Asia’s Gray Zone With Supply Chains

[slapper]

Tired of the usual “tariffs are bad/good” takes? Same. And after that, global supply chains are starting to look like one big arbitrage play, just with more lawyers, more stamp collectors, and a lot more plausible deniability

The U.S. put a 145% tariffs on China, then “pauses” to 30% because the ports are jammed and everyone’s threatening lawsuits. At the same time, Vietnamese, Indian, and Mexican factories are “winning”, but a ton of the goods are just taking a detour. Sometimes with less processing than goes into a McDonald’s cheeseburger

The U.S. cuts off China’s de minimis rule (now a 54% duty or $100/item on small parcels) so e-commerce sellers just bounce goods through every loophole they can find. The CBP can barely keep up. Taobao is blowing up, and Americans don’t even know half of what they’re buying is still made in China, or how it got here

Asia is both the star and the scapegoat in this game:
- Vietnam is “winning”, but if you ask anyone in Saigon’s export game, they’ll tell you half the new business is Chinese capital, Chinese inputs, Chinese brains, just rebranded.
- U.S. Customs is coming, and Vietnam’s making new rules to avoid a diplomatic slapdown.
-India’s getting in the mix, but labor, infrastructure, and, politics are still hurdles.

If supply chains are this fluid and legal frameworks are this sketchy, is the entire system just going to incentivize more gray/black-market activity? If every tariff creates a shadow market, who wins long-term? Nations, corporates, or just the best arbitrageurs with the best VPN?

[Fortify]

What do you mean "arbitrage play"? It has always been the goal of companies based in capitalist countries to earn as much money as possible while staying within the confines of the law. Globalization has allowed for goods to be manufactured and services to be provided from cheaper geographic locations, which still brings profit to American companies who are able to sell these imported products on. I'm no fan of Trump, but maybe China is the worse of the two evils when you consider their authoritarian dictatorship in Xi Jinping - who is itching to invade the democratic country of Taiwan. Companies are constantly looking at maximizing their supply chains and squeezing profit, but it's hard to ramp up in a new country. It seems easy to say "we'll just make this in Vietnam now" but one of the reasons China is so successful is it produces all components that get pulled together into a product, it does not simply import and construct parts from elsewhere. That interconnected web of factories took decades to construct and gives it a full feature advantage.

Removing de minimis and similar rules in Europe is going to dent Chinese exports, but they were absolutely taking advantage of that perk. It was intended to be used at relative parity between countries, but especially with the explosion in retailers like Temu and Ali Express the benefit was way too lopsided in China's favor. They used to hide behind dropshipping on places like eBay but dropped that pretense and exploited it to the maximum with direct sales. It's good to see some pushback on this "we abuse capitalist countries but only pretend to be capitalist" pretender, even if a wrecking ball was used when surgical instruments might have been more helpful.

[slapper]

What do you mean "arbitrage play"?

It could have sounded more like a conspiracy when I mentioned "arbitrage play". It is simply the next step in what you said: businesses are constantly looking for an edge, whether it is in hiring, finding loopholes, or just the best shipping route. And yes, globalisation made it the default operating system. The incentives stayed the same; only the playgrounds and the size changed

...Companies are constantly looking at maximizing their supply chains and squeezing profit, but it's hard to ramp up in a new country. It seems easy to say "we'll just make this in Vietnam now" but one of the reasons China is so successful is it produces all components that get pulled together into a product, it does not simply import and construct parts from elsewhere...

Agree. People outside the game think you just swap China for Vietnam or India overnight, but the web China built is basically a real-life cheat code. No one else has that depth of parts, labor, and logistics. At least not yet, or not at the same speed. That is why, even as U.S. and EU policies push companies to move, most of the big players are hedging, doing half-and-half, or keeping the critical stuff in China for now

Removing de minimis and similar rules in Europe is going to dent Chinese exports, but they were absolutely taking advantage of that perk. It was intended to be used at relative parity between countries, but especially with the explosion in retailers like Temu and Ali Express the benefit was way too lopsided in China's favor. They used to hide behind dropshipping on places like eBay but dropped that pretense and exploited it to the maximum with direct sales. It's good to see some pushback on this "we abuse capitalist countries but only pretend to be capitalist" pretender, even if a wrecking ball was used when surgical instruments might have been more helpful.

