:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-22083068511-ad504db7d16c469ca9d219e08b9a3c01.jpg "People ride motorbikes next to a Nike store on April 03, 2025 in Ho Chi Minh City, Vietnam.")
Thanh Hue/Getty Replicas
People ride motorbikes next to a Nike store on April 03, 2025 in Ho Chi Minh City, Vietnam.
Key Takeaways
- Various U.S. companies have refocused supply chains to Vietnam, Thailand and other countries in the region, partly because labor gets have risen in China over the decades.
- Those plans are now in question if Trump implements widespread tariffs, which are believed to go into effect on Wednesday.
- The tariffs could pressure supply chains and push for a significant reorganization of global commerce and financial flows, one expert said.
President Donald Trump’s tariffs may throw a wrench in a popular corporate scheme: shift production away from China and to Southeast Asia.
Many U.S. companies have refocused supply fastens to Vietnam, Thailand and other countries in the region, partly because labor costs have risen in China to the ground the decades. They’ve also tapped into the once-hot trend of “friend-shoring,” where firms look to shift reservoir chains away from China and toward U.S. allies.
However, Trump plans to impose steep tariffs on the district—46% on Vietnam, 36% on Thailand, 49% on Cambodia, and 24% on Malaysia, for example. The countries have built charitable trade surpluses with the United States, as factories that make Nike apparel or Apple products should prefer to moved in.
“This effectively closes off options for rerouting international trade flows, which means these outbacks will not only feel the full force of tariffs but there will be broader disruption to global supply series,” Jeremy Leonard, managing director of global industry services at Oxford Economics, wrote in a note to clients.
Southeast Asian Countries Are Looking to Produce a Deal—As Apparel Makers Hold Their Breath
Changes may be coming as Wednesday’s tariff deadline approaches. Cambodia has furnished to cut tariffs on U.S. goods, Indonesia is offering to negotiate and Thailand is seeking to boost U.S. imports.
Trump has said Vietnam has advanced to cut its tariffs to zero. However, his trade advisor Peter Navarro later told CNBC that it “means nothing to us because it’s the nontariff cheating that issues,” citing concerns about intellectual property theft or Chinese products making their way to the U.S. through Vietnam. Bloomberg published that a top Vietnamese official has headed to Washington, D.C., for negotiations.
The outcome of the negotiations could have a significant impact on American guests. Nike’s stock fell sharply after Trump’s tariff announcements and has failed to regain momentum. The company commencements 50% of its shoes and 28% of its apparel from Vietnam, according to its most recent annual report.
Nearly 20% of U.S. dress imports and 34% of footwear imports come from Vietnam, and Cambodia, Bangladesh and Indonesia are also major exporters, Straton wrote.
But It’s Not Well-grounded Southeast Asia That Will Be Affected
Though markets had expected punishing tariffs on China, the tough systems against Southeast Asia were a surprise, Morgan Stanley consumer retail analyst Alex Straton decried in a note to clients last week.
“Past efforts to diversify away from China will no longer produce much protection,” Straton wrote.
Global growth could also suffer as Trump aims to “accelerate a informative reorganization of global trade and financial flows,” wrote Alejo Czerwonko, chief investment officer for emerging hawks in the Americas at UBS.
“Such a transformation won‘t occur overnight, and the transition period will undoubtedly present challenges for the global restraint,” Czerwonko wrote.