The announcement of the “America First Trade Policy” by President Trump on January 20, 2025 began what would become one of the most dramatic restructurings of U.S. trade policy in modern history. What started as targeted measures against China evolved into a comprehensive global tariff system that fundamentally altered the landscape of international trade, affecting billions of dollars in commerce across Asia, Europe, and beyond. This year-in-review examines the key developments, turning points, and implications of this unprecedented trade policy transformation.

Phase 1: The China Offensive (September 2024 – January 2025)

The foundation for 2025’s tariff revolution was laid in late 2024. On September 13, 2024, the U.S. finalized significant Section 301 tariff increases targeting China, including raising EV tariffs from 25% to 100%, solar cells and modules from 25% to 50%, steel and aluminum products up to 25%, EV batteries and battery parts from 7.5% to 25%, and critical minerals and cranes up to 25-100%. These measures took effect on September 27, 2024.

The pressure on China intensified as the year turned. On December 12, 2024, additional tariff hikes on clean energy inputs were announced, including solar wafers and polysilicon at 25-50% and tungsten products from 0% to 25%, effective January 1, 2025.

The most significant early 2025 development came on February 4, when the U.S. imposed an initial 10% “fentanyl tariff” on all Chinese imports, which was subsequently raised to 20% on March 3, 2025, cited as a response to fentanyl precursor exports. This marked a shift from sector-specific tariffs to broader, punitive measures against China.

Phase 2: Liberation Day and the “Reciprocal” Tariff System (April 2025)

April 2, 2025, marked “Liberation Day” with the announcement of a reciprocal tariff system that included a 10% universal tariff on all U.S. imports, effective April 5, 2025. This set off a 90-day negotiation window for trading partners to negotiate lower bands, exclusions, or access to the newly created Annex III mechanism.

Just one day later, on April 3, the administration announced Section 232 auto tariffs of 25% on autos and auto parts with global application, effective April 3 for vehicles and May 3 for parts. The rapid succession of these announcements created significant uncertainty in global supply chains and sent shockwaves through the automotive industry.

Shortly after Liberation Day, a coalition of importers caught the administration off guard by filing suit in the U.S. Court of International Trade challenging the President’s use of the International Emergency Economic Powers Act (IEEPA) as the basis for reciprocal tariffs.

Phase 3: The Roller Coaster – Escalation and De-escalation (May – July 2025)

The middle months of 2025 were characterized by dramatic swings between escalation and negotiation. The most significant development came on May 14, 2025, with the U.S.-China “Geneva Truce,” which reduced China’s reciprocal tariff from 125% to 10% for an initial 90-day period through August 10, reducing China’s effective tariff burden from 124% to 51% according to UNDP weighted-average calculations, achieved through partial suspension of reciprocal uplifts and temporary sector exclusions.

However, other sectors faced continued pressure. On June 4, 2025, Section 232 steel and aluminum tariffs were raised to 50% for both materials, effective immediately. This was followed on August 1, 2025, by the imposition of 50% tariffs on copper.

On July 7, 2025, Executive Order 14316 extended the 10% universal tariff through August 1, 2025, keeping negotiation channels open for partners while announcing new country-specific negotiated rates effective August 7, 2025.

To add to the uncertainty, on May 28, 2025, the U.S. Court of International Trade ruled in favor of the importers, finding that the administration exceeded its authority under the IEEPA and issued a permanent injunction against the reciprocal tariffs. However, the very next day, the U.S. Court of Appeals accepted the administration’s appeal and stayed the injunction so that the tariffs remained in effect pending appeal.

Phase 4: Country-Specific Frameworks and Tiered Systems (August 2025)

August 7, 2025, marked a critical turning point when country-specific negotiated reciprocal rates took effect under Executive Order 14329. The administration created a tiered system that differentiated between trading partners based on their negotiating positions and trade relationships.

The lower tier, with rates of 15-20%, included Japan, Vietnam, Thailand, Indonesia, Philippines, and Korea. The higher tier, with rates of 25-40%, included India, Myanmar, and Laos. As of October 2025, the reciprocal tariff matrix showed Cambodia, Indonesia, Malaysia, Philippines, and Thailand at 19%, Vietnam and Bangladesh at 20%, Brunei at 25%, Singapore at 10%, and Laos and Myanmar at 40%.

India faced particularly severe treatment. India was subject to a 25% reciprocal tariff plus a 25% secondary tariff for Russian oil purchases, creating a combined 50% burden under the International Emergency Economic Powers Act (IEEPA), effective August 27, 2025.

A significant innovation was the creation of the Annex III zero-tariff mechanism for aircraft parts, pharmaceutical inputs, scarce resources, and select agriculture, requiring countries to apply and receive approval for specific HS codes. Additionally, a 40% transshipment penalty tariff was established for goods determined to be of Chinese origin routed through third countries.

On August 29, 2025, the de minimis exemption was suspended, eliminating the $800 duty-free threshold for low-value shipments globally, with major impact on e-commerce platforms such as Shein and Temu.

August also saw the 29th, the U.S. Court of Appeals for the Federal Circuit uphold the CIT decision, finding the IEEPA-based tariffs exceeded statutory authority. The Supreme Court granted expedited certiorari to hear the case, and on November 5, 2025, oral arguments were held. A decision is expected in early 2026.

Phase 5: Détente – The KL Summit and Xi-Trump Deal (October – November 2025)

The final quarter of 2025 brought unexpected diplomatic breakthroughs. On October 26, 2025, the Kuala Lumpur Summit produced bilateral framework agreements between the U.S. and ASEAN countries, whereby ASEAN countries agreed to reduce tariffs on U.S. imports in exchange for U.S. guarantees of previously announced reciprocal tariff rates capped at negotiated levels, plus 0% tariffs for selected Annex III goods.

