Tariff Advantages Narrow as Some Companies Shift Orders Back to China
nashnova research
Roughly a year after shifting production out of China, some companies are moving orders back — cost gaps have shrunk and replicating China's factory ecosystem has proven harder than expected, putting real-world friction on the "China-plus-one" strategy.
Who is moving orders back to China?
U.S. retail giant Target has shifted some orders back to Chinese suppliers, citing supply-chain disruptions and capacity constraints, according to two people familiar with the matter.
Chinese fast-fashion retailer Shein is also scaling back parts of its Vietnam operations.
This means → the return flow is not just American buyers; even Chinese firms that set up abroad are finding the move doesn't pay off.
Why is it so hard to manufacture elsewhere?
Hangzhou furniture exporter Jin Chaofeng shut the factory he opened in Ho Chi Minh City in 2024 and moved production back — in Vietnam, even screws and cup-holder molds had to be imported from China.
In plain terms = the factory moved, but the parts still came from China. Add freight and lead time, and total cost was about the same.
A U.S. farm-equipment client of Liaoning-based Dawang Metal shifted orders to India, hit problems, then came back with new orders. This reflects a deeper reality: China's supply chain is an entire ecosystem, not a single address you can swap out.
How much has the tariff gap actually narrowed?
The Economist Intelligence Unit estimated in July that China faces a U.S. effective tariff of roughly 20%, versus 6.1% for Vietnam, 13.4% for Indonesia, and 4.5% for Thailand.
But as the U.S. extends tariffs to more countries, the low-rate advantage of those alternatives has visibly shrunk.
This means → the old math of "move to Vietnam, save on tariffs" is breaking down — when everyone gets taxed, the low-tariff havens are being leveled too.
Beyond cost, what else are companies weighing?
Stanislaw Krykun, CEO of Polish packaging firm DST Pack, said the Middle East crisis in April pushed up oil prices and raised plastic-feedstock costs by 15% — he weathered it alongside his Chinese factory partner of six years.
80% of his products come from a Shenzhen factory; U.S. and European backups each handle 10%, but cost two to three times more per unit.
In plain terms = stability is overtaking price as the deciding factor — in a crisis, a supplier that sticks with you is worth more than a cheap one.
Is "China-plus-one" over?
Not quite. India, Indonesia, and Vietnam still attract investment in electronics, autos, and other sectors. The diversification drive is not dead.
But execution has been far harder than expected. This reflects the gap between the slogan and the reality: building a supply chain truly independent of China is still out of reach.
These shifts come ahead of an expected meeting this month between Trump and Xi Jinping. Markets will watch whether the two sides can agree on a mechanism to lower trade barriers on some non-sensitive goods.
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