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- China recently reached a record $1.1 trillion trade surplus in spite of President Trump’s tariffs.
- Trade data shows that the relocation of manufacturing to lower tariff Asian countries in recent years, coupled with forced labor, have enabled China to thrive amid a trade war that began in 2018.
- Supply chain consultant Exiger says its data shows that the cost of China’s latest manufacturing success also can be measured in the lost potential for new jobs in the U.S. and other countries.
China’s recent record $1.1 trillion trade surplus showed that despite President Donald Trump‘s efforts to use tariff policy to slow China’s manufacturing export strength, the geopolitical and economic rival has not only found global workarounds, but thrived. Trade and supply chain data shared with CNBC show that behind China’s success in mitigating the impact of U.S. tariffs, two factors loom large: use of secondary manufacturing markets to finish products, particularly in Asia, and forced labor.
In recent years, Chinese companies rerouted their manufacturing to Southeast Asian countries including Vietnam to offset tariffs that began with Trump’s first-term trade war in 2018, a shift that continues to benefit China today. Trade between China and Southeast Asia (including Malaysia, Singapore, Thailand, Vietnam, Indonesia, Philippines, Cambodia, Laos, Myanmar, Brunei, and Timor-Leste) tracked by the freight data tracker Vizion show increased volumes of Chinese goods during the 2025 frontloading effort by many manufacturers and importers to avoid the first tranche of Trump’s second term tariffs ahead of April’s so-called “Liberation Day.”
As that strength in trade flows has increased U.S. efforts to reverse its trade balance remain in flux: the U.S. deficit with its global trading partners nearly doubled based on the most recent data from November, to $56.8 billion, with European Union trade representing one-third and the goods deficit with China decreasing by about $1 billion to $13.9 billion. For the year-over-year period, the U.S. trade deficit was up 4%.
“Southeast Asia volumes are growing as shippers diversify imports away from China towards lower-tariffed countries,” said Paul Brashier, vice president of global supply chain at ITS Logistics. “Imports from key Southeast Asia countries (Vietnam, Thailand, Indonesia) are each up roughly 20 percent year over year.”
“The $1.1 trillion surplus is a result of the country effectively doing a global rerouting of manufacturing through the transshipment of products to other Asian countries,” said Brandon Daniels, CEO of Exiger, which provides supply chain and third-party risk management, and regulatory compliance solutions to over 150 Fortune 500 companies and 60-plus government agencies, including the U.S. Department of Defense and U.S. Customs and Border Protection. “China creates special economic zones in these countries. The reality is that the vast majority of the product is made in China and rerouted to these countries for assembly,” he said.
Redirected shipments and tariff evasion in trade war era
Based on 2024 full-year data from Exiger on the top 10 countries by number of shipments to the U.S. from companies with 100 percent ownership by Chinese entities, Vietnam accounted for 80 percent of those shipments. Italy ranked second, followed by Thailand and Malaysia. Daniels said he would expect 2025 full-year numbers to be consistent with 2024, as the additional Trump trade policy moves change more quickly than the existing structural shifts. The impacts of reshoring, and the creation of additional tariff evasion facilities, is more likely to show up in the 2026-2027 period.
“When you look at weekly export flows, what’s striking is how persistent the shift in trade from China to South Asian countries [has been] since late 2025,” said Kyle Henderson, CEO & co-founder of Vizion. “China’s export volumes have established a higher baseline across Vietnam, Indonesia, Malaysia, and Thailand, and those levels have held into 2026. That pattern points to new buyers and more durable sourcing relationships forming across Southeast Asia, rather than a temporary rerouting tied to headlines or tariffs.”
One such example Daniels pointed to was HHC Changzhou Corp., doing business as MotoMotion China, based in Changzhou, China. The company founded Jiangxin Home Furnishings in 2002 to produce metal mechanical parts. Today, the company designs and manufactures structural mechanisms for smart furniture under the brand MotoMotion. The company’s products exported from China to the United States were subject to a 10 percent tariff starting in September 2018, and a 25 percent tariff starting on May 2019. To avoid these tariffs, the company established a wholly-owned subsidiary, Craftsmanship Vietnam (aka MotoMotion Vietnam), in Binh Duong Province, Vietnam, in June 2019.