Malaysia claimed that 1,711 products were granted 0% status under Annex III, though the HS list was not published. Cambodia, Thailand, and Vietnam signed bilateral frameworks and began negotiating Annex III 0% access.

The most significant development came at the end of October. The Xi-Trump Deal of October 30-November 1, 2025, extended the Geneva truce through November 10, 2026, maintaining China’s 10% reciprocal tariff rate while reducing the fentanyl tariff from 20% to 10%, bringing the effective rate down from 57% to 47%. On November 7, 2025, China suspended rare earth export controls as part of the broader U.S.-China détente following the Xi-Trump deal.

Phase 6: Sectoral Weaponization (September – November 2025)

Even as diplomatic progress was made, the administration continued to impose sector-specific tariffs. Pharmaceuticals faced up to 100% tariffs effective October 1, 2025, though with an exemption for manufacturers building facilities in America. Wood upholstered furniture was subject to 25% tariffs starting October 15, 2025, rising to 50% on January 1, 2026. Wood cabinets and vanities faced the same schedule: 25% from October 15, 2025, increasing to 50% on January 1, 2026. Wood timber faced a 10% tariff from October 15, 2025. Heavy trucks were subject to 25% tariffs effective November 1, 2025.

Critically, these sectoral tariffs operated differently: heavy trucks and pharmaceuticals were added to reciprocal and other tariffs (stacking), while wood-related tariffs replaced reciprocal tariffs for covered products.

The Complex Tariff Architecture: Understanding the Layers

By year’s end, the U.S. tariff system had evolved into a complex, multi-layered structure. Reciprocal tariffs were additional ad valorem duties under Executive Order 14257 (Annex I) added to Most Favored Nation (MFN) HTS lines unless replaced by another instrument. The 40% transshipment penalty applied in lieu of the reciprocal add-on, though its interaction with other sectoral measures remained uncertain.

The proper calculation of tariff exposure required modeling as MFN (HTS Column 1) plus reciprocal tariffs plus extra penalty tariffs (India’s additional 25%, China’s 20% fentanyl tariff) plus sectoral overlays (trucks, pharmaceuticals, wood) plus Section 301 duties for China, while applying anti-stacking rules for wood and furniture where Section 232 duties replaced reciprocal tariffs for those HTS lines.

Implications and Looking Ahead

The 2025 tariff transformation represents a fundamental shift in U.S. trade policy from multilateral frameworks toward bilateral negotiations backed by the threat of punitive tariffs. The system created strong incentives for countries to negotiate directly with the United States, reduce their own tariffs on U.S. goods, and demonstrate compliance with U.S. policy priorities beyond traditional trade concerns.

The tiered approach rewarded cooperative partners with lower rates while punishing those perceived as adversarial or non-compliant. The Annex III mechanism created opportunities for strategic sectors to maintain tariff-free access, potentially reshaping global supply chains around U.S. preferences.

For businesses, the complexity of the new system—with its multiple layers, stacking rules, and country-specific variations—created significant compliance challenges and uncertainty. The rapid pace of change, with major announcements occurring monthly throughout the year, made long-term planning difficult.

As we move into 2026, key questions remain: Will the Xi-Trump deal hold through November 2026? How many countries will successfully negotiate Annex III access? Will the sectoral tariffs continue to expand? And perhaps most importantly, how will the Supreme Court rule on the IEEPA challenge—a decision that could either cement or dismantle the entire reciprocal tariff framework—and how will this new architecture reshape global trade flows and supply chain strategies in the years to come?

What is certain is that 2025 will be remembered as the year that fundamentally transformed the rules of international trade, with implications that will reverberate for years to come.

Useful Resource:  DFDL US-ASEAN Tariff Tracker

Concise Timeline: U.S. Tariff Events (Sept 2024 – Nov 2025)

Phase 1: China Onslaught
13 Sept 2024Section 301 China tariff increases finalized (EVs, solar, steel, batteries, minerals). Effective 27
Sept 2024.
12 Dec 2024Additional China tariff hikes (clean energy inputs). Effective 1 Jan 2025.
20 Jan 2025“America First Trade Policy” announced.
4 Feb 2025China “Fentanyl” tariff (10% on all imports, raised to 20% on 3 Mar 2025).
Phase 2: Reciprocal Tariffs & Universal Layer
2 April 2025“Liberation Day” reciprocal tariff system announced. Initial country-specific rates (up to 49%
for ASEAN, 34% for China, 26% for India, 10% baseline for Singapore).
10% universal tariff effective 5 April 2025.
3 April 2025Section 232 auto tariffs (25% globally). Effective immediately for vehicles, 3 May for parts.
Phase 3: Negotiations & Truce
14 May 2025U.S.-China “Geneva Truce” (China’s tariff reduced from 125% to 10%, truce
extended through 10 Nov 2026).
4 June 2025Section 232 steel & aluminum tariffs raised to 50%.
2 July 2025U.S.-Vietnam tariff framework announced (20% for most exports, 40% for Chinese transshipments).
7 July 2025Negotiation extension (universal 10% tariff extended through 1 Aug 2025).
1 Aug 2025Section 232 copper tariffs (50%).
Phase 4: Country-Specific Rates & De Minimis
6 Aug 2025EO 14329; new negotiated reciprocal rates effective 7 Aug 2025 (lower tier: 15–20%, higher
tier: 25–40%).
27 Aug 2025India-specific tariffs (25% reciprocal + 25% secondary for Russian oil).
29 Aug 2025De Minimis exemption suspended ($800 duty-free threshold eliminated globally).
1 Sept 2025Indonesia reciprocal rate finalized (19%).
Phase 5: KL Summit & Xi-Trump Deal
26 Oct 2025 Kuala Lumpur Summit; ASEAN countries reduce tariffs, U.S. guarantees capped
reciprocal rates, 0% for selected Annex III goods.
30 Oct –
1 Nov 2025		Xi-Trump Deal; Geneva truce extended, China maintains 10% tariff, rare earth export controls
suspended.
Phase 6: Sector Add-ons
Oct – Nov 2025Additional tariffs on heavy trucks (25%), pharma (100%), wood products (25–50%), effectivedates vary by sector.

