Tariff shift forces some companies to reconsider their exist from China

A year after companies rushed to move production out of China in an effort to avoid steep U.S. tariffs, some businesses are now reversing course as the challenges and costs of operating in alternative manufacturing hubs become increasingly clear.

The trend highlights the difficulty of replacing China’s deeply established manufacturing ecosystem, which combines large supplier networks, skilled workers, specialized equipment, logistics infrastructure and relatively reliable access to electricity.

One example is Dawang Metals, a Chinese metal-casting company whose U.S. customer moved some orders to India last year. According to the company, the customer has since returned with new orders after encountering difficulties with production in India.

China’s manufacturing network remains difficult to replicate

The push to reduce dependence on China accelerated after U.S. tariffs prompted companies to explore countries such as Vietnam, India, Indonesia and Thailand.

The strategy, often described as “China plus one,” involved maintaining Chinese operations while establishing additional production capacity elsewhere.

But for some manufacturers, the move has proved more complicated than expected.

Businesses have reported difficulties finding the right machinery, sourcing components locally and building reliable supplier networks. In some cases, companies operating outside China still depend heavily on Chinese-made equipment and parts.

Jin Chaofeng, an outdoor furniture exporter based in Hangzhou, said he closed a workshop in Vietnam that had opened in 2024 and shifted production back to China after finding that the overall cost difference was smaller than expected.

Tariff differences have also narrowed

Another factor changing corporate calculations is the changing gap between U.S. tariffs on Chinese goods and those imposed on alternative manufacturing locations.

China previously faced significantly higher U.S. tariffs, prompting companies to search aggressively for other production bases. But as Washington expanded tariffs to a wider range of countries, the advantage of moving production to some Southeast Asian locations became less pronounced.

Earlier this year, reports also highlighted cases in which companies reconsidered investments in Thailand and other Southeast Asian countries after U.S. tariffs on Chinese imports fell substantially from their earlier peak.

Some companies are keeping their alternatives

The shift does not mean businesses are abandoning supply-chain diversification.

Vietnam, Indonesia, Thailand and India continue to attract manufacturing investment as companies seek protection against future tariff changes and geopolitical disruptions.

Some businesses are therefore maintaining factories outside China while returning part of their production to Chinese suppliers.

For example, one exporter cited by Reuters said it continues to keep part of its capacity in Vietnam as a hedge and could expand there again if U.S. tariffs on Chinese goods rise sharply.

Businesses remain cautious

Despite the recent reversals, companies are not assuming that the current tariff environment will last.

The possibility of future changes in U.S. trade policy means manufacturers are increasingly focused on flexibility rather than committing completely to one country.

The emerging picture is therefore less about a mass return to China and more about companies reassessing where production makes the most economic sense.

For many manufacturers, China’s combination of suppliers, skilled labour, infrastructure and production scale remains difficult to reproduce elsewhere. At the same time, companies continue to build alternative capacity to protect themselves against another sudden change in tariffs or global trade conditions.

The result is a more complicated global manufacturing landscape: companies that once rushed away from China are now discovering that leaving may be easier than replacing what they left behind.