US Trade Deficit With Asia Widens Despite China Squeeze

The U.S. trade deficit in goods and services with Asia climbed to $70.8 billion in November, as a narrowing gap with China was more than offset by a surge in imports from Southeast Asia. This trend highlights the complex outcomes of the Trump administration's efforts to rebalance global trade.

According to new Commerce Department data, American imports from China dropped 12.2% to $20.9 billion in November. This decline aligns with President Donald Trump's stated goal, coming after the U.S. imposed an average effective tariff rate of 47.5% on Chinese goods.

However, while the U.S. deficit with China shrank by $80.9 billion in the first 11 months of 2025, the deficit with the rest of Asia grew. The total regional trade deficit hit $778 billion, marking a 10% increase year-over-year. Even with widespread tariffs, the U.S. continues to consume more Asian goods than it exports and appears headed for a larger annual trade deficit than in 2024 or 2023.

The Great Supply Chain Reroute

Analysts point to a clear pattern: as tariffs on China rose, trade flows shifted to neighboring countries. Kelvin Lam, senior China economist at Pantheon Macroeconomics, noted that Southeast Asia is likely being used by China to arbitrage tariff differences.

"The shifting of deficits from China to other Asian countries has been the trend since the first trade war in 2017," Lam said. He added that China’s share of the U.S. trade deficit with Asia is expected to fall from 66% in 2017 to just one-quarter last year.

Even with new tariffs slapped on them, Southeast Asian nations saw their collective trade surplus with the U.S. grow through November 2025. Deficits with Singapore, Malaysia, and Thailand all expanded in November, driven by electronics and textiles.

Gareth Leather, a senior economist at Capital Economics, explained that since tariffs were applied broadly across the rest of Asia, these nations "haven't seen a kind of a big competitive loss vis-a-vis their main kind of trading competitors."

Current U.S. tariff rates across the region include:

• Laos & Myanmar: 40%

• Vietnam: 20%

• Cambodia, Thailand, Malaysia, Indonesia: 19%

• Singapore: 10%

Experts say Chinese supply chains continue to reroute through Southeast Asia, where manufacturers have boosted capacity but still depend on Chinese components. This "China plus one" strategy is difficult to distinguish from illegal transshipment fraud.

Key Asian Economies: A Mixed Picture

Taiwan's AI-Fueled Export Boom

Shipments from Taiwan, primarily semiconductors needed for AI data centers, have caused the U.S. trade deficit with the island to nearly double. For the January-November 2025 period, the deficit reached a record $126 billion. In a recent deal, Taiwan agreed to invest $250 billion in American chipmaking, energy, and AI in exchange for a lower U.S. tariff rate of 15%, down from 20%.

Japan and South Korea Face Headwinds

In contrast, exports from Japan and South Korea declined in November compared to the previous month. This slowdown is likely linked to U.S. levies on automobiles and car parts, even after both countries secured agreements to lower their tariff rate to 15% last year.

India's Imports Shrink Under Pressure

Goods from India have also continued to decline, as the country faces a total tariff of 50%, which includes a secondary levy related to its purchases of Russian oil. While Indian imports fell 2% in November, a corresponding dip in American exports to India meant the trade deficit still expanded.

Broader US Economic Implications

Overall, total U.S. imports jumped 5% in November from the prior month, while exports fell 3.6%. This widened the country's total trade deficit to $56.7 billion for the month.

A third of the import surge was attributed to pharmaceuticals, with shipments of computers and semiconductors also remaining strong. Thomas Ryan, North America economist at Capital Economics, sees this as a positive signal. "This provides further evidence... that business investment remained strong in the fourth quarter, supported by the AI buildout," he commented.

An Uncertain Policy Horizon

The Trump administration's aggressive tariff policies have disrupted trade flows and impacted small businesses. The legality of these sweeping tariffs is now under review by the U.S. Supreme Court, which will rule on whether the president overstepped his authority.

Regardless of the court's decision, the White House retains other options to impose tariffs on goods and sectors it considers vital to national security. As of January, the average effective U.S. tariff rate stands at 16.9%—the highest level since 1932, according to Yale's Budget Lab—making it significantly more expensive to import products into the country.