The Strategic Intent Behind the U.S. “Transshipment Clauses” and China’s Response

Recently, the United States has introduced “transshipment clauses” in new trade agreements with countries like Vietnam and Indonesia. While these provisions appear to target the circumvention of tariffs through third-country routing, their design clearly reflects a strategic intent to target China. In essence, they represent a key component of the U.S. effort to promote the “de-Sinicization” of global supply chains.

These clauses impose high punitive tariffs, strengthen rules-of-origin verification, and deliberately keep origin definitions vague—thereby granting U.S. authorities broad discretion to increase the cost and risk of Chinese goods entering the U.S. market via Southeast Asia. In the case of Vietnam, some goods deemed to be “transshipped” may face tariffs as high as 40%, compared to just 20% for direct local exports. Indonesia’s agreement similarly imposes extra restrictions on goods not classified as locally sourced, further raising the uncertainty and compliance burden for Chinese products re-exported through the region.

More notably, the targeted sectors—lithium batteries, solar panels, and critical minerals—closely overlap with China’s core export strengths. These provisions align with U.S. tariff hikes on China’s “new three” (electric vehicles, lithium batteries, and photovoltaics), collectively forming a multi-layered containment strategy aimed at blocking China’s industrial chain from expanding overseas. At the same time, the agreements impose market access conditions that require Vietnam and Indonesia to adopt U.S.-led standards in areas such as technology norms and data regulation. This effectively pressures them to decouple from China in terms of supply chain integration, trade rules, and policy orientation. The U.S. is essentially offering market access in exchange for strategic alignment—a shift that reflects the growing role of geopolitics over market logic in global trade.

Particularly noteworthy is the fact that these transshipment clauses are set to take effect on August 1, 2025—the same date as the next round of U.S. tariffs on China. This synchronicity reveals a high level of coordination and long-term planning, underscoring that these measures are not isolated trade tools, but part of a broader strategy to reshape global industrial networks. The U.S. is attempting to construct a parallel supply system in Southeast Asia that is centered on itself and excludes China, pushing regional economies to “choose sides” at the supply chain level and thereby building a de facto “China-free network.”

In response to this challenge, China must act on multiple fronts. First, it should deepen the local integration of Chinese enterprises operating in Southeast Asia—enhancing compliance, transparency in sourcing, and operational localization—to reduce the risk of being labeled as “transshipment.” This includes joint ventures, co-invested industrial parks, and local branding initiatives. Second, China should negotiate clear and enforceable rules of origin with its trading partners to prevent the misuse of vague standards as disguised trade barriers. Third, it is critical to diversify export markets by accelerating outreach to emerging regions such as the Middle East, Latin America, and Africa, thereby reducing overdependence on the U.S. Fourth, China should reinforce self-sufficiency in key industries—particularly in batteries, solar energy, and electric vehicles—by strengthening domestic supply chains and enhancing economic resilience.

In addition, China needs to improve its trade risk alert systems and regulatory guidance mechanisms to help companies navigate increasingly complex compliance environments. It should also assertively participate in global trade rule-making through multilateral platforms like the WTO, while building bilateral and regional mechanisms that promote fair, transparent, and non-discriminatory trade standards.

Ultimately, the transshipment clauses signify more than a technical adjustment—they mark a turning point where global trade is increasingly shaped by security priorities and geopolitical alignment. To safeguard its position, China must respond proactively, think long-term, and adapt strategically to this evolving international landscape.