*This Client Alert is for informational purposes only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.*

The U.S. has softened tariffs on China while locking in reciprocal frameworks with several ASEAN members.
Our Trade & Tariffs Group breaks down what the Busan Trump–Xi truce and Kuala Lumpur ASEAN meetings mean for exporters, supply chains, and tariff exposure heading into 2026.

Executive Summary

The United States has taken two important, and somewhat contrasting, tariff steps this week:

  1. With China (Busan, 30 Oct 2025): President Donald Trump announced that the effective U.S. tariff burden on Chinese goods will be reduced “from about 57% to about 47%” following his meeting with President Xi Jinping in Busan. This reduction is achieved mainly by cutting the fentanyl-related surcharge from 20% to 10% and by pausing certain escalation measures that had been threatened for 1 November. This is a de-escalation but not a rollback to pre-2025 levels. It is based on the President’s public statement and press reporting, not yet a consolidated CBP/USTR tariff table.

  2. With ASEAN (KL, 26–28 Oct 2025): On the margins of the 47th ASEAN Summit in Kuala Lumpur, the U.S. confirmed or initialed a set of “reciprocal tariff frameworks” with several ASEAN members — notably Malaysia, Cambodia, Thailand and Vietnam — broadly aligning them with the 19–20% U.S. reciprocal tariff band that has applied since the July 31 / 7 Aug 2025 tariff modification. These frameworks give exporters in those countries predictability and open the door to sectoral carve-outs (e.g. Vietnam coffee, Malaysia aerospace/pharma, critical minerals cooperation).

For DFDL clients exporting to the U.S. or routing goods with China-origin componens through ASEAN, this is a good moment to re-check origin, routing, and HS-line exposure. The new arrangements buy time, but they do not remove the core “reciprocal” architecture the Trump Administration has been building through 2025.

1. The Busan Trump–Xi Meeting: What Actually Changed?

What was announced?

  • President Trump said U.S. tariffs on China would “fall to about 47% from 57%” after his talks with Xi. The reported reason: the fentanyl-linked tariff on Chinese goods will be cut from 20% to 10%.
  • China, in return, agreed to delay for one year its planned export controls on rare earths and critical minerals, a major concern for U.S. manufacturers.
  • China also signaled resumption of agricultural purchases from the U.S. (soybeans and related lines), which the U.S. has been demanding.

What this figure is — and is not

  • The “57% → 47%” is a presidential/political figure repeated by Reuters and the Guardian, reflecting stacked measures on China at that point in time (reciprocal baseline + fentanyl measure + earlier China-specific actions). It is not yet a single, line-by-line tariff schedule published by CBP/USTR.
  • Until a Federal Register notice or CBP Cargo Systems Messaging Service (CSMS) message is issued, importers should continue to classify and enter at the actual rate that applies to their HTS line.

What was paused?

  • Ahead of Busan, Washington had been threatening tariffs of up to 100% on Chinese imports if no deal was reached by 1 November; that escalation is now paused under the “framework” agreed. This lowers immediate risk but keeps leverage in place.

Why it matters to ASEAN clients

  • Many ASEAN exporters ship goods that embed PRC content and some are even “transshipped” through such countries. U.S. authorities have been actively using transshipment/China-evasion tools (the 40% penalty that has appeared in several 2025 client alerts) — and those tools will remain relevant even after Busan. So the China truce reduces the top-end shock, but does not weaken U.S. scrutiny of ASEAN supply chains.

2. Kuala Lumpur ASEAN Meetings: What Did ASEAN Get?

Dates & context: 26–28 October 2025, Kuala Lumpur, 47th ASEAN Summit and related meetings.

Key U.S.–ASEAN tariff signals:

  1. Confirmation of the 19–20% band

    • Malaysia, Thailand, Cambodia and the Philippines all appear in U.S. briefings in the 19% band; Vietnam stays at 20% but now has a coffee carve-out announced by Trump on 27 October.
    • These figures align with what we have been tracking since the July 31 (effective 7 Aug) tariff modification, so KL is best seen as a locking-in and political endorsement rather than a brand-new rate.

  2. Selective carve-outs / sectoral doors

    • Vietnam coffee: Trump said the 20% U.S. tariff on Vietnamese coffee will be lifted under the new U.S.–Vietnam deal. Details, including HS coverage and rules-of-origin tests, still have to be published — so treat this as “announced but not yet operational.”
    • Malaysia: Reporting from KL suggests Malaysia secured improved treatment for aerospace, pharmaceuticals and certain commodities in exchange for trade-facilitation and alignment on critical-minerals policy.
    • Critical minerals / rare earths: Several ASEAN states signaled willingness not to impose export bans to the U.S., reinforcing Washington’s effort to diversify away from China. This mirrors the Chinese one-year pause, but from a different angle.

  3. Why ASEAN agreed

    • The U.S. is now using the same template across multiple partners: accept a U.S. “reciprocal” rate in the high-teens/20% area → get predictability + targeted U.S. market access + political upgrade.
    • For ASEAN states who fear being swept into the China tariff dragnet, this is a pragmatic outcome.

3. What Stays in Force (and Still Hurts)

  1. Transshipment / China-origin penalties

    • The U.S. has repeatedly warned that goods routed through Vietnam (and, in practice, through Thailand or Malaysia) that are actually of Chinese origin or substantially Chinese can be hit with penalty rates up to 40%. Nothing in Busan or KL softens that. This should remain a red-flag point in every origin review and in every long-term supply agreement.

