ASEAN in the Sandwich: Economic Impacts of the US-China Trade War

By: M Hasbi Ribhi D S

In the beginning, maybe some of us used to think that China was the creator of fake technology, copycat products, and that almost no one likes them—but many people still use them.

Someone once asked, “What brand is your cellphone? If it’s from China, it won’t last long.” Assumptions like this are similar to those made by America before they realized that their own dominance, especially in technology, could be overtaken by Chinese innovation. China never stagnated—they advanced in 5G, artificial intelligence, electric vehicles, and many other fields. Okay, that’s just a little introduction.

It started when Trump raised tariffs on imported goods from other countries, which was then countered by China. Eventually, America and China entered a tariff war. America raised import tariffs to over 100%, and China responded by doing the same and even deciding not to use American goods and brands anymore.

At first glance, this may seem like a war only between China and America. But in reality, this war has affected—and even threatened—the economies of surrounding countries, especially ASEAN. How could this be? ASEAN has had a stable, positive economic trend, and if ASEAN’s GDP were combined, it would become the 5th largest economic power in the world, with a total of 3.6 trillion USD, surpassing India’s GDP of 3.568 trillion USD. It’s even estimated that in the next 5 years, ASEAN’s GDP will be the 4th largest in the world, surpassing Japan, which is currently experiencing economic decline—”If Asia becomes one.”

According to McKinsey & Company, one of the “Big Three” (McKinsey, Bain, and Boston Consulting Group) in the management consulting industry, in 2024, the average Southeast Asian country would experience 5% economic growth, including Vietnam, whose growth was the highest last year at over 7%. Even Thailand, which was previously the only country in ASEAN with negative growth, rose above 3% in 2024—surpassing China’s growth rate of 2–3%. It’s no wonder that ASEAN is becoming a major consideration in the global economy, especially as it lies on the strategic trade route of the Malacca Strait.

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But behind this positive economic development, ASEAN faces a serious problem—the trade and tariff war between these two global giants. Before we talk about its impact on Asia, let’s understand the background of the trade war more clearly.

It began with the American president, Donald Trump, deciding to increase import tariffs on various foreign goods, including Chinese imports. China then responded by imposing higher tariffs on American products—something that continues to this day.

So, why did America raise import tariffs on China? According to the BBC, America wanted its own people to buy more American-made products. This, in turn, would increase domestic tax revenue and encourage investment in the U.S., especially since America is facing a trade deficit (exports are lower than imports). From America’s point of view, this move does make sense. The Bureau of Economic Analysis (BEA) reported that America’s monthly trade deficit at the beginning of 2025 reached between 120 and 130 billion USD. That’s one of the reasons Trump raised tariffs—to fix the deficit. It aligns with his famous slogan MAGA: “Make America Great Again.” No wonder he wanted Americans to stop depending on foreign goods.

Still, the effects of this decision have spread to other countries, even across the world—including us in ASEAN. According to Mari ElkaPangestu, an economist and former Minister of Tourism of Indonesia, ASEAN is now under the threat of cheap Chinese goods. One of the reasons China has an advantage in trade competition is because they can produce goods at very low prices. Yes, there are still many stigmas about the poor quality of Chinese products, but in reality, their sales remain high.

After Trump officially announced new tariffs on Chinese goods, much social media content revealed how many so-called luxury brands are actually produced in China—at extremely low costs, far below their selling prices.

So, why are goods from China so cheap? According to Victor Gao, Vice President of the Center for China and Globalization (CCG) in Beijing, one main reason is China’s high production chain efficiency, especially in manufacturing. There are many factors behind this, including well-distributed infrastructure and nearly complete industrial facilities. As one of our teachers said—CMIIW—”Whatever God creates, China will make a copy.”

Unfortunately, although China’s production level is very high, domestic consumption is relatively stagnant or even declining. That’s why China needs new markets—specifically, consumers outside China. As a result, they export their goods abroad. And yes, many of us are the ones buying them. Unlike America, which has a trade deficit, China enjoys a trade surplus of up to 2 trillion USD per month.

Now, back to ASEAN. Since Chinese products can no longer enter the U.S. due to the new tariffs, China clearly needs new consumers outside America. That’s why China is now turning to ASEAN—an easier market to target for goods originally intended for the U.S. market.

According to CNA Insider, these products create serious issues in Southeast Asia. When Chinese products enter ASEAN—even with high taxes—the prices still remain low. Compared to locally produced goods, Chinese imports are often still cheaper. As a result, domestic products struggle to compete.

This is clearly seen in our own country—through the rise of “thrifting.” According to CNA Insider, the flood of Chinese textile and clothing products has caused Indonesia’s largest textile company, Sritex, to suffer massive losses—eventually going bankrupt. This forced the company to lay off nearly 50,000 workers.

According to APSYFI, from 2023 to 2024, at least 60 textile factories have closed, and around 800,000 workers were affected—250,000 of them laid off due to the influx of Chinese textile imports.

The terrifying part is, this all happened before Trump’s new tariff policy. What will happen when even more Chinese products, once meant for the U.S., are redirected here? And yes, this is just one impact—there are many more, including the effect on solar panels, electric vehicles, batteries, and even nickel mining here in Indonesia.

To sum up, we in Southeast Asia are stuck in the middle—or, as some call it, “a sandwich”. Chinese goods come in cheaply, while our products entering America face high tariffs, as they’re seen as potentially affiliated with China. Meanwhile, China loses a key market in the U.S., so it redirects its surplus to ASEAN—with prices still much lower than what local producers can offer.