I don’t blame anyone for gaming it to the max, but at some point it stops being clever and just feels like a hack everyone’s tired of. You can’t run a marathon on technicalities and not expect the rules to get rewritten. But you’re also right: governments wield the hammer, not the scalpel, so we get market earthquakes instead of adjustments

About the China vs. “the West”, I don’t think there’s a perfect hero in this story. China’s model is ruthless, yeah, and plenty scary geopolitically. But the Western approach is often more about optics and less about long-term strategy. Maybe the real “arbitrage” is in values: companies (and governments) talk a big game about principles but chase the margin wherever they can find it

[Despairo]

Bro, this already happen from a long time ago, the difference is just the way it works.

The developed countries will use third world countries to make more money, either they open a production manufacture in there, they use immigrants to work in their country, they use their country before they sent it to receiver etc.

We will see mass products who made in china, finished in Vietnam.

[davis196]

Asia is both the star and the scapegoat in this game:
- Vietnam is “winning”, but if you ask anyone in Saigon’s export game, they’ll tell you half the new business is Chinese capital, Chinese inputs, Chinese brains, just rebranded.
- U.S. Customs is coming, and Vietnam’s making new rules to avoid a diplomatic slapdown.
-India’s getting in the mix, but labor, infrastructure, and, politics are still hurdles.

That was pretty much expected. The "High tariffs" policy can lead to at least two negative side effects.
1.Chinese goods being labeled as "Vietnamese" or "Indian" in order to avoid higher tariffs.
2.Contraband of Chinese goods. The contrabandists across the southern US border would start to import Chinese goods illegally.
All this shows that Trump doesn't know what he's doing. There are no winners, when global trade gets disrupted. I can't see any Chinese manufacturers moving to the USA and building industrial facilities. Protectionism won't lead to the re-industrialization of the USA.

[JiiBs]

Bro, this already happen from a long time ago, the difference is just the way it works.

The developed countries will use third world countries to make more money, either they open a production manufacture in there, they use immigrants to work in their country, they use their country before they sent it to receiver etc.

We will see mass products who made in china, finished in Vietnam.

That’s what happens when you are mainly concerned with having to generate the raw materials for production and not actively do any of the productions yourself. You don’t get the chance to get into fair or proper trade agreements. At most, you get most of these products resold to you at a cost you can’t disagree with. That’s why you see hostile policies or high duties from nations that almost don’t import as much but, are always about the exportation of their own product like we have in China. Policies that are focused on them as found in the OP is mainly so they could get some out of them.

Then, we get to understand that there would always be an underground or dark market on the go to weave through these policies and still get the job done.

[slapper]

Bro, this already happen from a long time ago, the difference is just the way it works.

The developed countries will use third world countries to make more money, either they open a production manufacture in there, they use immigrants to work in their country, they use their country before they sent it to receiver etc.

We will see mass products who made in china, finished in Vietnam.

Developed countries have always played the location shuffle to squeeze extra profit, whether it’s chasing cheap labor, bending the rules, or running goods through half a dozen “finishing” stages just to slap a new label on the box

Now the only difference is how much faster and sneakier it gets. Used to be “Made in China” was obvious. Now it’s “Finished in Vietnam”, “Assembled in Mexico”. or whatever looks cleanest for customs. The winners are always those who can move the quickest, switch labels, and keep one step ahead of the next crackdown

All this moving around doesn’t actually fix anything for the countries in the middle. They get some jobs, sure, but the real money and control still flow back up the ladder. Next year, it might be Indonesia or Bangladesh. Rinse, repeat

~

That was pretty much expected. The "High tariffs" policy can lead to at least two negative side effects.
1.Chinese goods being labeled as "Vietnamese" or "Indian" in order to avoid higher tariffs.
2.Contraband of Chinese goods. The contrabandists across the southern US border would start to import Chinese goods illegally.
All this shows that Trump doesn't know what he's doing. There are no winners, when global trade gets disrupted. I can't see any Chinese manufacturers moving to the USA and building industrial facilities. Protectionism won't lead to the re-industrialization of the USA.

