‘China-plus-one’ is in turmoil again

A new US-China agreement to pause sky-high tariffs on each other is pressuring manufacturing hubs such as Vietnam and Mexico to make their own deals with the US to continue benefiting from a “China-plus-one” strategy by global producers.

- LAURIE CHEN EMILY GREEN FRANCESCO GUARASCIO

In the new world order dictated by President Donald Trump's shifting announcements of tariffs, countries measure their success not by the terms of their trade deals with the US but by how they compare to other countries.

For the past five weeks, many nations facing significant duties under Trump's now-paused “reciprocal” global tariff regime announced on April 2 took solace from having better rates than China, which saw US tariffs on Chinese imports ratchet up from 20% to an embargo-like 145% from March to May.

Vietnam, for example, was better off than China with a 46% rate, while Thailand was at 36% and Malaysia at 24%.

Given their comparative advantage, manufacturing hubs anticipated further moves by multinational corporations to set up shop in their countries and decrease their dependency on China, potentially adding to a years-long trend known as “China-plus-one”.

Now, everything is up in the air again following a breakthrough in US-China trade talks that resulted in a 90-day reprieve from the astoundingly high tariffs on China, leaving a base 30% import tax rate for made-in-China products.

Tariffs on China still remain higher than competing industrial hubs paying 10% under Trump's 90-day pause on the reciprocal duties, but some experts said the deal could halt some of the momentum pushing multinationals to further shift supply chains outside of China.