U.S. Tariff Convergence Drives Some Businesses Back to China
0xBroomberg
US tariffs on China dropped from 145% to 12.5%, nearly matching Southeast Asian rates. Some American firms are now shifting orders back to China — leaving newly built overseas factories idle.
What changed on tariffs?
Trump's tariffs on China peaked at 145% last year, driving a wave of companies toward Vietnam and Thailand.
Last week Washington set the new China tariff rate at 12.5% — roughly in line with dozens of other countries.
This means → the tariff moat between China and Southeast Asia has all but vanished, removing the core incentive to relocate.
Who is already moving orders back?
Alliance Consumer Group, a Texas-based flashlight seller, has shifted orders back to China from Thailand.
The company had previously pushed its Chinese supplier, Ningbo Bright Electric, to open a Thai factory — that plan is now on hold.
COO Phil Laster put it bluntly: "We didn't want to go back to China, but we have a business to run."
Why not stay in Southeast Asia?
Producing flashlights in Thailand costs roughly 15% more than in China, driven by higher material and shipping expenses.
Chinese competitors list products on Amazon at prices below what Alliance spends just to ship goods to the US.
In plain terms = once the tariff wall dropped, China's manufacturing cost edge snapped back into view — Southeast Asia's value proposition no longer held up.
What do economists say about this trend?
Mary E. Lovely of the Peterson Institute notes that China carries a significant inherent cost advantage.
If the final tariff gap with alternative locations narrows further, business previously moved out of China could reverse.
Guojin Securities estimates the trade-weighted average US tariff on Chinese goods sits just above 23% — still above the headline rate, but far below last year's peak.
Will the broader trend reverse?
US imports from China have fallen sharply since their 2018 peak — down nearly one-third last year.
Imports from Mexico, Vietnam, and Taiwan rose markedly over the same period; supply-chain diversification is already a fact on the ground.
This reflects a key open question: whether narrowing tariff gaps can truly reverse the diversification trend — for now, the return flow is anecdotal, not a wave.
Content is for reference only, not financial advice.