  2. Sectoral U.S. actions continue

    • Separately from the Busan and KL announcements, Trump’s October 17 order imposing 25% on imported medium-/heavy-duty trucks and 10% on buses (effective 1 November) is still moving ahead. That can stack on top of the ASEAN/China country rate when the goods fall in those HS lines.

  3. De-minimis tightening

    • The July–August 2025 orders that curtailed / effectively ended the USD 800 de-minimis route for most China/Asia e-commerce parcels remain an important practical issue for consumer-goods exporters in ASEAN. KL did not reopen this.

4. Action Points for DFDL Clients

  1. Update customs broker instructions (U.S.)

    • Tell U.S. brokers to watch for the implementing notice of the Busan China reduction (20% → 10% fentanyl tariff). Until CBP publishes, enter at the existing rate.

  2. Refresh origin / routing documentation

    • For Vietnam, Thailand, Malaysia and Cambodia suppliers: update supplier declarations to show legitimate non-China origin and, where relevant, substantial transformation in ASEAN. This is your best defense against the 40% transshipment penalty.  Continue to be wary of supply sources that might raise a UFLA review.

  3. Model landed cost scenarios

    • Run two scenarios for PRC goods:
      • (a) if the U.S. reduction to “about 47%” is fully implemented, and
      • (b) if talks falter and the threatened higher China rate returns in Q1 2026.
    • This will help in contract negotiations and price-review clauses.

  4. Contractual clauses for 2026 deliveries

    • Insert tariff-change and origin-challenge clauses in supply and distribution contracts. Link them to: (i) modifications to reciprocal tariffs; (ii) U.S. transshipment findings; (iii) re-escalation with China.

  5. Monitor USTR/CBP, not just press

    • Because the “57% → 47%” is a political number, in-house teams should keep checking:
      • USTR announcements;
      • CBP CSMS; and
      • Federal Register.
    • DFDL can help clients bridge the gap between what was said in Busan/KL and what can actually be claimed at the time of entry.

Annex A – Garments, Textiles & Apparel

1. U.S. Tariff Exposure (as of 31 Oct 2025)

OriginTariff BandNotes
China~47 % (effective rate after Busan truce)High due to stacked Section 301 + reciprocal surcharges; apparel remains politically sensitive.
Vietnam20 %No change from Aug 7 order. Coffee carve-out only; textiles still covered.
Cambodia / Thailand / Myanmar19 % (reciprocal)Confirmed under KL framework.
Indonesia / Philippines / Malaysia19 %Stable.

2. Opportunities

  • Predictability: 19–20 % locked in for 2026 contracts.
  • ASEAN sourcing advantage: 20 % vs. China’s 47 % makes ASEAN sourcing more attractive for U.S. brands.

3. Compliance Risks

  • Transshipment (40 %): Chinese fabrics or cut-and-sew in VN/TH flagged as PRC origin.
  • Country-of-origin labeling: Must show substantial transformation (yarn-forward or assembly-forward).
  • De-minimis closure: Direct-to-consumer shipments > USD 800 → full tariff now applies.

Annex B – Electronics, Semiconductors & ICT Devices

1. U.S. Tariff Exposure

OriginTariff BandKey Details
China~47 %Busan truce prevents 100 % tariff; high-tech (AI chips, blacklisted items) remain restricted.
Malaysia / Thailand / Philippines19 %KL deals confirmed reciprocal rate; U.S. investment incentives for domestic assembly announced.
Vietnam20 %Remains under reciprocal framework.
Singapore10 % baselineNo reciprocal rate imposed due to high-tech treaty alignment.

2. Opportunities

  • “Friend-shoring” drive: U.S. OEMs actively shifting final assembly to MY, TH, VN to bypass PRC tariffs.
  • Critical-minerals clause: ASEAN commitments to keep export channels open favor local component suppliers.

3. Compliance Risks

  • PRC components: PCBs, wafers, or sub-assemblies of Chinese origin → Section 301 liability.
  • Technology transfer controls: Dual-use electronics → ITAR/EAR scrutiny; coordinate with U.S. export-control counsel.
  • Rules-of-origin: Minimum 35 % ASEAN value-addition advisable to sustain non-China classification.

Annex C – Food, Agriculture & Beverages

1. U.S. Tariff Exposure

OriginTariff BandNotable Updates
China~47 %Agricultural goods excluded only for U.S. imports into China, not the reverse.
Vietnam20 % (coffee exemption pending)Trump announced coffee tariff removal Oct 27 – awaiting Federal Register notice.
Thailand / Malaysia / Indonesia19 %Stable reciprocal rates.
Cambodia / Laos / Myanmar19–25 %Some agricultural-health certification issues may trigger higher rate.

2. Opportunities

  • Vietnam coffee: Once exemption formalized, zero % entry → major boon to VN exporters, ASEAN roasters.
  • Palm oil, rubber, cocoa: Malaysia’s deal protects exports via sectoral carve-outs.
  • U.S. importers: Likely to favor ASEAN suppliers as Chinese agri-tariffs remain high.

3. Compliance Risks

  • Country-of-origin marking for processed foods with PRC ingredients.
  • U.S. FDA registration required even if tariff reduction applies.
  • Rules-of-origin for blended products (e.g., instant coffee mixes).

Annex D – Automotive & Transport Equipment

1. U.S. Tariff Exposure

OriginTariff BandAdditional Measures
China~47 % + possible 232 actionsThreat of 100 % deferred; certain EV & battery lines face 232 national-security review.
ASEAN (MY, TH, PH, VN)19–20 %Confirmed reciprocal frameworks – KL sign-offs.
Global (all origins)+25 % (medium/heavy trucks) + 10 % (buses)Sectoral tariffs effective 1 Nov 2025; cumulative with reciprocal country rates.

2. Opportunities

  • Localization credits: 3.75 % U.S. production credit for domestically assembled vehicles → supply-chain incentives.
  • Thailand & Malaysia: Positioned as U.S.-friendly assembly bases; potential for joint ventures.

