_{Cranes stand above shipping containers at the Port of Los Angeles, which is the US' busiest container port, on 6 March 2020, in Terminal Island, Calif. (Mario Tama/Getty Images)}

By Jennifer Ng

China’s exports to ASEAN surged in April as it diverted shipments to the region in response to US tariffs. However, the optimism may be short-lived, as ASEAN has announced a crackdown on the transshipment of Chinese goods to the US via its member countries.

After growing for several years, the US trade deficit has ballooned to US$1.2 trillion—the largest in the world. US President Donald Trump is seeking to reduce the US' trade deficit by imposing tariffs to rebalance its trade with the world.

ASEAN is the fifth largest importer from the US. Total US imports from ASEAN amounted to US$352.3 billion in 2024, with ASEAN recording a trade surplus of US$227.7 billion with the US.

                _{Largest US Trading Partners in 2024 (in billions US$)}

Meanwhile, ASEAN is China’s largest export market. Total China exports to ASEAN stood at US$586.5 billion in 2024. ASEAN’s trade deficit with China was US$190.7 billion in 2024.

Trump’s 10% baseline tariffs and reciprocal tariffs on ASEAN aim not only to address trade imbalances with its trading partners, but also to close trade loopholes that China has exploited to bypass US duties by transshipping goods through third countries—particularly ASEAN—which then re-export these goods to the US. The Trump administration alleges that these third countries label imported Chinese goods as originating from their own country, despite adding little or no value to the products.

Tightening measures on transshipment by ASEAN will hurt China’s exports, given that ASEAN is its largest export market. Notably, Vietnam, Malaysia and Thailand are among China’s top 10 export markets. Outside of ASEAN, South Korea is China’s fourth largest export market by country. A curtailment of imports from China by these countries will hurt China’s exports.

Following Trump’s sweeping tariffs on April 2, Chinese leader Xi Jinping visited three ASEAN member states—Vietnam, Malaysia and Cambodia—from April 15 to 17 to strengthen trade ties.
 

Vietnam

After Xi’s visit to Vietnam on April 15, Vietnam’s Ministry of Industry and Trade (MOIT) issued a directive on the same day to crack down on illegal transhipment of goods to the US and other countries as it tries to avoid US tariffs.

China is Vietnam’s largest source of imports. Total goods imported from China amounted to US$161.9 billion in 2024. Vietnam recorded a trade deficit of US$63.1 billion with China.

The US is Vietnam’s largest exporter, with total goods exported to the US at $136.6 billion in 2024, up 19.3% from 2023. Vietnam has a trade surplus with the US of $123.5 billion in 2024, an 18.1% increase over 2023. It faces a 46% reciprocal tariff on exports to the US, barring the negotiation of a satisfactory deal with the US by July.

The directive said trade fraud is likely to increase with the US tariffs and prevention of trade fraud is the key to avoid sanctions.

Under the directive, officials at the trade ministry, customs and other agencies were instructed to strengthen supervision and inspection of imported goods to establish their origin, especially raw materials imported for production and subsequent export.

In addition, the directive called for new stricter procedures to be implemented to inspect factories that claim their goods are made in Vietnam. Authorities will also tighten supervision of Vietnamese companies with a sudden increase in applications for certificates of Vietnamese origin.

         _{The major trading partners for mainland China 2024 (in billions US$).}

Malaysia

Malaysia’s Ministry of Investment, Trade and Industry (Miti) announced on May 5 that it will take additional measures to curb any offences involving transshipment of Chinese goods to the US via Malaysia’s entry or exit points.

The US is Malaysia's third largest export market with total exports to the US at US$52.5 billion.  Malaysia has a trade surplus with the US at US$24.8 billion in 2024. Malaysia faces a 24% reciprocal tariff on its exports to the US, expected to take effect in July if a mutually satisfactory deal with the US is not reached.

