US Beats China As ASEAN’s Top Export Market; Southeast Asia Gains Big From US, China Rivalry

In a key shift in global trade dynamics, the Association of Southeast Asian Nations (ASEAN) saw its exports to the United States surpass those to China for the first time in six quarters. 

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This trend, reflecting changes in the global supply chain, highlights the growing importance of the US market for ASEAN countries amidst ongoing trade tensions and economic shifts.

According to data compiled by Nikkei Asia from ASEAN’s secretariat, individual governments, and local media, ASEAN exports to the US totaled $67.2 billion in the January-March quarter of 2024. 

This figure surpassed the $57 billion in exports to China during the same period. Experts attribute this trend to the increasing US demand for semiconductors and electrical parts from ASEAN, contrasted with China’s slowing economy.

Malaysia exemplified this trend, with exports to the US increasing by 8% year-on-year, while exports to China decreased by 3.3%. An economist quoted in the Nikkei report pointed out that this shift is driven by both structural and cyclical factors. 

Rising costs and political tensions, particularly the trade disputes between the US and China, are prompting American companies to relocate their procurement from China to other regions, including Malaysia.

Vietnam saw the most significant gain among ASEAN members, with exports to the US rising by 24% to $25.7 billion in the first quarter. 

This surge is notable compared to Thailand’s $12.6 billion and Singapore’s $12.0 billion in US-bound exports. In 2023, the US accounted for 28% of Vietnam’s exports, whereas China received 17%.

Thailand also experienced a notable shift, with first-quarter exports to China falling by 5.1% year-on-year. The decline affected various products, including natural rubber, tapioca, and fruit. In contrast, exports to the US increased by 9.8%, driven by agricultural and agro-industrial products. 

A major factor in Thailand’s export performance was the decrease in auto exports, with the number of vehicles produced for export dropping by 5% to 273,680 units.

While ASEAN’s exports to China and Hong Kong combined totaled $69.4 billion in the first quarter of 2024, exceeding those to the US, the gap has narrowed significantly compared to previous years. 

In the first quarter of 2021, ASEAN’s exports to China and Hong Kong were $86.4 billion, while exports to the US were $59 billion. This shift indicates a broader trend of ASEAN countries diversifying their export markets and reducing reliance on China. 

Southeast Asia Gains From US-China Rivalry

Southeast Asia is experiencing a rapid surge in investment as businesses from the US and China are drawn to the region’s political stability and expansive markets. The region’s pivotal role as a middle ground in the escalating competition between the US and China continues to draw global investors. 

Between 2017 and 2022, investment in the 11 Southeast Asian countries grew by 40%, outpacing investment increases in China, Latin America, and Africa. This growth period coincides with rising trade tensions between the US and China. 

The US is the leading investor in capital projects in Southeast Asia, spending $74.3 billion on plant construction and other ventures between 2018 and 2022. China follows closely with $68.5 billion in investments during the same period. 

Several US firms perceive Southeast Asia as an excellent location to reestablish supply chains due to its proximity to China, a major manufacturing hub, and stable political and social environment.

US companies have mainly targeted semiconductor-related investments in countries such as Singapore and Malaysia. In contrast, Chinese firms have directed their investments towards projects like electric vehicle plant construction in Thailand and mining development in Indonesia. 

In September 2023, after President Joe Biden visited Vietnam, the US Department of State emphasized Vietnam’s potential as a partner for ensuring a diverse and resilient semiconductor supply chain. 

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US-based Amkor Technology opened a $1.6 billion semiconductor plant in Bac Ninh in October 2023. The plant is expected to become the company’s largest manufacturing base and create around 10,000 jobs.

On the other hand, in July 2023, Malaysia announced that the major Chinese carmaker Zhejiang Geely Holding Group would invest $10 billion in Perak to establish an automobile production base. Plans for an electric vehicle plant in Thailand are also being considered.

US and Chinese companies are also acquiring businesses in Southeast Asia. For example, in 2020, the US company Kimberly-Clark announced its plan to acquire Softex Indonesia for $1.2 billion. Similarly, China’s Alibaba Group has invested billions in Lazada, a major e-commerce company based in Singapore.