As markets digest the latest trade data released this Monday, January 26, a clearer picture is emerging across the global economy. Rather than reducing reliance on Chinese manufacturing, years of US-China trade tensions appear to have reshaped how that dependence is expressed. A recent report published by the S. Rajaratnam School of International Studies (RSIS) reinforces what many supply chain analysts have suggested, while direct US-China bilateral trade fell sharply in 2025, Chinese exports to Southeast Asia expanded rapidly, with electric vehicle shipments to ASEAN markets rising by an estimated 75% year on year.
This pattern, increasingly described as “The Great Re-Routing,” highlights the limitations of the decoupling strategy. Instead of large-scale reshoring to the United States, multinational firms have reorganized production through multi-country supply chains. Chinese components are now more frequently assembled or finished in Vietnam, Thailand, or Mexico before entering the US market. Available data suggests that, despite Washington’s expanding tariff regime, with effective duties on some Chinese goods approaching historically high levels, Chinese value added continues to reach American consumers under new country-of-origin labels, often at higher final prices.
As US regulators intensify scrutiny of these transshipment routes, the European Union is moving to strengthen its position in Southeast Asia. Reports late Sunday indicate that the EU plans to elevate its diplomatic relationship with Vietnam later this week. European Council President Antonio Costa is expected to visit Hanoi on Thursday to formalize a Comprehensive Strategic Partnership, signaling a significant upgrade in political and economic engagement at a time of heightened trade uncertainty.
This shift reflects a calculated form of economic pragmatism. While the United States has introduced additional non-tariff barriers affecting regional partners, including stricter enforcement actions linked to fisheries compliance, the EU is presenting itself as a more predictable counterpart. By deepening cooperation with Vietnam, including in critical minerals where the country holds substantial rare earth potential, Europe is seeking to diversify supply chains and reduce exposure to both Chinese export controls and abrupt US policy changes. For firms operating across jurisdictions, this points to a widening transatlantic divergence in supply chain risk.
Uncertainty is further amplified by the unresolved prospect of President Trump’s proposed “Iran Tariff,” which continues to weigh on medium-term planning in the automotive sector. Although the administration has not yet implemented the threatened 25% secondary sanction, its potential application has delayed investment decisions. Automakers with supply networks spanning Turkey and India report growing difficulty certifying future models for US market entry, given concerns that minor components linked to sanctioned jurisdictions could trigger broad tariff penalties.
Taken together, the evidence of sustained trade re-routing and the EU’s diplomatic engagement suggests that 2026 is less likely to mark an era of deglobalization than one of reconfiguration. Rather than a retreat from global trade, the system appears to be reorganizing along increasingly fragmented lines, with the United States tightening access conditions while Europe and much of Asia deepen interconnected, regionally anchored networks that operate alongside, and sometimes around, the US market.
https://www.japantimes.co.jp/business/2026/01/25/eu-ties-vietnam-trade/