China is Malaysia’s largest source of imports, totalling US$101.5 billion. As Malaysia exports more to China than it imports, it recorded a trade surplus of US$9.1 billion with China in 2024, though this surplus is smaller than that with the US.

Under the new measures, Miti will be the only body that issues non-preferential certificates of origin (NPCOs) for shipments to the US, and will cease the issuance of these certificates by previous Miti-appointed organisations like local business councils, chambers or associations. The NPCO is a document that helps to identify the origin of goods for international shipments in order to satisfy Customs or trade requirements in the importing countries, according to the Federation of Malaysian Manufacturers.

Miti said in its statement that it is unequivocally committed to upholding the integrity of international trade practices and the Malaysian government views any attempt to circumvent tariffs through wrong or false declaration including the origin of goods as a serious offence.

The measures will enhance audits of NPCO applicants, and involve collaboration with the Customs Department to investigate and take action against offenders.

The Straits Times reported that it spoke to some industry sources, who said: “Some Chinese manufacturers have used Malaysia as a transshipment hub, going as far as falsifying certificates of origin in an effort to bypass the US tariffs.” It also reported that an industry veteran, who requested anonymity due to the sensitivity of the issue, revealed that in some cases, perpetrators pay as little as MYR100 or S$30 to obtain fraudulent certificates of origin for containers bound for the US.

The Straits Times also reported that Minister for Miti Tengku Zafrul Aziz said in Parliament on May 5 that Malaysia has received “many complaints from industry partners” that “many items coming from other countries are stamped as if they come from our country”.

Thailand

Thailand informed the US on May 14 that it will crack down on transshipments through its ports, buy more US goods and improve local market access to avoid US tariffs.

The US is Thailand's largest export market with total exports of US$63.3 billion. Thailand’s trade surplus with the US stood at US$45.6 billion in 2024. Thailand faces a 36% reciprocal tariff on its exports to the US if it fails to negotiate a mutually satisfactory deal by July.

China is Thailand's largest importer, with imports from China totalling US$86 billion. Thailand’s trade deficit with China stood at US$38 billion.

Thailand’s Deputy Prime Minister Pichai Chunhavajira said the Trump administration has responded positively to Thailand's proposal. He added that Thailand is advocating for strict enforcement of rules of origin to prevent the routing of shipments from third countries through Thailand.

The proposed measures include designating 49 export categories to the US as priority items for strict monitoring, requiring all exporters of these products to undergo origin verification before applying for a certificate of origin, expanding the list of monitored items and track high-risk trade data, and cooperating with US authorities to prevent foreign goods from being falsely labelled as Thai-made.

The proposal includes strengthening cooperation in sectors such as food processing and digital technology, as well as increasing Thai investment in the US.

Thailand has also laid out steps to increase imports of US energy, agricultural products, aircraft and parts, and to provide greater market access for US farm products, including fruits and feed corn, to reduce its trade deficit with the US.

South Korea 

According to a report by the Independent Commodity Intelligence Services, the Korea Customs Service released a statement on April 21 that it has established an investigation team to crack down on illegal transshipments to align with US tariff policies.

China is South Korea's largest importer. South Korea is China’s second largest trade partner, after the US. Total goods imported by South Korea from China was US$146.4 billion in 2024.

The US is South Korea’s largest exporter, with total goods exported to the US at $131.5 billion. South Korea has a trade surplus with the US of US$66 billion in 2024 and faces 25% reciprocal tariffs for goods exported into the US if it fails to reach a satisfactory deal with the US.

The statement said that the agency identified multiple cases where Chinese goods were transshipped through South Korea, falsely labelled as Korean-made and exported to the US to evade high tariffs, including anti-dumping duties.
The agency highlighted that 75% of the total cases investigated in early 2025 involving high-value goods, particularly batteries and raw materials used in production and export, were related to exports to the US.

One of the cases involved a Chinese-established company in South Korea that imported 1.2 million Chinese-made batteries, valued at KRW74 billion, which were falsely labelled as Korean-made.