Trump's tariffs leave China's neighbours with an impossible choice

When US President Donald Trump hit China with tariffs in his first term, Vietnamese entrepreneur Hao Le saw an opportunity.

His company is one of hundreds of businesses that have emerged to compete with Chinese exports that have increasingly been facing restrictions from the West.

Le's SHDC Electronics, which sits in the budding industrial hub of Hai Duong, sells $2m (£1.5m) worth of phone and computer accessories every month to the US.

But that revenue could dry up if Trump imposes 46% tariffs on Vietnamese goods, a plan that is currently on hold until early July. That would be "catastrophic for our business," Le says.

And selling to Vietnamese consumers is not an option, he adds: "We cannot compete with Chinese products. This is not just our challenge. Many Vietnamese companies are struggling in their own home market."

Trump tariffs in 2016 sent a glut of cheap Chinese imports, originally intended for the US, into South East Asia, hurting many local manufacturers. But they also opened new doors for other businesses, often into global supply chains that wanted to cut their dependence on China.

But Trump 2.0 threatens to shut those doors. And that's a blow for fast-growing economies like Vietnam and Indonesia that are gunning to be key players in industries from chips to electric vehicles.

They also find themselves stuck between the world's two biggest economies - China, a powerful neighbour and their biggest trading partner, and the US, a key export market, which could be looking to strike a deal at Beijing's expense.

In the days after Trump unveiled his sweeping tariffs, South East Asian governments scrambled into deal-making mode.

In what Trump described as a "very productive call" with Vietnamese leader To Lam, the latter offered to completely scrap tariffs on US goods.

The US market is crucial to Vietnam, an emerging electronics powerhouse where manufacturing giants like Samsung, Intel and Foxconn, the Taiwanese firm contracted to make iPhones, have set up shop.

Meanwhile, Thai officials are headed to Washington with a plan that includes higher US imports and investments. The US is their largest export market, so they are hoping to avoid the 36% levy on Thailand that Trump may reinstate.

"We will tell the US government that Thailand is not only an exporter but also an ally and economic partner that the US can rely on in the long term," Prime Minister Paetongtarn Shinawatra said.

The Association of Southeast Asian Nations (Asean) has ruled out retaliation against Trump's tariffs, instead choosing to emphasise their economic and political importance to the US.

In these uncertain times , Xi Jinping is tyring to send a steadfast message: Let's join hands and resist "bullying" from the US.

That is no easy task because South East Asia also has trade tensions with Beijing.

In Indonesia, business owner Isma Savitri is worried that Trump's 145% tariffs on China means more competition from Chinese rivals who can no longer export to the US.

"Small businesses like us feel squeezed," says the owner of sleepwear brand Helopopy. "We are struggling to survive against an onslaught of ultra-cheap Chinese products."

One of Helopopy's popular pyjamas sells for $7.10 (119,000 Indonesian rupiah). Isma says she has seen similar designs from China going for around half that price.

"South East Asia, being close by, with open trade regimes and fast-growing markets, naturally became the dumping ground," says Nguyen Khac Giang, visiting fellow at the ISEAS Yusof-Ishak Institute in Singapore. "Politically, many countries are reluctant to confront Beijing, which adds another layer of vulnerability."

"South East Asia had to think about whether they really wanted to offend China. Now this complicates things," says Chong Ja-Ian, associate professor at the National University of Singapore.

China's loss could be South East Asia's gain.

Hao Le, in Vietnam, says he has seen a surge in enquiries from American customers scouting for new electronics suppliers, outside of China: "In the past, US buyers would take months to switch suppliers. Today, such decisions are made within days."

Malaysia, with sprawling rubber plantations and the world's largest medical rubber glove maker, has nearly half the world's market for rubber gloves. But it is poised to grab a bigger share from its main competitor, China.

The region still faces a 10% baseline tariff, like most of the world. And that is bad news, says Oon Kim Hung, president of the Malaysian Rubber Glove Manufacturers Association.

But even if the paused tariffs kick in, he says, customers will find paying an additional 24% on Malaysian gloves vastly preferable to the 145% levy they will jave to cough up for Chinese-made gloves.

"We're not exactly jumping with joy, but this may well benefit our manufacturers, as well as those in Thailand, Vietnam and Cambodia."

Additional reporting by Bui Thu and Tessa Wong