Factories are seeking alternatives to China

A trade truce between the United States and China has calmed nerves, but it won't stop the broader movement of companies to countries like Vietnam, writes Alexandra Stevenson from Shanghai and Ho Chi Minh City

- Alexandra Stevenson

Trayton Group's owner, Simon Lichtenberg, walks through the company's new factory in Jiaxing, China. Around 500 Chinese workers who once filled the factory have been laid off this year. Trayton Group invested around $20 million to move its furniture factory for American clients to Vietnam this year. Companies that have quit China have gone to neighboring countries like Vietnam, where labour is cheap and it is easy to move machinery and raw materials.

(NYT PHOTOS)

When President Donald Trump started a trade war with China during his first term, Simon Lichtenberg decided to ride it out. He owned factories making leather sofas in China since the 1990s and figured the two sides would resolve the dispute.

He doesn’t think that anymore. Mr Lichtenberg invested around $20 million to move his factory for American clients to Vietnam this year. Now, not even the ceasefire Trump has reached with China has changed his outlook that deep-seated animosity between the countries has altered the economics of his business.

China's scale and abundant labour turned it into a factory juggernaut for decades, placing it firmly at the heart of the global economy. But Trump is tearing down the system that allowed manufacturers to seek out the most efficient supply chains. At the same time, China has doubled down on making itself less reliant on the US economy.

Trump's latest deal to cut some new tariffs placed on China has not reversed those trends. It has underscored the volatility of the US-China relationship.

So executives like Mr Lichtenberg are opting out of China for their US business, motivated by a fear of getting caught on the wrong side of what they expect to be an even more unpredictable bilateral relationship. Where it once seemed like having a factory outside China was a fallback, it is starting to look like an economic imperative.