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Southeast Asia ‘Is Not Such a Safe Haven'

Southeast Asia ‘Is Not Such a Safe Haven'

Yahoo29-03-2025

Geopolitical uncertainty looms large and in charge over supply chain professionals' heads this year—and alternative sourcing comes with its own challenges.
Inspectorio's newly released State of Supply Chain Report 2025 shows that, even as supply chain professionals see opportunity for growth in other areas of their business, they feel keeping up with U.S. President Donald Trump's tariff regime has to be the top priority.
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The supply chain management software company's data shows that 95 percent of all executives surveyed indicated that tariffs are a primary disruptor to their businesses.
Daniel Smith, vice president of product marketing at Inspectorio, said, in previous years, sustainability and compliance have emerged as key focus points for supply chain industry professionals. The shift in prioritization marked a deviation from what the industry has expressed concern over in recent years.
'To see the rise of geopolitical strife, and especially tariffs, in the minds of the market as a really important topic that's overshadowing everything else, was a huge shift,' Smith said. 'It's extremely pressing. If you have slim margins as it is, and then you get a tariff placed on [a] piece of your product or material in your product or the finished good itself, that can really erase your margin.'
More than one in five executives indicated that, in response to that threat, their company has looked to diversify their supplier base, and 36 percent of executives said they are looking to either relocate production or shift sourcing to low-risk regions.
So far, the winner for alternative sourcing as some brands and retailers shift away from China has been Southeast Asia. Among respondents evaluating alternative locations for sourcing, about four in 10 executives indicated they've turned their interest there.
Mark Burstein, SVP Americas at Inspectorio, said companies have shown a particular interest in Vietnam, Bangladesh and Cambodia. That's likely in part because those nations have existing manufacturing infrastructure suited to handle some degree of scale.
But that's now becoming an issue, Burstein said, noting that, for brands and retailers looking to enter Vietnam, in particular, factories may not have the availability to create and ship finished goods their way.
'Everyone jumped into Vietnam, and they just don't have the capacity, so it's not like you're going to find a bunch of factories with available capacity,' he said.
And, even if companies can strike deals with manufacturers throughout Southeast Asia, it doesn't mean they've found a fireproof solution; Vietnam, Cambodia, Bangladesh and a slew of other countries could still be subject to new tariff requirements from the Trump administration, Burstein noted.
'Southeast Asia is not such a safe haven—it's [just] a safe haven to get out of China,' he said.
The alternatives don't seem popular among respondents; just over 20 percent said they would look to shift toward South Asia, while nearly 13 percent have an eye on Eastern Europe and about 7 percent are looking toward Latin America. Africa seems to be on the fringes of respondents' considerations on sourcing, with just over 5 percent saying they have prioritized it as an alternate sourcing location.
For Burstein, that feels like it could be a mistake. He recently lobbied legislators to renew the African Growth and Opportunity Act (AGOA) later this year, alongside the American Apparel and Footwear Association (AAFA). That's partly because he believes it could be a viable option for brands looking for a quick exit from China and a new set of long-term manufacturing partners.
But despite the opportunity in Africa, companies don't seem to be biting. That's partially because the continent would need a high degree of further investment to make scalable sourcing viable—and the looming expiration of AGOA could be driving some of the trepidation about sourcing from Africa.
What's more, Smith noted, some of the existing investment in the continent has come from Chinese companies, which could spell trouble if Trump continues to show an interest in bringing the hammer down on China. Effectively, the continent faces the plight of every other region vying for new business: businesses have no way of knowing whether tariffs will soon hit African nations.
'China has been investing heavily in Africa for quite a while,' Smith said. 'If you switch some sourcing over to Africa, you might think you're in the clear, but we know that this administration is using tariffs as a weapon. They have certain outcomes that they're wanting; they want certain nations to feel the pain. There's no reason why they wouldn't say, 'Okay, I see you're importing that from Africa, but that factory was owned by a Chinese company…and we're not cool with that, so we're going to slap the tariff on you anyway.''
That kind of strategy isn't totally out of the question; Trump has already proposed a port tax on container shippers with ties to China—whether because they have China-operated ships, China-built ships or orders with Chinese shipbuilders for future ships. The proposal hasn't been finalized, and has faced heavy backlash from the industry because of the gargantuan cost increases it could see logistics companies paying, but Trump proposed it in a play to bring some shipbuilding to the United States. If the president maintains similar aspirations for U.S. apparel manufacturing, locales with factories associated with China could be susceptible to a similar blueprint.
Those kind of additional tariffs on any alternative sourcing destination could leave brands and retailers feeling defeated, paying higher prices for goods and passing those costs on to the end consumer. But, as the arena stands today, Burstein said he has yet to see movement from some companies whose sourcing strategies could leave them in limbo. In essence, nowhere's safe, but China certainly isn't.
'People are just waiting to see what happens, because things change every day—even sometimes, every hour, they're changing,' he said. 'People don't want to make a rash decision.'

