Looking to Dodge U.S. Tariffs, Chinese Manufacturers Set Up Shop in Southeast Asia

In recent years, there has been a discernible shift in manufacturing dynamics as a growing number of Chinese manufacturers establish operations in Southeast Asia. This trend is primarily motivated by the intention to bypass U.S. import controls amidst escalating tariffs on Chinese goods under the Trump administration. However, uncertainties linger over the efficacy of this strategy, as heightened scrutiny could target Chinese companies registered overseas.[para. 1][para. 2]

One notable instance of this trend is observed in the industrial parks operated by Amata Corp. PCL across Southeast Asia. In 2024, these parks attracted nearly 90 foreign-funded factories, with 75% being Chinese. This exemplifies the region’s growing allure for Chinese firms seeking to mitigate the impacts of U.S. tariffs.[para. 3]

Amata Corp. has a rich history in industrial real estate development, with operations spanning Thailand and other Southeast Asian nations like Vietnam and Laos since 1988. A quarter of the approximately 1,600 factories in Amata’s properties are Chinese-owned, and there are plans to increase this presence significantly.[para. 4][para. 5]

This manufacturing migration aligns with a broader shift where Chinese firms are expanding their presence in Southeast Asia, akin to the strategy previously employed by Japanese companies. The objective is primarily to circumvent the burgeoning trade surplus with the U.S., pivoting production locations to regions such as Thailand to evade higher tariffs while continuing to serve American markets.[para. 6][para. 7][para. 8]

In a recent announcement, President Donald Trump revealed plans to impose an additional 10% duty on Chinese imports, set to be effective from March 4, following a prior increase in tariffs.[para. 9]

Thailand has emerged as a hotspot for Chinese foreign direct investment, signaling a shift from traditional labor-intensive sectors to high-tech industries. Notably, Chinese electric vehicle manufacturers are posing significant competition to entrenched Japanese carmakers in Thailand.[para. 10][para. 11]

Additionally, the influx of Chinese consumer electronics manufacturers has become prominent in Thailand, contributing to a burgeoning industrial landscape that aims to establish comprehensive supply chains. This growth is supported by the Thai Board of Investment’s efforts to attract foreign investments that bolster the local economy.[para. 12]

Besides Thailand, Southeast Asian nations like Vietnam and Indonesia present lucrative opportunities for Chinese investors due to their vast markets, involvement in the Belt and Road Initiative, and favorable trade relations with the U.S.[para. 13]

However, challenges remain for Chinese manufacturers exporting goods to the U.S. from Southeast Asia. The imposition of anti-dumping and countervailing duties has considerably slowed down the growth of Chinese firms, particularly in the photovoltaic sector. This may prompt these companies to shift towards asset-light investment models, such as contract manufacturing, to continue their business operations in the region.[para. 14][para. 15][para. 16]

The U.S. government could potentially view these overseas investments by Chinese companies as threatening, leading to possible sanctions. There is a possibility that differentiated standards could be used to trace and identify ultimate controllers of target companies, particularly in sensitive sectors like microchips, biotechnology, and telecommunications.[para. 17][para. 18]

In a move that could exacerbate Sino-U.S. tensions, on February 21, President Trump signed a memorandum instructing a high-level committee to restrict Chinese investments in strategic U.S. sectors, which further complicates the economic relations between the two countries.[para. 19]