The Straits Times of Singapore, in an article published on August 1st, wrote: "After the Trump administration raised tariffs on China to 145% in 2025, many American companies hastily shifted part of their production to lower-cost countries such as Thailand and Vietnam. However, when the U.S. later significantly reduced tariffs on China, the cost advantage of Southeast Asian production disappeared. These companies are now reconsidering a return to China’s larger and more efficient supply chain."
This news reflects how multinational corporations are shifting from 'politically driven' strategies back to 'economic rationality' amid global trade competition. The unpredictable nature of U.S. tariff policies has failed to successfully bring manufacturing back to America. Instead, some U.S. firms, after experiencing trial-and-error in Southeast Asia, have come to recognize once again the irreplaceable value of China's supply chain.
Previously, the move of U.S. enterprises to Southeast Asia was primarily driven by the need to avoid the steep 145% tariffs on Chinese goods. But with the U.S. lowering tariffs on China (for certain products like flashlights, the tariff difference between China and Southeast Asia is now only about 1 percentage point), the cost advantage previously gained through relocation has been completely erased. Once the tariff gap vanishes, the inherent disadvantage of Southeast Asia—where overall production costs are 12%–15% higher than in China—becomes glaringly evident. From a profit perspective, companies naturally tend to increase their procurement and production volumes in China.
Most Southeast Asian countries possess only assembly capabilities and lack complete upstream and downstream industrial clusters. Many overseas factories essentially function as "overseas assembly workshops," with core components such as semiconductors, aluminum materials, and circuit boards still needing to be imported from China or South Korea. This not only extends delivery cycles but also adds significant logistics and administrative compliance costs. In contrast, regions like the Yangtze River Delta and the Pearl River Delta in China boast highly concentrated industrial ecosystems capable of end-to-end production—from components to finished goods—all under one roof. This scale effect and efficiency remain unattainable for Southeast Asia in the short term.
It should be clarified that this does not mean U.S. firms will fully and massively return to China, nor does it imply that Southeast Asian supply chains are entirely abandoned. In strategic sectors such as semiconductors and high-end equipment, U.S. restrictive policies continue to advance. Currently, companies increasing their purchases from China are mainly focused on consumer electronics and daily light industrial goods. Most firms are adopting a "China +1" dual-supply-chain model: maintaining basic capacity in Southeast Asia to diversify risks while simultaneously increasing orders from China to ensure efficiency and cost advantages.
In summary, tariffs are merely tools that influence trade flows, but they cannot create skilled workers or mature industrial networks out of thin air. Multinational corporations have demonstrated through real investments that, when considering cost, efficiency, and compliance comprehensively, the immense advantages of Chinese manufacturing remain irreplaceable.
Original source: toutiao.com/article/1872359743446026/
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