BLOG — Oct. 20 2025
Transshipment: Outlook and implications for ASEAN
Key Takeaways
- Increased US Scrutiny: The US is intensifying its scrutiny of Chinese exports redirected through Association of Southeast Asian Nations (ASEAN) countries, potentially leading to stricter rules of origin.
- ASEAN Economic impact: Economies like Malaysia, Singapore, Thailand, and Vietnam may face higher tariffs on exports with low domestic value content (DVC).
- China+1 Strategy: Mainland China is redirecting exports to ASEAN countries as part of its "China+1" strategy to maintain market access amid US tariffs.
- US-China Trade Dynamics: ASEAN has become a crucial player in US-China trade dynamics, with its share of US imports increasing significantly.
- Investment Trends: Chinese investments in ASEAN are rising, particularly in manufacturing, as countries like Vietnam and Thailand attract significant foreign direct investment.
- Transshipment Trade Compliance Challenges: ASEAN countries are likely to struggle with meeting potential new US rules of origin requirements, which could adversely affect their export competitiveness.
How Is Increased US Scrutiny Impacting Transshipment Trade in ASEAN?
The US has ramped up its examination of transshipment trade, focusing on Chinese goods that are being redirected through ASEAN supply chains as a strategy to circumvent tariffs. This scrutiny is likely to result in stricter rules of origin (ROO), which define the local content required for goods to benefit from lower tariffs.
ASEAN economies, particularly those with low domestic value content (DVC), such as Malaysia, Singapore, Thailand, and Vietnam, may find themselves at a disadvantage. If the US enforces higher tariffs on these transshipped goods, transshipment trade could face significant disruptions across regional supply chains, leading to economic challenges for these nations.
What Role Does the China+1 Strategy Play in Shaping China-ASEAN Trade?
In response to US tariffs, mainland China is increasingly redirecting its exports through ASEAN as part of its "China+1" strategy. This approach not only helps mainland China maintain access to markets like the US and EU but also strengthens China-ASEAN trade links by channeling more goods through the region. As part of this strategy, transshipment trade has become a critical tool for maintaining export flows while reducing tariff exposure.
At the same time, Chinese investment in ASEAN has surged, particularly in manufacturing sectors in Vietnam, Thailand, and Indonesia. This trend underscores ASEAN's growing importance as a strategic hub for Chinese exports.
How Are US-China Trade Dynamics Shifting Through ASEAN?
As the trade landscape shifts, ASEAN's role in US-China trade dynamics and China-ASEAN trade becomes more pronounced. The region has overtaken the US as mainland China's largest export destination, reflecting a significant realignment in trade patterns. In the first half of 2025, the share of Chinese exports to the US has decreased, while transshipment trade through ASEAN has risen sharply.
This shift highlights the changing dynamics of global trade and poses new challenges for ASEAN countries as they navigate regional supply chains while managing strategic relationships with both the US and mainland China.
What Compliance Challenges Are Likely to Emerge?
The potential introduction of stricter rules of origin requirements by the US poses compliance challenges for ASEAN countries. Many of these nations currently meet or exceed the existing 40% DVC threshold set by ASEAN agreements.
If the US adopts more stringent standards akin to those in the United States-Mexico-Canada Agreement (USMCA), several ASEAN members, particularly Malaysia and Singapore, may struggle to comply. This could disrupt transshipment trade, lead to an increased reliance on foreign inputs and a decline in self-sufficiency in exports.
What Is The Outlook for Transshipment Trade and China-ASEAN Trade Dynamics?
The transshipment trade outlook for ASEAN presents challenges and opportunities. As the US continues to scrutinize trade practices and mainland China redirects its exports, ASEAN countries must adapt to these changes to maintain their competitiveness in the global market. The interplay between US trade policies and Chinese investments strategies will undoubtedly shape the future of trade in the region, making it imperative for ASEAN nations to bolster their compliance systems and enhance their domestic value content in exports.
The evolving transshipment trade landscape presents both challenges and opportunities for ASEAN. By understanding these dynamics, stakeholders can better navigate the complexities of international trade and position themselves for success in an increasingly interconnected world.
—With contributions from Jeffery McElroy
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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