3 Statements 1 Strategy Southeast Asia Races to Hedge Amid 46 Percent Tariffs

Just as Trump’s second trade war rears its head with tariffs as high as 46% on Southeast Asian countries, China and Vietnam issued a joint statement that reverberated across the region. This was quickly followed by similar declarations from Malaysia and Cambodia, signaling a decisive shift toward strategic alignment with China.

At the core of the China-Vietnam document lies an ambition to deepen their comprehensive strategic partnership and create a shared future community. Behind the diplomatic language is a sobering economic reality: 70% of Vietnam’s exports depend on the US and China, and the new American tariffs target Vietnam’s crucial textile and electronics industries.

Vietnam’s relationship with the US is strikingly one-sided. In 2024, it exported $119.6 billion worth of goods to the US but imported only $15 billion, creating a trade surplus of $104.6 billion—equivalent to nearly 30% of Vietnam’s total exports. Since 2018, Vietnamese exports to the US have grown 243%, while imports rose just 10%.

By contrast, China and Vietnam have cultivated deeply intertwined supply chains. In 2024, Vietnam imported $161.9 billion from China and exported $98.8 billion, with a trade deficit of $63.1 billion, triple the level six years ago. A stunning 65% of Vietnam’s manufacturing output depends on Chinese inputs. In fact, 80% of Vietnam’s US-bound exports contain Chinese components.

The dynamic is clear: China supplies, Vietnam assembles, the US consumes. Any disruption to this loop could erase $200 billion in annual re-export value for Vietnam—nearly a third of its GDP.

Trump’s tariffs risk unraveling this balance. On one hand, excluding Southeast Asia from new tariffs risks turning the region into a backdoor for Chinese goods. On the other, enforcing the duties could inflict damage on American consumers, increasing inflation by up to 2 percentage points, and slow global growth by 1.2%, according to the IMF.

The vacuum left by Washington is being filled swiftly. China signed 45 cooperation deals with Vietnam, from semiconductor parks to cross-border rail, effectively stabilizing supply lines. Chinese FDI into Vietnam grew 35% in Q1 2025, capturing 28% of all new foreign investment. Vietnam’s economy, where foreign firms account for 71.8% of exports, depends heavily on this investment.

Other nations are following suit. In April alone:

• China and Malaysia launched a rail project with CRRC leading tech support.

• China and Cambodia signed 30 cooperation agreements, spanning everything from AI to customs, healthcare, and logistics.

73% of Southeast Asians see China as economically dominant, and 60% doubt US security assurances. Their survival tactic? Stay neutral, profit from both sides. As a Singaporean scholar observed, Southeast Asia is turning “the risk of choosing sides into the reward of staying balanced.”