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25 Oct 2025 7:35
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  •   Home > News > International

    Donald Trump's trade moves with China put South-East Asian countries in the crossfire

    As US President Donald Trump visits South-East Asia amid global trade tensions, Indonesian exporters worry the region could bear the brunt of his protectionist policies.


    Read the story in Bahasa Indonesia

    Surrounded by the humming and whirring of dyeing machines and looms, David Leonardi walks around his textile manufacturing plant with a deep sense of pride and concern.

    His father started the business almost 50 years ago in the south of Bandung in West Java, the beating heart of Indonesia's textile industry.

    But in all that time, there's never been a more challenging moment for his industry than now.

    The COVID-19 pandemic struck an enormous blow to Indonesia's textile industry and, in recent years, China's export dominance in the sector has been eating away at the market for South-East Asian manufacturers.

    To add insult to injury, US President Donald Trump's so called Liberation Day tariffs have begun to put enormous pressure on export-oriented businesses, including Mr Leonardi's textile plant.

    In July, the US reached a deal with Indonesia that meant it would pay no tariffs, while goods from the South-East Asian nation would face a 19 per cent levy.

    "Mr Trump, why don't you let us do the work and supply to you?" Mr Leonardi said.

    "You have your own industries … let us do the job, you do the selling."

    Mr Trump will touch down in Malaysia this weekend for the 47th Association of Southeast Asian Nations (ASEAN) summit.

    After rewriting trade norms, the president arrives in the region on shaky ground, with his support of Israel during the Gaza war angering many in South-East Asia, particularly in Muslim-majority Malaysia and Indonesia.

    South-East Asian economies, many of them heavily reliant on their exports to the US, have already started feeling the pinch from the President's protectionist agenda.

    Most countries in the region have come away from negotiations with tariff rates of about 19 to 20 per cent.

    The tariffs have only been in place for three months but already export-dependent businesses are deeply concerned about the impact they are having on their margins.

    In a report last month, the United Nations Development Program (UNDP) warned that exports from South-East Asia to the US would be deeply affected and were expected to decline by almost 10 per cent because of tariff-induced price increases.

    Mr Leonardi is predicting a worse outcome for his business.

    "If these tariffs continue, we'll be facing a 20 to 30 per cent decline in exports to the US in the next year or two," he told the ABC.

    He was worried about the impact to his staff and Indonesian workers, having already halved his workforce and laid off more than 1,000 employees in recent years.

    "It's going to be a major problem in Indonesia," he said.

    "This is one of the only sectors which can absorb people with lower levels of education."

    US importers have already started asking his business for discounts to keep their prices competitive in the US market.

    Cheaper Chinese goods dominate South-East Asian market

    It's not just diminishing US exports from Mr Trump's tariffs that South-East Asian manufacturers are concerned about.

    During the US-China trade war in Mr Trump's first administration, many Chinese exporters diverted their goods through South-East Asia, in a bid to evade tariffs.

    The practice, known as transhipment, is now firmly on the radar of US officials.

    Transhipments are now subject to additional tariffs and have featured in bilateral trade agreements struck between the US and its trade partners this year.

    With an increasingly unpredictable United States market and heavy tariffs on transhipments, Chinese exporters have changed tack.

    Instead of South-East Asia being a transit point for Chinese goods, the region is now increasingly the destination.

    The UNDP noted that after the "Liberation Day" tariffs were announced in April, Chinese exports to ASEAN countries rose by about 20 per cent, with its export growth to the region remaining high.

    This has been one of the largest challenges for manufacturers in Indonesia, faced with a flood of Chinese goods.

    "We cannot survive," Mr Leonardi said.

    "These imported goods, the price is three to four times cheaper compared to local products.

    "Which one do you think you'd like to buy?"

    At the sprawling Tanah Abang clothing and fabric market in Jakarta, many shopkeepers did not want to speak about selling imported Chinese products, with the topic somewhat of a taboo.

    "The Chinese imports are pressuring the local products quite a bit," Farel, a market seller said.

    "It's good quality and a competitive price."

    On Wednesday, the Indonesian government moved to impose its own three-year tariffs on imports of cotton yarn products.

    The move came after lobbying by industry bodies, with one writing to the country's finance minister warning of "illegal imports and dumping of Chinese products".

    Edi Pambudi, deputy minister at Indonesia's Coordinating Ministry for Economic Affairs, said his department was monitoring the "over-supply" of Chinese products as a result of the trade conflict between the US and China.

    "We understand the US consideration in this because of their situation of trade deficits," he said.

    "But on the other side, we have to find how we can still keep a balance.

    "I think there is no country that can produce a lot of things based on their own modalities; they need other countries.

    "We have to work and how to keep the market fragmented, because if [not], the impact globally will be severe."

    Trump prioritises peace deal over tariff talks

    While ASEAN leaders will be eager to use the summit to face-time with Trump on tariffs and trade, the US president will instead be witnessing a ceasefire deal between Thailand and Cambodia.

    It has been described as the "Kuala Lumpur Accord".

    An initial ceasefire was brokered in the deadly, five-day conflict in July, but this deal will take the form of a broader ceasefire, requiring the two countries to remove mines and heavy artillery from the border.

    It had been reported by American publication Politico that Mr Trump's attendance at ASEAN was conditional on a peace deal ceremony taking place.

    The event will no doubt distract from South-East Asian leaders eagerly trying to improve bilateral relations with the US in a bid to wind back tariffs or carve out exemptions for certain products.

    In May, a joint statement of ASEAN leaders was pointed in its assessment of Mr Trump's tariffs, what it described as "global trade uncertainties".

    "ASEAN underscores that unilateral and retaliatory trade actions are counterproductive and risk exacerbating global economic fragmentation, especially when these actions create indirect impacts on ASEAN," it reads.

    Businesses, like Mr Leonardi's, will be eager for Indonesia to try and wind back tariffs, to provide some relief for exporters.

    "What happens if all these industries, not only textile, but any other sector, if they slowly collapse?" he said.

    But the flow on effect from the US-China trade war, and the threat to South-East Asian manufacturers from increased Chinese exports to the region, may be a genie that will be too difficult to re-bottle.


    ABC




    © 2025 ABC Australian Broadcasting Corporation. All rights reserved

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