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"China is hurting, yes—but they still hold the upper hand on critical resources, and they know how to use them." Any lessening of tensions — and freer flow — of these mineral resources in China would be a significant boost to the global economy with China holding outsized leverage in both the reserves and processing capacity of these key building blocks for everything from computers to electric vehicle batteries to medical devices. Likewise, the US offering concessions on export controls would be a significant move after years where successive US administrations have wielded these controls — especially around the design and manufacture of semiconductors — by saying they need to be tight on China for national security reasons. Read more here. May's Consumer Price Index (CPI) report will be released on Wednesday and its expected to show that prices rose a bit faster than in April. Yahoo Finance's Allie Canal breaks down what to look out for and how President Trump's tariffs are impacting what consumers are now paying for goods and services. Read more here. Now that the US-China trade truce is back on track, both sides are keen to ensure it stays that way. China's Vice Premier He Lifeng said both sides need to now 'show the spirit of good faith in abiding by their commitments and jointly safeguard the hard-won results of the dialogue.' Bloomberg News reports: Read more here. Reuters reports: Read more here. Despite the US-China trade truce resuming the pain from President Trump's tariffs remains in China, especially among small exporters. Reuters reports: Read more here. Japan warned Wednesday that tariffs threaten its economic growth, the government said in a monthly report. Reuters reports: Read more here. Reuters reports: Read more here. Reuters reports: Read more here. A federal appeals could said on Tuesday that President Trump's sweeping tariffs can continue for now. This is a significant win for Trump, who introduced tariffs back in March and declared "Liberation Day," as he saw them as a way to free the US from what he called unfair trade practices. Bloomberg News reports: Read more here. Early summer sales for Inditex, the owner of fashion retailer Zara, came in weaker, as the company missed expectations for first quarter sales on Wednesday. President Trump's tariffs have impacted consumer demand in the US and other major markets. Reuters reports: Read more here. After weeks of back and forth, the US and China have agreed on a framework to implement the Geneva consensus that helped ease tariffs. The breakthrough came after two days of talks in London, including a marathon session on Tuesday. US Commerce Secretary Howard Lutnick said both sides had to "get the negativity out" before making progress. 'Now we can go forward to try to do positive trade, growing trade,' he said. As part of the deal, Beijing has promised to speed up shipments of rare earth metals, a crucial component for global auto and defense industries. Washington will ease export controls. This marks the first sign of movement on key issues. The proposal will now be presented to President Trump and China's Xi. Still, the discussions also did little to resolve a long-standing issue: China's trade surplus with the US. 'Markets will likely welcome the shift from confrontation to coordination,' said Charu Chanana, chief investment strategist at Saxo Markets. 'We're not out of the woods yet — it's up to Trump and Xi to approve and enforce the deal.' The meeting was set up after a phone call between the two leaders, following weeks of each side accusing the other of breaking the Geneva commitments. Both countries had used chips, rare earths, student visas and ethane as bargaining tools. Josef Gregory Mahoney, a professor at East China Normal University, said trust, not money, has been the biggest casualty of the trade war. 'We've heard a lot about frameworks,' he said. 'But the fundamental issue remains: Chips versus rare earths. Everything else is a peacock dance.' Bloomberg reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data

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