Reform or perish: Asian factories must shape up or ship out in the face of Chinese export aggression

Since US President Donald Trump started hiking tariffs last year, many commentators have called attention to Asian exporters’ resilience. But the narrowly concentrated gains in Taiwan, Vietnam and Thailand have been driven primarily by electronics, obscuring the sharp divisions that a protectionist US and an export-reliant China are perpetuating across the region. Beyond electronics exports, other sectors are being undercut, leading several governments to announce targeted support measures for firms and consumers, even as headline growth has headed higher.

At the same time, policymakers across the region have scrambled to negotiate trade deals with the US to secure a lower tariff rate than their competitors.These tensions are set to persist as the US and China continue to rely on trade policies to advance their strategic objectives. While the Trump administration frames lower bilateral trade deficits as a way to strengthen national security, China is supporting advanced manufacturing for self-reliance in critical technologies and growth. Neither has much regard for the economies caught in between.

The regional spillovers are large. Consider tariffs. In the US, domestic substitution to offset costlier imports is constrained by the absence of a mature manufacturing ecosystem, which may take years to develop.

And even then, cost considerations may keep low-value-added manufacturing offshore. Thus, import demand is likely to be redistributed among trade partners, benefiting those with advanced abilities and lower tariffs.This is what happened when massive US tariffs put China at a disadvantage vis-à-vis other Asian economies. Asean countries offset 55% of the decline in China’s share of US imports and India accounted for