Companies return to China after tariff-driven exodus

China's competitive advantage in global supply chains remains strong, making it challenging for companies to replicate domestic production elsewhere. Following last year's shift of production and sourcing out of China due to higher US tariffs, several firms are finding it difficult to replicate China's factory ecosystem and are bringing manufacturing back.

Heather Kuang, vice president of Dawang Metals, a family-owned metal casting company in China's Dandong, experienced a US customer moving some orders to India after running into problems there. Kuang noted that China's supply-chain advantage is still too great to replicate. While other Southeast Asian countries continue to attract investments, Chinese firms are optimistic about a proposed mechanism to reduce non-sensitive goods barriers during an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping.

Target, a US retailer, has reportedly shifted some orders back to Chinese suppliers due to supply-chain disruptions and production constraints. Even Jin Chaofeng, an exporter of outdoor furniture in Hangzhou, eastern China, who opened a workshop in Vietnam in 2024, has moved production back to China due to difficulties in sourcing equipment in Vietnam.

The cost comparison between China and other countries has also changed, making China a more attractive option.