with these technologically advanced producers.

Finally, we arrive in Malaysia. In recent years, our country’s semiconductor industry has been rapidly expanding, and as a result, many major solar panel companies have been opening factories and production plants in the country, many of which are Chinese.

The problem with the Liberation Day tariff for Malaysia is that it was added on top of existing tariffs from the Biden administration. In November last year, Joe Biden wanted America to reclaim its position as a top global solar panel manufacturer and introduced varying tariffs for international solar companies, including up to 80% for some Malaysian companies. Combined with the new blanket tariff of 10%, this has caused a massive scale-back in foreign investment in the Malaysian solar industry, including valuable support from Chinese companies like Jinko Solar, Risen Energy and Longi Green Energy.

It might kill off the whole industry

— Davis Chong, President of the Malaysian Photovoltaic Industry Association (Credit: CNA Insider)

Can ASEAN weather the storm?

Although things might look grim for many of the ASEAN countries, others are looking for the support of one of the titans involved in the battle. Many of you have heard of Xi Jinping’s visit to Vietnam, Cambodia and Malaysia in April. This recent diplomatic tour coincided with the US tariffs on China and strengthened cooperation and stability between China and Southeast Asia. 

In particular, Xi Jinping aims to increase Chinese investments in emerging advanced technology in Malaysia, with artificial intelligence being a key example. He also promises to safeguard Malaysia and other vulnerable Asian countries from the US tariffs by acting as a more reliable trading partner. Both parties agreed to sign unilateral (mutual) economic and trade cooperation agreements.

More strategically, the recent 46th ASEAN Summit of 2025, chaired by Malaysia, aimed to foster sustainability in the region. Since most countries are in the same boat, the summit allowed Southeast Asian leaders to discuss the Trump tariffs and devise potential negotiations with the United States on possibly lowering the tariffs in months to come.

Overall, the ASEAN region—and the world at large—is currently swimming against the tide to hopefully overcome the adverse impacts of the Liberation Day tariffs, and effectively negotiate with the US to either reduce or eliminate these tariffs. Until then, China will likely continue to court more nations as part of its Belt & Road Agenda, uniting many of the world’s less economically developed countries. Does this mean a new alliance is being formed, with the Red Giant at the helm?

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