America’s Loss Is the Rest of the World’s Gain

The twisting tariff tale continued last weekend as America and China met in Switzerland for talks. To the surprise of many based on financial publications we follow, the two economic behemoths reached a (temporary) reprieve, agreeing to lower tariffs on most goods for 90 days. From Wednesday, US tariffs on China dropped to 30% and China’s fell to 10%, which abates what we considered an effective embargo for now, but bigger tariffs aren’t off the table.^[i] Markets jumped, and this development understandably grabbed headlines this week.^[ii] However, data released last Friday indicate businesses may already have started adapting in other ways. It is still early days. But China’s April trade data suggest triple-digit US tariffs are re-routing—not vaporising—commerce, an avenue that would likely prove a positive surprise if it persists, in our view.

First, the numbers: China’s exports rose 8.1% y/y, slowing from March’s 12.4% but more than doubling consensus expectations of 4.0%^[iii] Much of the analysis we saw focussed on exports’ fall to America (-21.0% y/y), but perhaps the bigger surprise to us is that this isn’t a -100% drop, given the 145% tariff was an effective embargo. Then again, the de minimis exemption on parcels valued under $800 (£600) lasted through 2 May, so we don’t think April’s data don’t tell the full story. But on a more positive note, America’s plunge overshadows export growth to the rest of the world, from Indonesia and Vietnam to Canada and the EU. (Exhibit 1)

Exhibit 1: China’s April Exports to Select Trade Partners

Source: FactSet, as of 9/5/2025

The jump in exports to Southeast Asia was especially notable, in our view. Chinese shipments to Association of Southeast Asian Nations (ASEAN) member countries rose 8.1% y/y in April, with 20%+ growth to several major economies, including Indonesia (36.8%), Thailand (27.9%) and Vietnam (22.5%).^[iv] Exports also rose 14.9% y/y to Singapore and Malaysia, respectively.^[v]

In our view, that export surge to Southeast Asia may reflect some transshipping, as companies with factories in China reroute goods through nearby countries to evade the most draconian tariffs. Those experts who know how to mitigate duties’ bite are in hot demand today, e.g., customs brokers who can ensure shipments are properly classified and compliant with frequently shifting US trade policy.^[vi] 

However, transshipping isn’t a new phenomenon. According to our research, businesses have routed goods through Southeast Asia (and Vietnam in particular) for years—going back to the first Trump administration’s first trade spat with China in 2018 – 2019. Back then, America first announced a 30% duty on imported solar panels (which come mostly from China) in January 2018, eventually leading to 10% duties on $200 billion of Chinese goods that went into effect September 2018.^[vii] America and China’s tit-for-tat tariffs weighed on bilateral trade, as one may reasonably expect. But China’s exports to Southeast Asia jumped … as did US imports from the region. Data from both sides strongly hint goods still flowed from China to the US, just with a pitstop in Vietnam or elsewhere close by. (Exhibits 2 – 3)

Exhibit 2: China Exports, Q2 2015 – Q4 2019

Source: FactSet, as of 12/5/2025. Year-over-year change in China exports to ASEAN, Vietnam and the United States, quarterly, Q2 2015 – Q4 2019.

Exhibit 3: US Imports After September 2018 Tariffs

Source: FactSet, as of 13/5/2025. Year-over-year change in US imports from ASEAN, Vietnam and China, quarterly, Q3 2018 – Q4 2019.

In our view, tariffs are economically unproductive policy since they make trade more difficult, especially in the country that imposes them. But elsewhere, the effect is generally milder, and it can even be a catalyst for more positive developments. America’s tariffs don’t prevent the rest of the world (about 75% of global gross domestic product, a government-produced measure of economic output) from exchanging goods, and they seem to be incentivising freer trade elsewhere.^[viii] The UK and India just inked a free trade deal whilst the EU is in trade talks with Malaysia, Indonesia and Thailand—and just opened conversations with the United Arab Emirates.^[ix] Japan and Vietnam agreed to boost bilateral trade, and South Korea and Czechia met last week to discuss comprehensive economic cooperation.^[x] The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a 12-member trade agreement that includes Australia, Japan and the UK, is considering new applicants (e.g., Costa Rica and Indonesia).^[xi]

Granted, we don’t think these agreements will quickly unleash a huge wave of commerce. Our research shows free-trade deals tend to take effect gradually, over many years, and markets price in those effects quickly, too. But trade fundamentals overall appear more positive outside the US than in, likely contributing to non-US stocks’ outperformance this year.^[xii]

As for America, we don’t dismiss the lingering uncertainty, and we won’t have a good sense of how transshipping worked until the US’s detailed April trade data hit the wires in early June. But this preliminary cross read, at least, shows businesses have the means and motive to adapt, even if the newfound Trump-China accord hits the rocks.