Trump's tariffs were supposed to hurt China. They've made it dominant in ASEAN instead.

The logic of the tariff war was always that squeezing China out of the US market would weaken it. Two years in, that's not what the data shows.

Nikkei Asia's survey across 63 major categories of goods found Chinese companies expanded global market share in nearly 40% of them. China now holds the top rank in at least 16 strategic sectors. In Southeast Asia specifically, China-ASEAN trade hit 4.34 trillion yuan in the first half of 2026 alone, an 18.2% jump from a year earlier, putting two-way trade on track to exceed $1 trillion for the full year.

The mechanism isn't complicated. US tariffs pushed manufacturers to route supply chains through ASEAN countries to maintain access to the American market. That worked for a while. But what it actually did was pull enormous amounts of Chinese machinery, components and intermediate goods into Vietnam, Malaysia, Indonesia and Thailand, because those factories needed inputs from somewhere. China supplied them. ASEAN's export growth came partly on the back of deeper integration with Chinese manufacturing, not separation from it. Intermediate goods, things like parts and components, rose 24.5% to account for roughly two-thirds of China-ASEAN bilateral trade in H1 2026.

Washington noticed

In March the US launched a trade investigation into alleged excess industrial capacity against 16 trading partners, including Indonesia, Malaysia, Thailand and Vietnam. The message was that ASEAN couldn't just be a laundry for Chinese goods. Tariff rates for major ASEAN economies came in at 19-20% in the subsequent deals.

Those rates only took full effect in August. The hit to ASEAN export volumes hasn't fully shown up in the data yet. When it does, the question is where those countries turn. China is already the largest trading partner for the bloc. The US is fourth.

ASEAN governments have been careful not to publicly pick a side. The economic ministers' meeting in Manila earlier this year committed to not retaliating against US tariffs. But not retaliating and not drifting toward Beijing are two different things, and the trade numbers suggest the drift is already happening regardless of what anyone says in official statements.

The tariff strategy assumed economic pressure would isolate China. What it's done instead is accelerate a reorganisation of Asian trade that leaves China more central to regional supply chains than it was before.