Cheap Chinese goods are flooding South east Asia Can the region turn the tide

BANGKOK - Factory workers in Muar, known for its abundant high-quality rubberwood sourced from end-of-life-cycle rubber plantations, are working speedily to polish ready-to-assemble furniture pieces and arranging them into flat-pack boxes.

The hive of activity in the coastal town in north-western Johor, Malaysia’s biggest furniture manufacturing hub, belies the confluence of pain points that are contributing to an undercurrent of foreboding and gloom.

There is a well-founded sense of urgency: While some orders to the United States have already been halted, others are being expedited to ensure shipments are made before the full force of US President Donald Trump’s “reciprocal tariffs” take effect when the 90-day pause ends in July.

Even as negotiations on tariff adjustments continue apace, the industry fears a blunting of demand from a market that accounted for half of Malaysia’s RM9.89 billion (S$2.99 billion) wooden furniture exports in 2024.

Yet Malaysia’s furniture producers, such as Ms Candice Lim, founder of Nature Signature, are also being forced to simultaneously contend with increasingly stiff competition from China. That challenge began in earnest back in 2019 when furniture was among the categories of Chinese goods hit with tariffs during Mr Trump’s first administration, resulting in Chinese manufacturers who found themselves priced out of the US searching for new buyers, including in Malaysia.

“Faced with the first wave of tariffs, Chinese competitors slashed costs across raw materials, rent, and salaries to stay afloat,” said Ms Lim, who employs more than 100 mostly migrant workers at its Muar operations. “Their ‘pile it high, sell it cheap’ strategy enabled them to sell directly to consumers through Taobao,” the 56-year-old told The Straits Times, referring to the popular e-commerce platform owned by Chinese tech giant Alibaba.

An influx of Chinese output, upending industries and local economies like Muar’s, is a phenomenon playing out