The Mirage of De-escalation
The trade truce is a ghost. While headlines from the November 19th bilateral meetings in San Francisco suggested a cooling of tempers, the hard data tells a different story. According to the latest trade flow reports from November 20, 2025, transshipment volumes through Mexico and Vietnam have surged by 14 percent in the last quarter alone. This is not a cessation of hostilities. It is a tactical repositioning. Firms are not stopping their trade. They are hiding it. The phantom trade phenomenon involves shipping semi-finished Chinese goods to secondary nations, adding minimal value, and re-exporting them to the United States to bypass Section 301 duties.
The ASEAN Trap
Southeast Asia was supposed to be the winner of this conflict. Instead, it is becoming a warehouse for Chinese overcapacity. Vietnam and Thailand are seeing record levels of Foreign Direct Investment, but the quality of that investment is questionable. Much of it is focused on final assembly rather than deep manufacturing integration. This creates a precarious dependency. If the United States decides to investigate regional value content more strictly in early 2026, these ASEAN hubs could face the same tariff walls currently blocking mainland China. The manufacturing PMI data released on November 19, 2025, shows a widening gap between output and new export orders, suggesting that inventories are piling up in regional warehouses.
The Electric Vehicle Glut in Bangkok
Chinese electric vehicle manufacturers are not just expanding. They are dominating via predatory pricing. In the 48 hours leading up to November 21, 2025, BYD and Xiaomi announced further price cuts in the Thai market, bringing the cost of entry-level EVs below the threshold of local internal combustion competitors. This is a survival strategy. With the European Union and the United States effectively closing their borders to Chinese EVs, Southeast Asia has become the primary vent for excess industrial capacity. As reported by Yahoo Finance on November 20, BYD now commands nearly 40 percent of the new energy vehicle market in Thailand, a figure that has tripled in eighteen months.
Predatory Pricing Mechanisms
The mechanism is simple but devastating for local competition. Chinese firms benefit from state-subsidized credit lines and integrated battery supply chains. When they export to Thailand or Indonesia, they leverage existing Free Trade Agreements that provide zero-percent import duties on EVs. Local manufacturers in Indonesia, attempting to build a domestic nickel-based battery ecosystem, find themselves unable to compete with the sheer scale of the Chinese supply chain. This is not a fair market exchange. It is an industrial steamroller. The aggressive discounting observed this week in Bangkok showrooms is a clear signal that the Chinese domestic market can no longer absorb its own production.
Tariff Divergence and Global Friction
The world is splitting into distinct tariff zones. On one side, the United States has effectively decoupled its automotive sector from China. On the other, ASEAN nations remain open, hoping to capture the transition to green energy despite the risks to their own industrial sovereignty. The table below illustrates the massive discrepancy in trade barriers as of late November 2025.
| Jurisdiction | Effective Tariff on Chinese EVs | Policy Stance (Nov 21, 2025) |
|---|---|---|
| United States | 102.5% | Total Exclusionary |
| European Union | 35.3% (Weighted Avg) | Targeted Countervailing |
| Thailand | 0% | Open Door / FTA Based |
| Indonesia | 5% (Conditional) | Incentive Driven |
This divergence creates a massive arbitrage opportunity. It also increases the likelihood of secondary sanctions or ‘origin of goods’ audits by the U.S. Treasury. Investors should look closely at the ASEAN manufacturing PMI reports, which indicate that while production is high, the profit margins are being squeezed to near-zero levels to maintain export volumes.
The Yield Curve and Trade Uncertainty
Capital is reacting to this instability. The 10-Year Treasury Yield sat at 4.62 percent this morning, reflecting a market that expects persistent inflation driven by trade friction. When goods cannot flow efficiently, they become more expensive. The ‘truce’ has done nothing to lower the cost of logistics or the risk premiums associated with South China Sea shipping routes. Global shipping rates for the Shanghai-to-Rotterdam route saw a 4 percent uptick yesterday, driven by insurance adjustments following renewed maritime tensions. This is the reality of 2025. Stability is a word used in press releases, but volatility is the reality on the trading floor.
The Intellectual Property Stalemate
The core issues of the 2018 trade war remain untouched. Forced technology transfers and state-directed industrial espionage are still the primary complaints of the U.S. Trade Representative. The recent truce deals only with the surface level of commodity purchases. It does not address the structural architecture of the Chinese economy. For investors, this means the risk of a sudden, sharp reversal in policy remains the single greatest threat to supply chain continuity. The ‘China Plus One’ strategy is no longer a luxury. It is a survival requirement for any firm with a global footprint.
Watch the upcoming January 15, 2026, Tariff Review. This date represents the next major milestone where the current temporary waivers on ASEAN-assembled components are scheduled for reassessment. If the U.S. Department of Commerce finds evidence of systematic tariff circumvention, the 4.62 percent yield we see today will look like a historical floor as markets price in a new, more aggressive round of global trade barriers.
