Last year, Trump raised tariffs on Chinese goods to 145%, prompting many firms to see “China+1” as a viable alternative. A year and a half later, their balance sheets delivered a sobering reality check.
ACG, a Texas-based flashlight manufacturer, shifted production to Thailand—investing in equipment, completing certifications—only to discover that its total costs were 12% to 15% higher than manufacturing in China. Even more disheartening: the retail price of Chinese competitors on Amazon was lower than the shipping cost from Thailand to the United States.
This is not an isolated case. The New York Times captured the irony in its headline: Trump’s tariffs are, in effect, pushing some companies “back to China.”
The reason is straightforward. According to a July estimate by the Economist Intelligence Unit, effective U.S. tariffs on Chinese goods have fallen to approximately 20%, compared to 4.5% in Thailand, 6.1% in Vietnam, and 13.4% in Indonesia. While disparities remain, they no longer justify relocation. ACG’s case illustrates this most starkly: Chinese flashlight tariffs sit at around 20%, Thai tariffs at 19%—a mere one percentage point difference. That gap cannot offset the significantly higher total costs of operating in Southeast Asia, nor compensate for the seamless integration of China’s supply chain ecosystem.
As a result, a quiet reversal has begun. In the first half of 2026, over 10,000 enterprises exited Vietnam—nearly doubling the previous year’s figure. Among newly established foreign-invested ventures, Chinese investment share dropped below 6%. Orders for textiles, footwear, and low-end electronics are increasingly returning to China. American clients have restarted placing orders for hundreds of thousands of small fans with Chinese factories.
A Hangzhou-based outdoor furniture exporter opened a plant in Ho Chi Minh City in 2024 but relocated back this year. The rationale was simple: even basic components like screws and cup holders had to be imported from China, making the overall cost comparable. “The total cost difference isn’t significant enough to justify the move,” said the company. In Xidian Town, Ninghai County, a town of tens of thousands, nearly 60% of the world’s flashlights are produced. LED chips, circuit boards, switches—all available within minutes of stepping outside. This deep-seated industrial cluster is the real moat.
An overlooked factor is energy. Power supply in Vietnam and Indonesia remains “unstable and intermittent.” Meanwhile, ongoing conflicts in the Middle East have reminded global manufacturers that reliable electricity access is as critical as pricing. Increasingly, consensus holds: “In any crisis, Chinese factories will be the most stable option.”
Still, the return should not be overstated. According to Korn Ferry’s 2026 Reshoring Index, China’s share of U.S. manufacturing imports has dipped below 10%, down from 20% just four years ago. The other 13 low-cost Asian economies absorbed $193 billion in trade. The return involves only a subset of previously relocated orders—not a full reversal of the offshoring trend. Moreover, those returning are cautious: some maintain one-eighth of their capacity in Vietnam as a hedge. “If Trump goes mad again, we may expand once more,” one executive noted.
This is the current truth: China has transitioned from being the “sole option” to the “default choice”—not a return to 2019, but a recalibration within a “China + N” framework. Tariffs can compel firms to shift a single production line, but they cannot replicate the entire ecosystem behind it. When tariff differentials narrow, competition reverts to fundamentals—ecosystem completeness, infrastructure quality, and the density of skilled engineers. These are precisely China’s widest and most durable moats.
Original source: toutiao.com/article/1877455278485516/
Disclaimer: The views expressed in this article are solely those of the author.