With Donald Trump’s recent election victory, a new wave of factory relocations from China to Southeast Asia is anticipated, as companies brace for potential 60% tariffs on Chinese goods entering the U.S. Southeast Asia, already a key manufacturing hub for automotive and electronics industries, stands to benefit as firms seek alternatives to Chinese production to avoid new tariffs. However, experts caution that while Southeast Asia could see increased investment, the region also faces trade policy uncertainties that could affect its own export relationships with the U.S.

A Shift in Supply Chains: Southeast Asia Poised for Growth

The industrial landscape in Southeast Asia has been evolving rapidly in recent years as companies diversified away from China to reduce risks from trade tensions and rising labor costs. Trump’s initial presidential term from 2017 to 2021 had already set the stage with tariffs on Chinese goods between 7.5% and 25%, but the prospect of a 60% tariff under a renewed Trump administration has escalated the urgency for many companies. Industrial parks and economic zones in countries like Thailand, Vietnam, and Malaysia are ramping up preparations to accommodate an influx of new businesses.

WHA Group, one of Thailand’s largest industrial estate developers, is witnessing a substantial increase in interest from Chinese firms looking to relocate. “There was already a shift toward Southeast Asia, but this round will be more intense,” said WHA’s CEO, Jareeporn Jarukornsakul. WHA is preparing by expanding its workforce, adding Chinese-speaking staff, and developing land to support new factories. The company’s industrial parks in Thailand and Vietnam, covering over 12,000 hectares, are poised to welcome businesses displaced by U.S.-China trade tensions.

In the past year alone, approximately two-thirds of the 90 factories opened in Southeast Asia by Thailand’s Amata Corp were companies relocating from China, according to Vikrom Kromadit, the company’s founder and chairman. He believes that Trump’s trade policies could further double this number, with Amata even planning new industrial projects, including one in Laos, to accommodate the growing demand.

Southeast Asia’s Manufacturing Boom: Opportunities and Strategies

Southeast Asia’s appeal is not just about avoiding tariffs. The region offers a competitive manufacturing environment, with nations like Thailand, Vietnam, and Malaysia emerging as important players in the automotive, electronics, and semiconductor sectors. Thailand, for instance, has attracted over $1.4 billion in Chinese investments for its electric vehicle industry, a sector projected to expand significantly in the coming years. Thailand’s Commerce Minister, Pichai Naripthaphan, expressed optimism about the country’s role in the shifting supply chain. “We want a lot of investment from China so we can sell to America,” he said. “The Americans love us, the Chinese love us—we don’t have to choose sides.”

Malaysia also hopes to leverage the shift in supply chains. With a goal of drawing more than $100 billion in new investments into its semiconductor industry, Malaysia could capture a larger share of the U.S. market, especially as global semiconductor demand rises. Soh Thian Lai, president of the Federation of Malaysian Manufacturers, noted that this realignment in manufacturing could open new doors for Malaysia to increase exports to key markets.

Vietnam, with its $90 billion trade surplus with the U.S. as of September, has also benefited from companies moving production out of China. However, Vietnam remains cautious about potential trade policy shifts under Trump, especially as he may consider tariffs that could impact Southeast Asian exports to the U.S.

Navigating Trade Risks: Uncertainty Ahead for Southeast Asia

While Southeast Asia stands to gain from factory relocations, there are also risks. Trump’s “America First” approach could complicate the region’s trade dynamics if Southeast Asian countries find themselves subject to tariffs or stricter trade conditions in the future. Leif Schneider, head of international law at Luther in Vietnam, warned that Southeast Asia should remain cautious of potential trade restrictions. “This shift could provide opportunities, but there’s also a risk if Trump targets other countries in the region with tariffs,” he said.

For Trump’s strategy to be successful, he may need alliances in Southeast Asia, especially given the complex interdependence of global supply chains. Jareeporn of WHA Group suggested that Trump’s approach could open doors for negotiation. “Trump will have to choose—you can be anti-China, but you’ll need to have some friends in Southeast Asia,” she said, underscoring the potential for diplomatic engagement with countries in the region.

Industrial Park Developers Gearing Up for Influx

With an expected increase in manufacturing relocations, industrial developers in Southeast Asia are expanding rapidly. WHA Group is not alone in boosting its workforce to meet demand from Chinese firms; other developers are similarly preparing for growth. Industrial parks are upgrading infrastructure, hiring Chinese-speaking staff, and working to provide smooth logistical support for new businesses. The expansion isn’t limited to current industrial zones—developers like Amata are also planning new projects, including an upcoming park in Laos linked to China’s high-speed rail network, potentially enhancing regional trade connectivity.

This shift could reshape Southeast Asia’s role in global supply chains, making it a strategic alternative for companies seeking stable and cost-effective production bases amid the evolving geopolitical landscape.

Outlook: Balancing Opportunities and Trade Tensions

While Southeast Asia has much to gain from Trump’s trade policies targeting China, regional leaders remain cautious. Countries like Thailand, Malaysia, and Vietnam recognize the opportunities to attract Chinese businesses, but they are also aware that being drawn into U.S.-China trade frictions could have adverse effects on their own exports to the U.S. Analysts highlight that Southeast Asian nations may have to engage in delicate diplomacy, positioning themselves as neutral grounds that welcome both U.S. and Chinese investment.

As companies settle into new industrial zones and local governments work to attract further investment, Southeast Asia may solidify its position as a leading manufacturing hub. Yet, the region’s long-term gains will depend on navigating a complex global trade environment shaped by protectionist policies and shifting alliances.

(Adapted from Reuters.com)

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