In HHC Changzhou Corp’s 2021 annual report, the company mentions the creation of the Vietnam-based facility in response to the tariffs imposed under Section 301 of the Trade Act of 1974.
These transshipment practices can undermine U.S. industry at every part of the supply chain, Exiger says, because the jobs that could be created in the U.S. are being done in Chinese shadow factories. The practices are not just limited to Asian markets, according to Exiger. “We saw in the tooling space as an example, where companies were rerouting goods through Taiwan, through Vietnam, through Malaysia, through Mexico, and South America,” Daniels said. “It is a strategy that is winning, but it’s putting millions of jobs that would be in the U.S. or other countries in peril,” he said.
The U.S. trade deal with Vietnam from last summer included a 40% transshipment tariff on top of standard tariff rates, but it is difficult to link imported products from countries such as Vietnam back to original sourcing in China.
China’s circumvention of tariffs under Section 301 alone will amount to over $30 billion this year, which translates to over one million trade and manufacturing jobs lost, according to Exiger.
Chinese GDP and ‘dominance through coercion’
According to Exiger’s new supply chain and labor risk database, forcedlabor.ai, China’s supply chain expansion and the multiple tiers of vendors also reveals distinct patterns or surges in illicit labor force activity. Exiger says its analysis of the supply chains of products once made solely in China shows that companies are now subsidizing tariff costs by using forced labor to speed the products, at some stage of manufacturing, to these secondary markets in Southeast Asian countries where they can finish production and ship more cheaply.
“The fact is China’s GDP is growing by using dominance through coercion,” Daniels said, adding there are signs of forced labor in both China and the secondary markets where it is moving some manufacturing to avoid tariffs.
The International Labour Organization estimates almost 28 million people are subjected to forced labor worldwide, with 63 percent happening in the private economy and generating $236 billion in illegal profits every year. China has long been accused of using forced labor by human rights watchdog groups, and these concerns continue to be raised in 2026. In 2025, the United Trade Representative’s Forced Labor Enforcement Task Force added 78 new entities to the forced labor entity list, bringing the total to 144 Chinese entities.
Daniels explained that supply chain risks related to labor practices can exist multiple levels away from the main source of manufacturing the company is contracted to buy from. If a supplier is the only provider of a specific product for a company and forced labor has been identified in these lower supply chain levels, Daniels says many companies now monitor and mitigate the product manufacturing through the use of contracts.
“Companies are going to the supplier directly and using their buying power to draw up contracts with them specifying they can only use specific mills to make the product,” Daniels said. “Prime defense companies have started to do this because of all of the restrictions that have been put in place around critical minerals from China and permanent magnets from China. But this is just scratching the service on how to monitor forced labor,” he said.
Chinese companies, specifically, “are utilizing forced labor in China to drive extremely cheap products into these secondary nations with favorable tariff rates, and then rerouting those goods into the United States or into other markets. It’s financial abuse,” Daniels said.
In addition to furniture, Exiger has identified a steady ramp-up of other industries like kitchen cabinets, automotive parts (gears, drive trains, carburetors), and electronics that have invested billions in countries like Vietnam and other Southeast Asian countries to sidestep the tariffs.
“The shadow factories in the intermediary countries are also employing less workers there as well for the products predominantly being made in the Chinese factories using forced labor. That impact their jobs growth as well,” Daniels said.
Trump’s tariffs have hit China’s exports to the U.S. and generated significant new revenue for the government. U.S. Customs and Border Protection reported that during the first year of Trump’s second term, the government collected over $305 billion in tariffs, taxes, and fees, including $250.9 billion in tariff revenue. Enforcement actions on tariff circumvention generated an additional $1.2 billion. The closing of the de minimis loophole resulted in Customs recovering more than $1 billion.
But Daniels says if the trade war has forced China to shift strategy, it hasn’t resulted in weakening China’s manufacturing juggernaut. “China’s economic dominance is maintained through these deceptive practices in investing billions of dollars into these shadow facilities,” he said. “It is complicating enforcement efforts on forced labor and giving China an economic advantage.”
