“The supply chain of the future will look like a multiheaded dragon,” said the CEO of a Vietnamese industrial-park. “The era of sourcing from one global manufacturing base in the world is completely over.”
Under the current U.S. tariff plans (which are subject to change, of course), certain countries with lower tariff rates are set to emerge as relative winners. Mexico, Brazil and India would step up to a bigger role linking China’s vast supply chain to the U.S. market. Those countries would draw investment to replace the current “connector states” in Asia, led by Vietnam and Cambodia.
Products vulnerable to tariffs are toys, videogames, computer parts and smartphones. Vietnam and China supply more than half of the furniture imported by the U.S. Vietnam supplies a third of the sports shoes and a quarter of the solar cells imported by the U.S. China, Vietnam and Thailand make much of the world’s portable computers.
Businesses such as Apple, HP and Nike have invested heavily in Asian countries outside China and moved assembly there, reports The Wall Street Journal (April 6. 2025). This strategy is termed “China plus one.” It was designed to sidestep tariffs imposed by both the Trump and Biden administrations.
Apple, Taiwan Semiconductor, and the South Korean automaker Hyundai have announced large factory investments in the U.S. this year, in line with the administration’s goal of rejuvenating American manufacturing.
But it would be unrealistic to expect labor-intensive businesses such as apparel to return to the U.S. It lacks workers skilled in those industries and a nearby supplier network to keep costs down. U.S. manufacturing employees earned around $103,000 on average in 2023 (including benefits). That is around four times the wage level in China and 2.5 times that in South Korea. Chinese factories could seek to cut costs by sourcing such components as resistors and transformers from parts of China where labor is cheaper.
Many Chinese factories have already relocated to Vietnam. The next place is jumping to India where tariffs are lower.
Classroom discussion questions:
- What is your supply chain strategy if you are an Asian manufacturer?
- What if you are a U.S. toy company with most production coming from China?