Companies left China to dodge tariffs, now some are heading back

A year after Chinese companies relocated production and sourcing out of China to dodge higher U.S. tariffs, some are finding that replicating China's factory ecosystem is proving difficult and are beginning to bring manufacturing back. Heather Kuang, vice president of Dawang Metals, a family-owned metal casting company based in Dandong, China, explained that a major U.S. customer she works with returned to sourcing from China after running into problems in India.

Dawang Metals also explored moving some production offshore but ultimately decided against it, as Kuang noted that China's supply-chain advantage remains unmatched. While some buyers continue to invest in Southeast Asia's manufacturing hubs, the "China plus one" strategy has proven more challenging to implement. Companies cite factors such as skilled labor, supplier networks, and reliable power as reasons for their return to China.

Despite the return, Southeast Asian countries like India, Indonesia, and Vietnam continue to attract investments from various manufacturers. Target, a U.S. retailer, has moved some orders back to Chinese suppliers due to supply-chain disruptions and production constraints. Shein, a Chinese fast-fashion retailer, is also reducing its operations in Vietnam.

Jin Chaofeng, an exporter of outdoor furniture, returned production to China after facing difficulties with equipment and basic items in Vietnam. The cost of moving abroad has become less justified, as tariffs on China have risen, making alternative countries less attractive. Power reliability has emerged as a critical factor in the decision, as companies have experienced disruptions in countries like Vietnam and Indonesia.

Despite these challenges, some exporters remain cautious, expecting the Trump-Xi summit to provide no definitive resolution to their issues.