South-East Asia’s Garment Industry Faces Heat from U.S. Tariff Turmoil

South-East Asia’s reputation as the world’s sportswear and apparel workshop is being put to the test. A looming tariff standoff with the U.S. is threatening to upend the region’s role as a reliable manufacturing base for global giants like Nike, adidas, and Lululemon.

For Vietnam, Indonesia, and Cambodia—where textiles and footwear are major economic drivers—the stakes couldn’t be higher. The U.S. remains their biggest customer, and any shift in trade dynamics could have far-reaching consequences.

Tariff tensions test South-East Asia’s grip on global manufacturing edge

Tariff Pause Offers Temporary Relief

Earlier this year, the U.S. announced steep tariff hikes—up to 49%—targeting imports from several countries, including those in ASEAN. However, a surprise 90-day pause replaced the increases with a more manageable 10% flat rate for most countries, excluding China.

While this provides short-term breathing room, the outcome of ongoing trade negotiations will be critical in shaping the future of South-East Asia’s export economies.

Regional Responses: Dialogue Over Retaliation

Rather than retaliating, ASEAN countries are opting for diplomacy. Vietnam is working toward a bilateral trade deal with the U.S. and has already lowered tariffs on some American goods. Indonesia plans to increase its U.S. cotton imports, while Cambodia has proposed import duty cuts on U.S. products like meat and motorcycles to strengthen its negotiating position.

Pressure from Global Brands

Major apparel brands are closely watching the situation. Nike, which relies heavily on factories in Indonesia and Vietnam, has already reached out to local governments to protect its supply chains. The uncertainty is adding strain to industries already dealing with reduced orders, factory closures, and job losses.

Diversification: A Long-Term Solution, Not a Quick Fix

Manufacturers across the region are seeking to reduce their dependence on the U.S. by exploring alternative markets. But the shift isn’t simple—meeting different standards, building new relationships, and adjusting supply chains takes time and investment.

In Vietnam, the challenge is further compounded by its heavy reliance on imported raw materials, particularly from China, which could complicate eligibility for tariff benefits under other trade agreements.

What’s Next?

As the 90-day countdown continues, all eyes are on the negotiating table. A favorable outcome could help South-East Asia retain its competitive edge in global manufacturing. But if talks fall through, the region’s apparel industry may face its toughest season yet.