3. Compliance Risks

  • Stacking of tariffs: ASEAN 19 % + 25 % truck tariff = 44 % effective.
  • Component traceability: PRC batteries → full Section 301 exposure even if final assembly in ASEAN.
  • Certification: Ensure Form A/ROO certificates align with reciprocal frameworks to avoid 40 % transshipment penalty.

*This Client Alert is for informational purposes only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.*

Executive Summary: On September 25, 2025, the U.S. administration under President Trump announced a significant expansion of import tariffs, set to take effect on October 1, 2025. These measures build on prior trade actions and target key sectors including consumer goods, industrial equipment, and pharmaceuticals. While the pharmaceutical tariffs (up to 100%) include exemptions for U.S.-based manufacturing and may have limited relevance for many of our clients, the duties on furniture, cabinets, and heavy trucks—primarily sourced from Asia—pose immediate challenges for importers and exporters alike.

Key Tariffs at a Glance
  1. Cabinets/Vanities: 50% – Hits wood imports hard.
  2. Upholstered Furniture: 30% – Broad scope for textiles/upholstery.
  3. Heavy Trucks: 25% – National security angle; components included.
  4. Pharma: 100% – Mostly irrelevant for our manufacturing clients but watch for exemptions.

These tariffs invoke Section 232 of the Trade Expansion Act, citing national security concerns for trucks and broader protectionism for consumer products. The short lead time—mere days—underscores the administration’s aggressive stance on “America First” policies, potentially pressuring foreign producers to relocate operations domestically.

Why These Products? Strategic and Political Context

The selection reflects a blend of economic protectionism and geopolitical signaling:

  • U.S. Industry Safeguards: Domestic producers of cabinets, vanities, and furniture claim unfair competition from low-cost Asian imports, which have “flooded” the market. Heavy trucks tie into infrastructure investments like the Bipartisan Infrastructure Law.
  • National Security Pretext: Section 232 provides expansive authority, historically used for steel and aluminum, now extending to vehicles critical for logistics and defense.
  • Electoral Timing: With visible impacts on everyday consumer items, these tariffs amplify protectionist messaging ahead of policy cycles, while incentivizing foreign investment in U.S. facilities—mirroring exemptions in the pharmaceutical sector.
Disproportionate Effects on Asian Supply Chains

Asian economies, long central to U.S. imports in these categories, face the brunt:

  • China: As the top exporter of wood furniture and cabinets, ongoing shifts under “China+1” strategies will accelerate, but new duties exacerbate existing pressures from prior rounds.
  • Vietnam: A rising star in furniture production, its exports (valued at billions annually) are now squarely targeted, potentially reversing recent gains.
  • Cambodia: Highly vulnerable due to heavy reliance on U.S. markets (58% of exports), Cambodia’s furniture sector—including upholstered seats and wooden items—faces severe contraction, with forecasts of up to 23.9% drop in U.S.-bound shipments and potential loss of over half its U.S.-oriented exports overall.
Example: Tariff Stacking for Upholstered Furniture from Cambodia

As an example, upholstered furniture (HTS 9401.61) exported from Cambodia:

  • The new tariff announced is 30% on upholstered furniture.
  • There is already a base U.S. “reciprocal tariff” or other general tariff structure in place (e.g., the 19% rate finalized on Cambodian goods in August 2025 following a universal tariff reset), then that base rate might still apply.
  • If there are no special or additional duties already on that line of furniture from Cambodia, then likely the 30% is the effective additional duty. However, under Section 232 authority, these new tariffs generally stack with existing duties like reciprocal tariffs.

So, if stacking is allowed and there is an existing duty, for example:

  • With the 19% base reciprocal tariff in place for Cambodian imports, upholstered furniture from Cambodia might face 19% + 30% = 49% total. But for every product we will have to check the HTD codes covering the product, whether there is an explicit order regarding stacking, and whether a specific country is subject to other prior measures (AD, CVD).
Actionable Strategies for Compliance and Mitigation

Our tariff counseling team recommends a phased approach to safeguard your operations. Below, we outline immediate, near-term, and long-term tactics, grounded in U.S. Customs and Border Protection (CBP) regulations.

Immediate Strategies (Pre-October 1)
  • Shipment Acceleration: Prioritize in-transit goods to clear U.S. ports before the deadline. For high-value items, consider expedited air shipping to lock in pre-tariff rates.
  • HTS Code Audits: Conduct urgent reviews of Harmonized Tariff Schedule classifications. Subtle differences in coding (e.g., for modular vs. assembled cabinets) can yield lower duties—our firm has successfully challenged misclassifications in similar cases.
  • Duty Mitigation Tools: Leverage bonded warehousing to defer payments or duty drawback programs for re-exportable goods, reclaiming up to 99% of duties paid.
Near-Term Strategies (3–6 Months)
  • Origin Engineering: Restructure supply chains for “substantial transformation” in non-targeted countries (e.g., final assembly in Mexico or India). Robust documentation is essential to withstand CBP audits.
  • Trans-Shipment Caution: Steer clear of superficial rerouting through third countries without value addition—penalties for evasion can exceed 300% of duties owed.
  • Contractual Safeguards: Renegotiate with U.S. buyers for shared tariff burdens via force majeure clauses or price escalation terms.
Longer-Term Strategies
  • Geographic Diversification: Expand into ASEAN+ markets or non-U.S. destinations like the EU to dilute reliance on American sales.
  • U.S. Localization: Explore joint ventures or limited domestic assembly to qualify for exemptions, as signaled in the pharmaceutical carve-outs.
  • Policy Monitoring: Stay ahead of retaliatory actions from affected nations, which could impact U.S. exports.

