Why Vietnam is clamping down on Chinese goods and trans-shipping loopholes.

Vietnam’s tariff clampdown: Ending the trans-shipping lifeline of Chinese manufacturers

Vietnam, once a silent facilitator of Chinese trans-shipped goods, is taking a decisive turn. In response to escalating global scrutiny, particularly from the United States. Vietnam has implemented strict tariffs and regulatory measures targeting Chinese goods disguised under false origins. This shift marks a significant geopolitical and economic realignment in Southeast Asia, exposing the collapse of a long-utilised loophole in global trade: trans-shipping.

The move is more than an administrative policy change; it symbolises Vietnam’s calculated choice between allegiance to its powerful northern neighbour, China, and alignment with its most lucrative export partner, the United States. It also signals the unraveling of a grey-market trade mechanism that has long underpinned China’s export economy amid intensifying tariff warfare.

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The mechanics of trans-shipping: A house of cards

For years, Chinese manufacturers exploited a legal grey zone known as origin laundering, rerouting goods through intermediary countries like Vietnam, Malaysia, and Cambodia to evade US tariffs. These goods, often only lightly processed or repackaged, would receive new certificates of origin and bypass the stiff penalties imposed on direct Chinese imports.

Videos circulating on REDnote from Malaysia recently exposed the process, showing workers grinding off Chinese fumigation marks and re-labelling packages as Malaysian. This tactic, while technically illegal, has been widespread, propping up Chinese exports during the US–China trade war.

However, this workaround is collapsing. In Vietnam, customs have begun conducting invasive inspections of shipments, opening thousands of semi-finished goods and returning non-compliant consignments to China. According to a Shenzhen-based trader, her factory’s entire shipment was denied entry despite seemingly proper documentation, highlighting a new era of rigid enforcement.

Tariffs and reciprocity: Trump’s economic domino effect

The underlying catalyst for Vietnam’s crackdown lies in Washington. Under President Trump’s re-election platform, the US reinvigorated its reciprocal tariff policy, slapping 145% duties on most Chinese goods and accusing Vietnam of being a conduit for trade cheating.

Vietnam initially attempted appeasement by cutting tariffs on US imports and expressing willingness to negotiate. Yet the White House remained firm, demanding a halt to trans-shipping. As a result, Hanoi’s Ministry of Industry and Trade introduced rigorous new rules to police certificates of origin and material sourcing.

These actions are not occurring in a vacuum. Multiple ASEAN countries have similarly tightened trade procedures. Singapore has issued stern warnings against falsifying origin documentation. Thailand uncovered 42 types of mislabelled products, and Cambodia is rewriting customs protocols to avoid becoming another scapegoat in the China–US tariff saga.

Political balancing: Vietnam’s delicate diplomatic act

Vietnam’s economic tilt toward the US comes despite political overtures from China. During a visit by Xi Jinping, China proposed an anti-US alliance under the banner of resisting “unilateral bullying”. While 45 cooperation agreements were signed, covering AI, railways, and agriculture and Vietnam’s reaction was tepid at best.

The joint communiqué between the Communist Party of Vietnam and the Chinese Communist Party contained only vague language about opposing “hegemonism”, widely interpreted as a subtle rebuke to Chinese aggression in the South China Sea. Political analyst Tong Jing Yun noted that the benefits Vietnam received were largely one-sided concessions from China, lacking strategic depth.

Just two days after Xi’s visit, Vietnamese Prime Minister Phạm Minh Chính met with US business leaders and reinforced Vietnam’s commitment to a balanced, transparent trade relationship with America. Trump also confirmed that he and Vietnam’s general secretary had discussed reducing tariffs to zero on US goods—a stark contrast to the strained rhetoric from Beijing.

Economic calculus: Why Vietnam can’t afford to side with China

Vietnam’s economic prosperity hinges on access to the US market. Last year alone, its trade surplus with the US exceeded US$123 billion, making America its most significant export destination. Vietnam is now a central manufacturing hub for Western companies diversifying away from China.

By contrast, while China offers investment in infrastructure, Vietnam remains wary of becoming entangled in Beijing’s broader geopolitical ambitions. It understands that participating in origin laundering not only jeopardises trade with the US but also risks future sanctions.

Chinese manufacturers, reliant on trans-shipment to bypass American tariffs, are now cornered. Many products—such as steel pipes, electric motors, and home appliances—require supply chains rooted deeply in China. As new laws demand that goods be substantively manufactured in the country of export to qualify for tariff exemptions, Chinese firms face a logistical and financial impasse.

Regional implications: The broader ASEAN realignment

Vietnam’s stance is mirrored across the ASEAN bloc. Countries like Malaysia, Cambodia, and Thailand are under pressure to end their roles in origin laundering schemes. Malaysia has implemented a 90-day tariff negotiation pause with the US while simultaneously urging Chinese companies not to misuse its export infrastructure. Cambodia, heavily reliant on Chinese aid, has begun talks with the US to mitigate the impact of tariffs as high as 49% on its exports.

This regional policy shift is underpinned by a broader consensus: continued access to the US market outweighs the benefits of Chinese capital and trade volume. As Taiwanese scholar Chin-Ming Shu aptly summarised, Southeast Asia’s maxim has evolved from “economic reliance on China and security from the US” to prioritising security and compliance with American-led trade norms.

The US’s global crackdown on trans-shipping

Washington isn’t limiting its efforts to Southeast Asia. It has implemented a global goods tracking system that follows products from their origin to final destination, rendering simple re-labelling tactics obsolete. Even small parcels under US$800 are now subject to tariffs, closing a loophole used by e-commerce sellers to avoid duties.

Chinese-owned vessels docking at US ports must pay exorbitant fees, and customs officials now require full documentation of the manufacturing process. The goal is clear: eliminate every viable channel for tariff evasion.

This comprehensive approach means that companies caught engaging in trans-shipping could see their exports banned entirely—not just the offending products, but all goods from that company or even their country of origin.

Economic consequences for China: A mounting crisis

For Chinese exporters, especially small- and medium-sized enterprises, the writing is on the wall. Provinces like Guangdong, Hunan, and Shanghai are already feeling the pinch. Exports to the US constitute over a quarter of total trade in some regions. The collapse of trans-shipping not only threatens factory orders but has ripple effects across retail, logistics, and services.

In places like Shenzhen, where the export economy underpins middle-class livelihoods, business owners now face layoffs, mortgage defaults, and reduced consumption. China’s overcapacity problems and sluggish domestic demand make it difficult to reroute foreign trade into the local market. The transition away from exports could take years—time many businesses do not have.

A new chapter in global trade enforcement

Vietnam’s move to impose tariffs and shut down Chinese trans-shipping is not a spontaneous policy decision—it is a strategic realignment in response to an evolving global economic order. As the US closes every avenue for origin laundering, Southeast Asian countries must choose sides.

For Vietnam, the choice is pragmatic and rooted in long-term economic survival. By aligning with US trade expectations and enforcing transparent customs regulations, Vietnam secures its role as a reliable manufacturing partner and protects access to its most valuable export destination.

As for China, its former tactics of circumventing tariffs through third countries are now untenable. Without a significant overhaul of its global trade strategy, Beijing faces economic isolation and internal unrest. The trans-shipping collapse marks the end of a decade-long workaround and the beginning of a new era in international commerce.