China plus one: A moving game that we could still win

Global trade is in flux but let's not lose any time in laying the ground to be the world's next factory

- PRASANNA KARTHIK

China accounts for over 30% of global manufacturing output—a figure the UN estimates could rise to 45% by 2030. However, for global manufacturers, 'China Plus One' (CPI) has emerged in recent years as a strategic imperative to diversify supply chains and reduce overdependence on China. For countries like India, CPI was seen as an opportunity to become a credible alternative. But that window is narrowing.

Amid global trade uncertainty and tariff wars, the CPI paradigm faces new challenges. For India to benefit meaningfully, CPI must be treated as a foundation for long-term, policy-driven industrial growth.

CPI was built on three key assumptions: that geographic diversification mitigates geopolitical risk; that complete decoupling from China is unrealistic; and that global supply chains are modular and relocatable. These three led the initial momentum. From 2020 to 2024, the share of Chinese goods in total US imports dropped from 18% to 14%, while countries like India, Vietnam, Mexico and Thailand attracted the interest of global manufacturers seeking diversification.

Tariffs have intensified since under the trade-policy turn taken by US President Donald Trump. Some estimates suggest that effective US tariff rates on Chinese goods may exceed 50%, while CPI countries such as Vietnam and Thailand could face duties of up to 46%. The cost advantage of producing goods outside China for the US market is in flux, with clarity awaited on how trade deals will reshape the picture. Thailand, for example, could lose up to $24 billion in exports if a proposed 36% US tariff is imposed, offering a cautionary tale of how fragile a country's CPI hub status can be.