In summary, while these tariffs demand swift action, they also present opportunities for resilient supply chain redesign. Forum law can assist and guide clients through strategy, audits, negotiations, and restructuring. Let’s turn compliance into competitive advantage.

US-ASEAN Tariff Tracker

DFDL’s Trade & Tariffs Group monitors the latest U.S. reciprocal tariffs and their impact across ASEAN markets.
Stay informed on key trade developments and policy shifts — download the latest US-ASEAN Tariff Tracker below.

*This Client Alert is for informational purposes only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.*

This guide provides a comprehensive analysis of the concept of “transshipment” under international trade law and practice. It also looks at the concept from big regional players such as US and China. It provides key insights and guidelines on how to address transshipment risk in South East Asia.

What is Transshipment?

  • Transshipment is the customs-controlled transfer of goods from one means of transport to another within an intermediate location before reaching their final destination. It is a temporary procedure where the goods do not typically enter the local market of the intermediate country.
  • The guide references definitions from the World Customs Organization (WCO), China Customs Law, and U.S. Customs & Border Protection, highlighting the global consistency in the concept.

Core Features and Distinctions

  • Goods remain under customs supervision in bonded areas, ports, or free trade zones.
  • No local importation or duties are involved unless goods are diverted.
  • The process is time-bound and requires specific documentation.
  • The guide distinguishes transshipment from related concepts such as transit, re-export, and indirect shipment, clarifying their differences with practical examples.

Permitted and Prohibited Actions

  • Only minimal handling is allowed (e.g., sorting, inspection, basic repackaging, preservation) under customs supervision.
  • Any transformation, manufacturing, or relabeling that changes the goods’ origin or classification is strictly prohibited and may constitute a violation of customs law.

Legitimate Uses and Compliance Risks

  • Transshipment is used for logistics optimization, mode changes, bonded storage, and regional distribution.
  • The guide warns of compliance risks such as origin fraud, duty evasion, sanctions circumvention, and forced labor evasion, providing real-world case studies (e.g., U.S. solar panels routed via Vietnam/Malaysia).
  • Outlines the legal principles from WCO, WTO, ASEAN, China, and the U.S., emphasizing the requirement that goods remain unchanged during transshipment.
  • Explains the importance of Certificates of Non-Manipulation (CNM) and other documentation to prove compliance and preserve preferential origin status.

Compliance Tools and Checklist

  • Provides a practical workflow for obtaining a CNM, including a template and implementation notes.
  • Offers a compliance checklist detailing steps, responsible parties, and risks if requirements are not met.

Download the DFDL Transshipment Guide 2025 to strengthen your trade compliance strategy.

Author

Tony Kerr
Trade and Customs Consultant
[email protected]  LinkedIn

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This publication is provided for general information only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

The “China + One” Strategy Under Fire

For years, global manufacturers have pursued “China + One” strategies to diversify production and mitigate tariff risk. Vietnam, Thailand, and Malaysia became prime relocation targets. But now, these very countries are viewed with suspicion by CBP.

Vietnam negotiated a tariff reduction from 46% to 20% on most of its exports. However, any goods suspected of transshipment still face the 40% penalty.

No formal threshold exists for what qualifies as “suspect”.

As a result, companies are now questioning the logic of supply chain relocation. The cost of reorganisation may no longer be offset by tariff avoidance.

The Burden on Importers: Guilty Until Proven Innocent

CBP no longer needs to prove wrongdoing. Instead, importers must now prove:

  • Source of every significant component
  • Location and ownership of factories
  • Manufacturing processes and worker records
  • Substantial transformation, if any inputs are foreign

This includes:

  • Certificates of Origin
  • Bills of Materials
  • Utility bills
  • Supplier declarations
  • Chain-of-custody documentation

Even with this evidence, shipments may be detained, delayed, or rejected outright. In many cases, duties must be paid upfront with the hope of later recovery via protest.

This flips the legal standard from presumed compliance to presumed evasion.

A Global Shockwave: Trade Trust Undermined

This policy is sending tremors through Southeast Asia. Export-driven economies like Vietnam and Thailand face:

  • Reduced investor confidence
  • Export order cancellations
  • Costly compliance retrofits

Simultaneously, the policy could add inflationary pressure in the U.S. As costs rise due to tariffs, documentation requirements, and shipment delays, importers may pass these on to consumers.

Practical Risk Scenarios

  • Identical Products: A legitimate Thai or Indonesian product resembles a Chinese one and is flagged.
  • Shared Components: Electronics or machinery use Chinese parts but are assembled locally.
  • Associated Facilities: A Vietnamese exporter shares investors or branding with a Chinese firm.

Each case could lead to a 40% penalty, even if legal origin is unquestionable.

What to Watch Next

Definition Clarification: Will CBP define “trans-shipment” more clearly?

  • Published Watchlists: Biannual facility lists could institutionalise suspicion.
  • FTA/WTO Disputes: Legal action may take years and offer limited relief.
  • Realignment: Some firms may pivot back to China for cost certainty or double down on localization.

The Stacking Compliance Burden: Why the 40% Tariff Hits Harder Than It Seems

For many businesses, the 40% transshipment tariff isn’t just another cost, it’s the straw that risks breaking the camel’s back. Exporters and importers were already navigating one of the most complex compliance landscapes in modern trade. Now, this new penalty regime adds another layer of risk and documentation requirements.

What They’re Already Managing

  • Tariff Classification
  • Correct application of the Harmonised System (HS) is critical, with misclassification leading to penalties, retroactive duty claims, or seizure.
  • Export Controls
  • Screening goods, technology, and end-users against multiple jurisdictional control lists.
  • Customs Valuation & Transfer Pricing
  • Aligning transaction values for customs with transfer pricing policies, and ensuring compliance with WTO Valuation Agreement rules.
  • Rules of Origin
  • Proving preferential origin under FTAs and non-preferential origin for general customs purposes, each with different tests and documentary requirements.
  • Forced Labour Compliance
  • Ensuring supply chains meet laws like the U.S. Uyghur Forced Labor Prevention Act (UFLPA), which can block entry of goods linked to forced labour anywhere in the chain.
  • Cross-Border Data & Information Sharing
  • Complying with increased customs-to-customs data exchanges, which can flag inconsistencies across jurisdictions.