Yes, no one is seeing Chinese industries suddenly appear in Ohio or Michigan. It sounds wonderful on TV when people talk about "bringing jobs home," but the truth is far messier. If anything, it merely makes the trade more imaginative. Sometimes this is legal, and other times its not. In the end, the system always finds the easiest way out, even if it means coming up with new ways to go around the rules. This shows why it seems like everyone is always trying to catch up: new laws, more paperwork, and more enforcement, but the big incentives stay the same

So yeah, disruption is the only constant, and the state of "winning" is often temporary

[peter0425]

If supply chains are this fluid and legal frameworks are this sketchy, is the entire system just going to incentivize more gray/black-market activity?

Yes more loopholes, more inconsistencies so more gray or black market to exploit and make use of. Blocking one thing simply makes someone find a different path.

If every tariff creates a shadow market, who wins long-term? Nations, corporates, or just the best arbitrageurs with the best VPN?

Countries that can find a way to work around these blockages will be able to benefit massively as they will attract capital and investors. Countries with low tariffs have the opportunity to make the most out of here.

[tsaroz]

Can't say about everywhere but gray economy has been a big part of Asian countries. Some studies suggest it could be as big as formal economy.
Give free market to it and everything would be exported to US from where the taxes are lowest.
It's also not only from China but also to China. China in past didn't had a legal agreement to import meat from our nation and at that time, people here just exported it to Vietnam from where it went to China through porous border. This made the product more expensive due to longer routes and longer handling time.

Trump might have interest of US citizens in imposing huge tax to its trading partners but there's no way for America to go back to cheap industrial era while China is too quick in implementing AI and robots in production bringing the price down.

[WillyAp]

I wonder when the US entrepreneurship begins to think and arms factories in Latin America.
Especially the plastic based toy industry. Medical equipment, most stuff is made from plastic. 

[slapper]

Can't say about everywhere but gray economy has been a big part of Asian countries. Some studies suggest it could be as big as formal economy.
Give free market to it and everything would be exported to US from where the taxes are lowest.
It's also not only from China but also to China. China in past didn't had a legal agreement to import meat from our nation and at that time, people here just exported it to Vietnam from where it went to China through porous border. This made the product more expensive due to longer routes and longer handling time.

Trump might have interest of US citizens in imposing huge tax to its trading partners but there's no way for America to go back to cheap industrial era while China is too quick in implementing AI and robots in production bringing the price down.

When “official” channels get tighter, people just get more creative with the backdoors, and yeah, half the time the workaround becomes so normal nobody even calls it “gray” anymore

The Vietnam-China meat example you gave is great. The goods never stop, they just take the scenic route. Every extra checkpoint just adds cost, but the demand (and the hustle) always finds a way. It’s like the trade version of “life finds a way”

Indeed, the U.S. can throw tariffs at China, but China’s not standing still. They’re automating, AI, robots, whole new factories overnight. The cost gap might even widen, not shrink, no matter how high the walls go

If anything, these new barriers just push more business into the shadows. Sometimes it feels like the “gray” side of the economy is the only part that’s truly global now

I wonder when the US entrepreneurship begins to think and arms factories in Latin America.
Especially the plastic based toy industry. Medical equipment, most stuff is made from plastic. 

Latin America is getting a second look, not just as a market but as a new production “home base.” Labor’s cheaper, it’s closer to the States, and politics can be a bit more flexible than in Asia right now. Plastics are a perfect example. So many toy makers, packaging guys, and even medical supply chains want to “nearshore” to Mexico or Brazil. Saves a ton on transport, and they don’t have to stress about some random overnight tariff or port shutdown on the other side of the world

But same as Asia, the real winners aren’t always local. Big players come in, set up shop, run production, but control and profits still fly back north. It’ll be interesting to see if Latin America gets stuck as just another pit stop or if someone actually flips the script and builds their own brand, their own supply chain power