China Dodges US Tariffs with Surging Exports to Southeast Asia

Trade wars spark creative rerouting—China''s exporters pivot hard to Southeast Asia as US tariffs bite.

Supply Chain Chess Move

Beijing''s trade counterplay unfolds: factories shift shipments through ASEAN neighbors, turning tariff walls into mere speedbumps. No numbers? No problem—the trendline''s clear as a container ship''s wake.

Geopolitical Arbitrage 101

When Washington hikes duties, smart capital flows where it''s treated best. This week''s lesson? Globalization always finds a way—even if it takes extra nautical miles.

Bonus finance snark: Meanwhile, Wall Street still can''t decide if this is ''transitory'' or ''structural.'' Place your bets.

China may have dodged US tariffs by exporting via middle countries

Citigroup’s report also highlights a “significant increase in correlation” between the rise in Southeast Asian imports from China and those countries’ own exports to the US. That pattern suggests some of the goods may simply be transshipped, sent to a third country before onward shipment to America, to dodge higher tariffs.

US officials have focused on this practice in talks with Vietnam and Thailand, both of which have agreed to tighten rules around certificates of origin. As the WHITE House presses for stricter enforcement, Citigroup argues that China may respond by shifting more downstream production out of China altogether, while controlling the supply of key intermediate goods.

Despite the plunge in US-bound exports, China’s overall shipments ROSE 4.8% in May compared with the same month last year. That figure fell just short of market forecasts, which had predicted around a 5% gain.

At the same time, imports into China tumbled 3.4%, far worse than the 0.9% drop economists had expected. Weak domestic demand continues to weigh on inbound flows.

Chinese exports to Southeast Asia have increased

Chinese exporters have partly offset losses in the US market by boosting sales elsewhere. Shipments to Southeast Asian countries jumped nearly 15% year-on-year, while those to the European Union rose 12% and exports to Africa surged over 33%.

Overall, China’s trade surplus climbed 25% from a year earlier to $103.2 billion in May.

The pace of export growth did ease from April, when a sharp rebound in shipments to Southeast Asia helped mask a 21% slump in US exports. In April, the broader export tally jumped 8.1%, driven largely by regional demand.

Digging into commodities, customs data show China’s rare earth exports fell 5.7% year-on-year to 5,865.6 tons in May. Those minerals are critical for high-tech applications, and Beijing has tightened controls on their shipment to strengthen its position in trade talks with Washington.

By product, auto exports led the gains, with car shipments up 22% and ship exports rising about 5% year-on-year. In contrast, smartphones and home appliances each saw around a 10% and 6% drop, respectively.

China’s Ministry of Commerce said on Saturday that it will continue to process applications for rare earth exports, citing growing demand in areas like robotics and new-energy vehicles. 

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