Now Add the 40% Transshipment Tariff

This measure doesn’t replace any of the above, it sits on top of them. For many companies, it means:

  • Doubling origin documentation to withstand CBP scrutiny.
  • More extensive supplier audits to pre-empt “looks-like-China” accusations.
  • Greater alignment between trade compliance, legal, and finance teams to handle disputes or protests.

Why This Matters

The risk isn’t just financial. It’s operational:

  • Delays in clearance disrupt delivery schedules.
  • Cash flow strain from posting duties or bonds upfront.
  • Market access decisions may hinge not on competitiveness, but on enforcement unpredictability.
  • The 40% tariff is not just another duty. It’s a compliance multiplier in an already overburdened system.

Strategic Alternatives: Is it time to rethink the U.S. market?

Some exporters are now asking a radical question: Should we walk away from the U.S. market?

Why BRICS+ May Be the Answer

  • Lower Tariffs & Clearer Rules
  • BRICS+ and Global South blocs often offer more predictable, rules-based trade
  • Fewer politically-driven enforcement surprises
  • Growing Consumer Base
  • Over 45% of the world’s population and a rapidly expanding middle class
  • Strong demand in India, Brazil, Russia, and beyond
  • Independent Trade Infrastructure
  • Non-dollar settlement systems (e.g., BRICS Pay)
  • Belt & Road-linked corridors with customs harmonisation
  • Less Risk, More Stability
  • No 40% blanket penalties
  • Less reputational and legal risk at the border

The Hybrid Strategy

Some exporters are keeping:

  • A limited, high-margin U.S. presence, backed by watertight compliance
  • A volume strategy targeting BRICS+ and non-aligned markets
  • This balanced approach avoids over-exposure to any one market and builds resilience.

Conclusion: Welcome to the Era of Presumed Evasion

The 40% transshipment tariff marks a fundamental departure from the rules-based trade system. It does not rewrite WTO or FTA law, but it overrides their reliability.

Goods that are perfectly legal in origin are now penalised based on suspicion. Importers are treated as guilty until proven otherwise. And exporters are rethinking the value of the U.S. market altogether.

Trade professionals, manufacturers, and policy advisors must respond by:

  • Rethinking compliance frameworks
  • Reassessing supply chain footprints
  • Re-evaluating which markets truly offer sustainable, rules-based growth
  • The age of origin has given way to the age of optics. And in this new game, only those prepared to prove the obvious will survive.

If your business is exposed to U.S. import risks, from tariff classification to rules of origin, valuation, forced labour compliance, or the new 40% transshipment penalty, now is the time to act.

We welcome you to reach out to discuss further on how we can help you, whether you are importers and/or exporters.

Author

Tony Kerr
Trade and Customs Consultant
[email protected]  LinkedIn

To save or print the article, click the “Download” button below.

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This article is provided for general information only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

This is a two-part series exploring the importance of transshipment in the new global trade order under President Trump’s Executive Orders and how manufacturers should navigate this tricky and unclear issue.

Part 1: The Transshipment Shock

Even if your product never touched China, it could now face a 40% U.S. tariff, simply because it looks like it did. This isn’t a change in WTO law. It’s a political enforcement overlay that flips the burden of proof onto importers and exporters.

In this deep dive, we unpack how suspicion is becoming the new standard at U.S. borders, and what you can do about it.

The 40% Transshipment Shock: Why Compliance Is No Longer Enough

Introduction:

A New Era of Trade Enforcement

In August 2025, the United States triggered a major disruption in the global trading system. Under a new Executive Order, U.S. Customs and Border Protection (CBP) was authorised to impose a sweeping 40% tariff on goods suspected of being transshipped through third countries to avoid existing duties.

This policy shift, while framed as a crackdown on tariff circumvention by Chinese exporters, has sent shockwaves through Asia and beyond. The implications are vast: products that are legally of non-Chinese origin, but share characteristics with Chinese goods, may still be penalised. The burden of proof lies entirely with the importer, and it is a heavy one.

This article explores what the new 40% transshipment tariff really means, who it affects, why it matters, and what strategic options remain for exporters and importers navigating this volatile landscape.

What the 40% Tariff Actually Is

The policy emerged from a July 2025 Executive Order under the Reciprocal Tariff Act and Section 301 of the Trade Act of 1974. It empowers CBP to impose a flat 40% additional tariff on goods determined to have been transshipped to evade existing duties. Crucially:

  • It does not require definitive evidence of wrongdoing
  • There is no automatic appeal or remission process
  • Once flagged, the tariff applies unless the importer can prove otherwise
  • Although the official narrative focuses on Chinese-origin goods, the tariff is country – neutral in language and could eventually impact goods from any nation with U.S. trade penalties.

Legal Origin vs. Policy Perception

Under WTO rules and most FTAs, a good’s country of origin is determined by where it was wholly obtained or substantially transformed — not the last country it transited through.

However, CBP is now enforcing origin based on perceived intent. If a shipment passes through Vietnam, Malaysia, or Thailand, and resembles a Chinese product in appearance, specifications, or brand identity, it may be flagged as suspect.

