Tensions with Washington prompted Chinese companies to redirect their export strategies, prioritizing markets such as Indonesia, Vietnam, and Malaysia.
Chinese exports rose by 4.8% year-over-year in May, falling short of the 6% forecast by economists and marking a slowdown from the 8.1% growth recorded in April. At the same time, imports dropped by 3.4%, further amplifying concerns about the weakening of the world’s second-largest economy. Despite these fluctuations, the trade surplus reached USD 103.2 billion in May.
One of the most striking data points was the sharp decline in exports to the United States, which fell 34.5% year-over-year to USD 28.819 billion. In recent months, bilateral tensions between Beijing and Washington have remained in the spotlight, driven by disputes that extend well beyond tariff measures.
Surge in Exports to Southeast Asia
In response to the strained relationship with the United States, Chinese companies sought out alternative markets. Data show that exports to Southeast Asia rose by 14.8% year-over-year, while shipments to the European Union increased by 12%. Within Southeast Asia, record export volumes to Indonesia, Malaysia, Thailand, and Vietnam contributed significantly to this growth.
According to a report by Citigroup, the surge in exports to Southeast Asia was directly linked to Chinese companies’ efforts to bypass US tariffs. Many firms reportedly rerouted goods through neighboring countries to retain access to the American market while avoiding prohibitive duties.
Johanna Chua, Head of Emerging Markets Economic Research at Citigroup, noted that the tariffs imposed during the Trump administration prompted many firms to reconfigure their trade routes. In this context, exports to countries such as Malaysia and Vietnam reached historic highs.
The report highlights a “notable rise in correlation” between Southeast Asia’s imports from China and its exports to the United States, suggesting that a portion of these goods may simply be reclassified under a different country of origin before crossing the Pacific.
Domestic Pressures on the Chinese Economy
Despite efforts to maintain momentum amid an unfavorable international environment, China’s economy is also facing domestic headwinds. The Consumer Price Index declined by 0.1% in May, marking the fourth consecutive month of contraction, a trend widely attributed to falling food prices and subdued domestic demand.
The industrial outlook appears even more strained. The Producer Price Index dropped 3.3% year-over-year, the steepest decline in nearly two years. This indicates that Chinese manufacturers are earning less for their goods while having limited flexibility to raise prices to offset rising costs.
A Truce That Failed to Ease Tensions
Amid ongoing frictions, China and the United States agreed to a 90-day trade truce during negotiations held in Geneva. The deal temporarily halted further tariff increases that had marked an escalating dispute with global repercussions. The pause was intended to provide breathing room for companies already grappling with declining trade flows and shifting export routes aimed at avoiding tariffs.
The agreement also included expedited deliveries of strategic inputs, such as rare earth elements, from China to the United States. Additionally, both sides committed to intensifying technical discussions in sensitive areas, including semiconductors and intellectual property. However, political and commercial tensions continued even during the truce, fueling skepticism among analysts about its practical impact. The pause ultimately fell short of reversing the broader climate of uncertainty.
Outlook Following the Trade Truce
President Donald Trump stated that the Chinese government would supply all required rare earth elements and finished magnets to the United States in advance. He also confirmed that US tariffs on Chinese imports would remain at current levels, with duties reaching up to 55% on Chinese goods, while China would maintain a 10% levy on US imports.
Just days after announcing the truce, the US president accused China of violating the agreement signed weeks earlier, though he did not specify which part of the deal had allegedly been breached. In the meantime, China is increasingly turning to its Southeast Asian neighbors, seeking to offset the slowdown in trade with the US and sustain its export momentum in an environment that continues to show little sign of easing.
Logistics Implications of Rerouted Trade
This reconfigured trade network, marked by triangulated exports to circumvent tariffs, also introduces new logistical demands. Traceability, delivery timelines, and customs regulations across multiple jurisdictions have become non-negotiable factors. For many technology companies that rely on sensitive components (such as antennas, servers, or network equipment), the success of these strategies hinges on logistics partners capable of handling intricate operations, including cargo consolidation, warehousing, import processing, compliance, and final delivery to data centers or mission-critical facilities.
At Aerodoc, we have been supporting technology companies with these services for over two decades.
To learn more about how we can support your operations, please contact our team of experts.
Q&A
- How do Chinese exports affect tech supply chains in Latin America? The increase in Chinese exports to Asia is shifting global logistics routes, limiting the availability of certain components in Latin America, and raising import costs. Regional tech companies are facing delays and a growing reliance on intermediary suppliers.
- What legal risks arise from routing Chinese exports through third countries to bypass U.S. tariffs? This practice may violate U.S. customs regulations and breach rules of origin, leading to fines, cargo seizures, and trade penalties. It’s vital to conduct traceability audits and comply with origin certification requirements.
- How do restrictions on Chinese rare earth exports impact the global tech industry? Limitations on rare earths and key components are driving up prices and disrupting the production of semiconductors, magnets, and batteries. High-demand electronics manufacturers are being forced to secure alternative sources.
- What logistics strategies support the efficient transportation of Chinese exports to tightly regulated markets? Cargo consolidation, early customs clearance, and the use of operators with regulatory expertise help reduce delays and exposure. Additionally, real-time visibility tools strengthen shipment tracking for sensitive cargo.
