China’s concern over losing trade leverage in Southeast Asia — especially with countries such as Vietnam and Cambodia — amid its tariff standoff with the U.S. is more than just an economic issue. It carries strategic implications that could ripple into the national security arena and reshape regional dynamics in the Indo-Pacific.
China’s economic strategy at risk
Beijing’s current model involves exporting intermediate or finished goods to Southeast Asian nations, particularly Vietnam and Cambodia, which then reexport to the U.S. This allows China to blunt the impact of American tariffs by rerouting trade through these regional partners.
If Vietnam and Cambodia strike tariff or supply-chain alignment deals directly with Washington, cutting China out, it could destabilize one of Beijing’s key workarounds. Beijing and its trading partners in the region are grappling with two significant issues.
- Loss of trade buffer zones: Chinese firms use Vietnam and Cambodia as platforms to circumvent tariffs, effectively laundering origin labels. A tighter U.S.-Vietnam or U.S.-Cambodia trade framework may include provisions to block such backdoor exports.
- Fear of becoming dumping grounds: Southeast Asian economies may become reluctant to absorb excess Chinese goods that can no longer find American buyers, particularly if doing so risks economic blowback or sanctions from the U.S.
Diplomatic urgency for Beijing
Reflecting China’s urgency to shore up influence, President Xi Jinping is on a three-nation tour of Vietnam, Cambodia and Malaysia.
Beijing fears a domino effect: if smaller Southeast Asian states align more closely with Washington economically, they may also shift strategically, potentially allowing greater U.S. military presence, intelligence-sharing and tech cooperation in the region.
For the U.S., this would strengthen economic security diplomacy. By tightening economic ties with Vietnam and Cambodia, the U.S. can further embed security cooperation under the Indo-Pacific Strategy umbrella.
It would also restrain Chinese influence. Economic realignment could erode Beijing’s Belt and Road foothold, particularly in Cambodia, where Chinese infrastructure investment has surged.
It could also control Beijing’s so-called gray zone activities — including cyber intrusions, maritime coercion, or disinformation — using proxies in Southeast Asia.
U.S. national security benefits
From a national security perspective, any weakening of China’s ability to leverage Southeast Asia for economic or strategic gain reduces Beijing’s influence over U.S. supply chains and diminishes its reach in the South China Sea corridor.
There are at least three clear benefits for the U.S.
- Logistics and intel advantage: Stronger bilateral ties with Southeast Asian countries could improve U.S. access to critical maritime routes, ports and digital infrastructure.
- Tech transfer risks: If U.S.-aligned nations reduce dependency on Chinese hardware and software, there is a lower risk of backdoor surveillance and intellectual property theft.
- Regional stability: The more economically intertwined these nations become with Washington, the more likely they are to support regional rules-based norms, resisting Beijing’s revisionist agendas.
What might appear as a commercial tug-of-war has deep strategic undercurrents. If Vietnam and Cambodia pivot more firmly toward the U.S., China’s ability to insulate itself from tariff pain and project influence through economic diplomacy will be weakened.
This is a strategic opportunity for Washington to solidify its economic security alliances in Southeast Asia, fortify its Indo-Pacific footprint and constrain China’s asymmetrical power projection in the region.
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