When US President Donald Trump returned to office 12 months ago, he promised to reduce the country’s trade deficit in goods and services, which had ballooned to about $918.4 billion, or 3.1% of gross domestic product, in 2024.
Invoking the International Emergency Economic Powers Act (IEEPA), the United States imposed “reciprocal tariffs” on U.S. trading partners starting April 2 with the aim of “correcting trade practices” that the White House blamed for hollowing out the U.S. manufacturing industry.
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However, preliminary trade figures show that while the U.S. global trade deficit fell in 2025, as Trump had hoped, the tariffs have not had the intended effect in Southeast Asia and East Asia. Rather than reducing U.S. dependence on these two regions, both major manufacturing hubs, the tariffs simply reorganized supply chains.
“If you squeeze the balloon in one direction and people still want the product, whatever it is, they’re going to get it from somewhere else,” said Deborah Elms, head of trade policy at the Heinrich Foundation in Singapore.
“Trade will move where trade opportunities are found,” she told Al Jazeera. “We have changed the way we trade, but we are not done with trading.”
Exports from China to the US have decreased
One of President Trump’s biggest targets was China, the world’s factory and a major source of exports to the United States.
Months of retaliatory tariffs imposed by the U.S. and China ended with an average U.S. tariff on Chinese goods of 47.5% as of November 2025, according to the U.S.-based Peterson Institute for International Economics.
The final obligations may change after President Trump’s meeting with Chinese President Xi Jinping is scheduled for April, but it has already led to a significant drop in trade.
Amid the turmoil in 2025, China’s exports to the United States fell by 20%, according to Chinese customs data.
The U.S. Census Bureau, which publishes U.S. trade statistics, reported that the goods trade deficit also fell significantly. The value of imports from China fell from $438.7 billion in 2024 to $266.3 billion in 2025, according to U.S. Census data.
The overall U.S. goods trade deficit is According to the same data, it will reach $245.5 billion in 2024 and $175.4 billion in 2025.
However, U.S. trade statistics tell a different picture for Southeast Asia, where manufacturers are an important part of the “Chinese Plus One” supply chain.
Southeast Asia benefits
The region was a prime target of President Trump’s “Liberation Day” tariffs, which set temporary tariffs of 17% to 49% on Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Tariffs were subsequently negotiated to 19-20 percent through bilateral trade agreements, with some sector-specific exemptions granted.
Although higher than before, it is still lower than the tariffs the United States imposes on China.
U.S. trade in goods with Thailand, Indonesia and the Philippines all increased in 2025, even though these countries face a 19% “reciprocal tariff” rate, according to census data. The US trade deficit in goods increased by 11% relative to Indonesia, 23% relative to Thailand, and an astonishing 38% relative to the Philippines, from a relatively modest $4.9 billion to $6.8 billion.
Cambodia’s trade in goods with Malaysia remained unchanged from 2024 to 2025, despite the 19% tariff, according to census data.
The biggest change in terms of dollar value in Southeast Asia was in Vietnam, where the U.S. trade deficit in goods increased by more than $20 billion from $123.4 billion in 2024 to $145.7 billion in 2025, despite 20% tariffs, according to the same data.
Is China simply rerouting goods?
Part of this shift can be explained by Chinese goods being rerouted to the United States through Southeast Asia (a practice known as transshipment), but Jichun Huang, China economist at UK Capital Economics, told Al Jazeera that supply chains continue to move.
“Although rerouting exports to the U.S. through neighboring countries is playing a role, it is not the main driver,” he said in an email.
“Instead, there is a more fundamental reconfiguration of supply chains. ASEAN is importing more machinery and intermediate goods from China, which are used to produce exports to the United States,” she continued, using the Association of Southeast Asian Nations’ acronym.
Chinese exporters are expanding their customer base beyond the United States, as reflected in China’s record global trade surplus of $1.19 trillion in 2025, announced last week by the Beijing General Administration of Customs.
The White House last year threatened to impose 40% tariffs on “transshipments,” but Nick Marlo, chief economist for Asia at the Economist Intelligence Unit, said the term is becoming increasingly difficult to define as supply chains stretch across Southeast Asia and goods cross multiple borders during manufacturing.
“I think one of the reasons why the US is not moving on this issue is that transshipment is difficult to define,” he told Al Jazeera. At the same time, he said, the United States is preoccupied with trade and foreign policy concerns in other parts of the world.
Taiwan trade boom driven by AI
President Trump has threatened to impose new tariffs on European countries opposed to US efforts to take control of Greenland and on countries that continue to trade with Iran following Tehran’s massive crackdown on anti-government protests.
Meanwhile, experts like Elms say Trump has shown he can have conflicting, even conflicting, goals for the U.S. economy. The US president may want to reduce the US trade deficit, but he also wants to boost the AI boom and US-based manufacturing.
Nowhere is this more evident than in the deal with Taiwan, which President Trump has previously accused of stealing its semiconductor industry from the United States.
U.S. government data shows trade with Taiwan is booming even as trade in other parts of East Asia is sluggish. The U.S. deficit with Taiwan ballooned by more than 50% from $73.7 billion in 2024 to $111.8 billion in 2025, thanks to a tariff carve-out on Taiwanese semiconductors and derivatives.
Trump’s “reciprocal tariffs” on Taiwanese goods (agreed last week at 15%) only affected about 30% of exports, said Christie Tsung Tzu-Su, director of the Taiwan ASEAN Research Center at the China Economic Research Institute in Taipei.
Still, the surge in exports caught many observers off guard, she told Al Jazeera.
“This is very different from what anyone expected. Taiwan and other countries expected exports to be weak last year, but thanks to this stockpile and the AI boom, demand for semiconductors is very strong.”
Su said similar demand explains the surge in imports from Vietnam, which has moved up the rankings to become one of the US’s top chip suppliers. He predicted the surge would continue until 2026 in both locations.
Elms said it was unlikely that President Trump would take action against Taiwan on the chip issue, despite the U.S.’s growing trade deficit.
She acknowledged the US president’s “desire to reduce the trade deficit.”
But he added, “Trump loves the stock market boom as a result of AI.”
“If Mr. Trump had a choice between a lower overall trade deficit or a booming stock market, I think he would definitely vote for the stock market,” she said.
What’s next?
President Trump’s “reciprocal tariffs” face a legal challenge in the U.S. Supreme Court, so it’s unclear whether the tariffs will continue. Experts told Al Jazeera that even if the court rules, lifting the tariffs could take months, if not years.
Priyanka Kishore, director and chief economist at Asia Decode in Singapore, told Al Jazeera that the US midterm elections in November could dampen President Trump’s enthusiasm for tariffs as prices rise in the country.
“There’s a lot of uncertainty at the moment. There are two very strong schools of thought. One is that he has many other paths forward,” said Priyanka Kishore, director and chief economist at Asia Decode in Singapore. “And the other thing is that public sentiment is against him. He doesn’t have the public support that he used to have.”