This “looks-like-China” enforcement framework disregards the legal principle of substantial transformation. Instead, it leans on circumstantial factors: trade flow patterns, visual similarity, or links to Chinese suppliers. In doing so, it introduces political discretion into what was once a technical customs process

Scope & Legal Basis:

More Than Just a China Problem

While China’s rerouting through Southeast Asia is the policy’s immediate target, the legal authority behind this tariff could apply to:

  • Anti-dumping and countervailing duty targets (e.g., Brazilian or Indian metals)
  • Sanctioned countries (e.g., Russia)
  • Strategic sectors under safeguard measures (e.g., solar, semiconductors)
  • Neither the Reciprocal Tariff Act nor Section 301 requires proof of WTO violations before tariffs are applied. Instead, they allow the U.S. President to act unilaterally against perceived unfair trade practices. That means any nation with significant trade exposure to U.S. duties could be next.

Case Study:

The Vietnamese Solar Panel

A Vienamese manufacturer exports solar panels made entirely from local components to the U.S. The design, however, is identical to a popular Chinese model, because global specifications tend to be standardised.

Despite meeting origin requirements under the U.S.-Vietnam FTA, the shipment is flagged by CBP:

  • The panel’s specs match those of a Chinese brand already under penalty
  • The importer has past ties to Chinese suppliers
  • Even with a full origin file (certificates, BOMs, payroll, utilities, etc.), CBP applies the 40% duty. The importer can challenge this in court, but the shipment is delayed. The panels miss their deployment window. The commercial damage is done.

This is not theoretical. This is the new normal.

However, the importer may win a case like this eventually, but the cost of doing that may be substantial.

Stay tuned for Part 2

We welcome you to reach out to discuss further on how we can help you, whether you are importers and/or exporters.

Author

Tony Kerr
Trade and Customs Consultant
[email protected]

To save or print the article, click the “Download” button below.

Stay Ahead of Global Trade
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This Legal Update is provided for general information only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

Executive Summary

On July 31, 2025, the White House issued a significant Executive Order titled “Further Modifying the Reciprocal Tariff Rates”, which imposes new and increased U.S. import tariffs on a wide range of foreign-origin goods, including from nearly all ASEAN member states.

This action builds upon Executive Order 14257 (April 2, 2025), which declared that persistent trade deficits and non-reciprocal trade barriers posed an extraordinary threat to U.S. national security. The July 31 Order further escalates the reciprocal tariff regime by modifying the Harmonized Tariff Schedule of the United States (HTSUS) and assigning country-specific ad valorem duties, many of which target Southeast Asia.

Key Provisions of the Executive Order

  • Effective Date: 7 days from the date of the Order (i.e., August 7, 2025) for most goods, except for those already in transit and entered before October 5, 2025.

  • New Tariff Rates: Additional ad valorem duties imposed based on each trading partner’s engagement in trade negotiations and alignment with U.S. national security objectives.

  • A 19% Tariff rate was selected for most of the major ASEAN trading powers, except Vietnam which received a 20% Tariff due to the large size of its trade deficit with the US. Both Myanmar and Laos are penalized with a 40% tariff.  Singapore, enjoys the 10% base Tariff.

  • Default Tariff: 10% for countries not specifically listed in Annex I (e.g., Singapore).

  • Anti-Transshipment Measures: Goods found to be transshipped to evade tariffs may face a 40% duty, fines, and full customs liabilities.

Tariff Impact on ASEAN Countries

CountryNew Tariff Rate
Brunei25%
Cambodia19%
Indonesia19%
Laos40%
Malaysia19%
Myanmar40%
Philippines19%
Singapore10% (default)
Thailand19%
Vietnam20%

Compliance & Strategic Considerations

  1. Exporters & Manufacturers: ASEAN-based producers targeting U.S. markets must assess how these new tariffs affect pricing, margin, and competitiveness—particularly in electronics, apparel, and processed goods.

  2. U.S. Importers: Companies sourcing from ASEAN should review existing supply chains and contracts for tariff adjustment clauses or alternative sourcing strategies.

  3. Customs Compliance: Strict enforcement of anti-transshipment rules may expose trading hubs (e.g., Thailand, Malaysia, Vietnam) to audits and penalties. Documented country of origin compliance is now critical.

  4. Trade Negotiation Outlook: The Order explicitly provides for future tariff suspensions or modifications if affected countries conclude meaningful trade and security agreements with the United States. ASEAN governments and businesses should monitor or engage in relevant bilateral talks.

Next Steps for Clients

  • Evaluate Tariff Exposure: Conduct a full review of U.S.-bound exports subject to new tariff rates.

  • Review Supply Chain Contracts: Ensure appropriate pass-through or renegotiation mechanisms exist.

  • Monitor U.S. Trade Developments: Stay informed on future Executive Orders or bilateral negotiations that could alter tariff treatment.

  • Assess Transshipment exposure: evaluate your supply chain to reduce use of components that could be considered “Transshiped” under the Executive Order.

  • Country of Origin scrutiny: Assess and evaluate your local teams’ understanding of the importance of obtaining accurate and valid trade documents, such as Certificates of Origin, commercial invoices and shipping documents, that truthfully identify the Country of Origin and would be acceptable the US Customs and Border Protection agency.

  • Engage Experts: Consider engaging trade counsel in ASEAN and USA, such as DFDL, to undertake a strategic review of your company’s trade risk exposure.

Future client alerts will focus on the rules related to Transshipment, which incur a 40% tariff, the importance of the “FIRST SALE RULE” for valuation, and other key issues that would help you navigate the constrains arising from the executive orders.

*This Client Alert is for informational purposes only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.*

For further guidance on how these tariff changes may affect your company or sector, please contact David Doran.

In a significant development for regional trade and economic cooperation, the United States and Cambodia have concluded a new tariff agreement that sets a unified tariff rate of 19% on a range of Cambodian exports to the US effective 1 August 2025. This follows months of negotiations aimed at stabilizing bilateral trade relations and ensuring predictability for exporters and investors alike.

While any increase in tariffs may at first glance raise concerns, this agreement reflects a strategic middle ground—one that offers notable advantages for Cambodia’s economic positioning, particularly amid rising trade protectionism globally.

Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.