As the holiday season approaches in the United States, the rush for Christmas gifts is straining manufacturers thousands of kilometres away in Southeast Asia, where supply chain shocks triggered by US tariffs are hitting exports of everything from mittens and headphones to toys.
Manufacturers have spent much of the past year trying to adapt to the tariffs, which have driven up production and logistics costs while also disrupting delivery schedules. Now, the seasonal demand spike has only served to pile on more pressure.
“Everyone is scrambling to adjust,” said Ivan Sham, vice-president of the Malaysian Textile Manufacturers Association and owner of a textile company.
Everyone is scrambling to adjust
Although far from Southeast Asia’s largest garment exporter, Malaysia has positioned itself as an alternative to China for certain goods, supplying the US with textiles including knitted and crocheted sleepwear, mittens and cotton blends.
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After being hit with a 19 per cent tariff rate this summer, the Southeast Asian nation signed a trade deal with Washington to preserve US market access, opening its doors in turn to more competition from major American manufacturers.
US tariffs were placed on all of the region’s low-cost exporters, not just Malaysia, drawing Vietnam, Laos, Indonesia and the like further into the deepening structural rivalry between Washington and Beijing.
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The resulting supply chain squeeze is doing more than driving up festive retail prices in America; it also signals a deeper reordering of Southeast Asia’s place within the global economy.