The recent easing of trade tensions between the United States and China offers Southeast Asia a critical moment to solidify gains made during the trade war, experts say. The September summit between former US President Donald Trump and Chinese President Xi Jinping in Washington resulted in proposals to reduce tariffs on a list of non-sensitive goods valued at around US$30 billion in annual bilateral trade. Although the details on tariff rates and implementation remain unspecified, this development builds upon the US-China Board of Trade, established earlier in May to facilitate dialogue on non-sensitive goods.

For Southeast Asia, the trade truce signals an opportunity, but analysts caution against viewing it as a guarantee of long-term stability. The shifts in global supply chains seen since 2018 were driven largely by increased US tariffs on Chinese products, which incentivized multinationals to establish production facilities in the region while maintaining operations in China, a strategy known as "China plus one."

Companies like Ricoh and Sharp shifted some US-bound manufacturing to countries such as Thailand and Vietnam, and Chinese manufacturers themselves expanded operations in Southeast Asia. Manufacturing made up 20% of foreign direct investment (FDI) into the Association of Southeast Asian Nations (ASEAN) in 2024, up from 9% the previous year, while total FDI set a record of US$243.9 billion in 2025. However, the trade war alone does not fully explain these inflows.

A key challenge will be sustaining these investments beyond tariff-driven advantages. As tariffs potentially decrease, the lower cost benefit attracting businesses to Southeast Asia might diminish. Nonetheless, companies operating in the region may continue production if operating costs are manageable and relocating proves costly. The example of India is instructive: despite losing tariff advantages for US smartphone imports, it still accounted for nearly 60% of such imports between March and June, demonstrating that established production capacity and supplier networks can endure changes in trade policy.

Future success depends on building robust supplier ecosystems and reducing domestic operating costs. Southeast Asian countries need to develop regional supplier networks that can meet quality, delivery, and cost requirements to support continued investment. Singapore’s targeted development programs illustrate this approach, where local firms specializing in precision engineering and coating have partnered with multinational companies in aerospace and medical sectors, resulting in reduced lead times and diminished reliance on foreign suppliers.

Vietnam’s collaboration with Samsung provides another example, wherein local suppliers received support to improve capabilities, leading to more than 60 becoming official vendors by the end of 2024. Expanding such partnerships can spread risk and foster resilience among suppliers by diversifying their customer base.

Broader regional integration also remains critical. Although ASEAN’s Free Trade Area agreement has eliminated tariffs on most goods, border delays continue to hamper efficient supply chain operations. Recent efforts to streamline customs procedures, including provisions in the updated ASEAN Trade in Goods Agreement targeting electronic trade documentation and faster border clearance, aim to address these issues. ASEAN plans to enact these changes by the end of 2026, one year ahead of schedule.

Singapore, set to chair ASEAN in 2027, has expressed commitment to advancing the region towards a more effective single market. Implementing consistent customs procedures across member states will be vital to maximizing the benefits of regional supply chains.

Ultimately, analysts emphasize that while calmer US-China trade relations reduce risks for Southeast Asia, the region’s long-term economic prospects hinge on its ability to develop independent industrial capabilities and supplier networks that extend beyond temporary trade disputes. The goal is to transform short-term gains from tariff shifts into a sustainable competitive advantage.