How Trump tariffs, forced labor led China to $1 trillion trade record

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 prowess, its geopolitical and economic rival is not only finding global workarounds but also growing. Trade and supply chain data shared with CNBC shows that two factors are crucial behind China’s success in mitigating the impact of U.S. tariffs: the use of secondary manufacturing markets and forced labor to finish products, especially in Asia.

In recent years, Chinese companies have redirected their manufacturing to Southeast Asian countries, including Vietnam, to offset tariffs that began with Trump’s first-term trade war in 2018; This is a shift that continues to benefit China today. Trade between China and Southeast Asia (including Malaysia, Singapore, Thailand, Vietnam, Indonesia, the Philippines, Cambodia, Laos, Myanmar, Brunei and Timor-Leste), tracked by freight data tracker Vizion, shows volumes of Chinese goods rising as many manufacturers and importers scramble to front-load in 2025 to avoid the first tranche of Trump’s second-term tariffs ahead of the so-called “Liberation Day” in April.

The shift continues as this strength in trade flows increases U.S. efforts to reverse its trade balance: The U.S. deficit with global trading partners has nearly doubled to $56.8 billion, according to the most recent data in November; The European Union represents a third of trade, and its goods deficit with China fell by nearly $1 billion to $13.9 billion. The US trade deficit increased by 4% over the year.

“Volumes in Southeast Asia are increasing as shippers diversify imports from China to low-tariff countries,” said Paul Brashier, vice president of global supply chain at ITS Logistics. “Imports from key Southeast Asian countries (Vietnam, Thailand, Indonesia) increased by approximately 20 percent on an annual basis.”

“The $1.1 trillion surplus is a result of the country effectively rerouting production globally by offloading 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 more than 150 Fortune 500 companies and more than 60 government agencies, including the U.S. Department of Defense and U.S. Customs and Border Protection. “China is creating special economic zones in these countries. The fact is that the vast majority of the product is produced in China and sent to these countries for assembly,” he said.

Diverted shipments and tariff evasion during the trade war

According to Exiger’s 2024 full-year data, Vietnam, which is among the top 10 countries in terms of the number of shipments to the USA from companies 100 percent owned by Chinese organizations, accounted for 80 percent of these shipments. Italy ranked second, followed by Thailand and Malaysia. Daniels said he expects 2025 full-year numbers to be consistent with 2024 as Trump’s additional trade policy moves change faster than existing structural changes. The effects of reshoring and creating additional tariff evasion opportunities are more likely to emerge in the 2026-2027 period.

“What is striking when you look at weekly export flows is how persistently trade has shifted from China to South Asian countries. [has been] “China’s export volumes established a higher base in Vietnam, Indonesia, Malaysia and Thailand, and these levels were maintained into 2026. Rather than a temporary redirection due to headlines or tariffs, this pattern points to new buyers and more resilient sourcing relationships forming across Southeast Asia,” said Vizion CEO and co-founder Kyle Henderson.

One example Daniels pointed to was HHC Changzhou Corp., which does 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 MotoMotion brand. The company’s products exported from China to the United States were subject to a 10 percent tariff as of September 2018 and a 25 percent tariff as of May 2019. To avoid these tariffs, the company established a wholly owned subsidiaryCraftsmanship Vietnam (aka MotoMotion Vietnam) in Binh Duong Province, Vietnam, in June 2019.

HHC Changzhou Corp in 2021 annual reportThe company cites the creation of the Vietnam-based facility in response to tariffs imposed under Article 301 of the 1974 Commercial Code.

Exiger says these diversion practices could undermine U.S. industry at every point in the supply chain because jobs that could be created in the U.S. are done in China’s shadow factories. According to Exiger, applications are not limited to Asian markets. “In the tooling space, for example, we have seen companies rerouting goods through Taiwan, Vietnam, Malaysia, Mexico and South America,” Daniels said. “This is a winning strategy, but it jeopardizes millions of jobs that could be in the U.S. or other countries,” he said.

The U.S. trade deal with Vietnam last summer included a 40% transshipment tariff on top of standard tariff rates, but it is difficult to connect products imported from countries like Vietnam to original sources in China.

According to Exiger, China’s excess tariffs under Section 301 alone will amount to over $30 billion this year, meaning the loss of over a million trade and manufacturing jobs.

Chinese GDP and ‘dominance through coercion’

According to Exiger’s new supply chain and workforce risk database, forced labor.aiThe expansion of China’s supply chain and multiple tiers of suppliers also reveal distinct patterns or increases in illegal labor activities. Exiger says its analysis of supply chains for products once made exclusively in China shows that companies are now subsidizing tariffs by using forced labor at some stage of production to expedite products to secondary markets in Southeast Asian countries, where they can complete production and ship it more cheaply.

“The reality is that China’s GDP grows using domination through coercion,” Daniels said, adding that there are signs of forced labor both in China and in secondary markets where it has shifted some manufacturing to avoid tariffs.

International Labor Organization It estimates that almost 28 million people worldwide are in forced labor, 63 percent of which occurs in the private economy, generating $236 billion in illicit profits each year. China has long been accused by human rights watchdog groups of using forced labor and These concerns continue to arise in 2026. United Trade Representative in 2025 Forced Labor Enforcement Task Force added 78 new organizations to the list of forced labor organizations, bringing the total number to 144 Chinese organizations.

Daniels explained that supply chain risks related to labor practices can exist at multiple levels of distance from the primary manufacturing source the company has contracted to purchase from. If a supplier is the sole provider of a particular product for a company and forced labor has been identified at these lower supply chain levels, Daniels says many companies now monitor and mitigate product production through contracts.

“Companies go directly to the supplier and use their purchasing power to draw up contracts that state they can only use certain factories to make the product,” Daniels said. “Major defense companies have started doing this because of all the restrictions on critical minerals from China and permanent magnets from China. But this only undercuts the service on how to track forced labor,” he said.

Daniels said Chinese companies in particular “use forced labor in China to drive extremely cheap products to these secondary countries at favorable tariff rates and then divert those goods to the United States or other markets.” “This is financial abuse,” he said.

Exiger found that in addition to furniture, other industries such as kitchen cabinets, automotive parts (gears, drivetrains, carburetors) and electronics are also investing billions of dollars in countries like Vietnam and other Southeast Asian countries to avoid tariffs.

“Shadow factories in intermediate countries also employ fewer workers there for products that are predominantly produced using forced labor in Chinese factories. This affects the growth of their businesses,” Daniels said.

Trump’s tariffs hit Chinese exports to the United States and brought significant new revenue to the government. US Customs and Border Protection reported In the first year of Trump’s second term, the government collected more than $305 billion in customs duties, taxes and fees, including $250.9 billion in tariff revenue. Enforcement actions to circumvent the tariffs generated an additional $1.2 billion in revenue. Closing the de minimis deficit resulted in Customs receiving more than $1 billion in compensation.

But if the trade war has forced China to change its strategy, it hasn’t resulted in weakening China’s manufacturing juggernaut, Daniels says. “China’s economic dominance is maintained through these deceptive practices of investing billions of dollars in these shadow facilities,” he said. “This complicates enforcement efforts on forced labor and gives China an economic advantage.”