With tariffs on Chinese goods drastically reduced, US companies are considering returning to China's supply chain.

(Luo Yong) After the Trump administration raised tariffs on Chinese goods to 145% in 2025, many American companies hastily shifted some production to lower-cost countries such as Thailand and Vietnam. However, the subsequent significant reduction in US tariffs on Chinese goods has rendered Southeast Asian production no longer cost-competitive, and these companies are now considering returning to the larger and more efficient Chinese supply chain.

Alliance Consumer Group (ACG), a Texas-based consumer goods company, is one such American company facing strategic choices regarding its supply chain. The company's Chief Operating Officer, Phil Laster, told The New York Times that its Chinese supplier, Ningbo Bulaite Electric, set up a factory in Thailand to produce flashlights, but due to higher raw material and transportation costs, the overall cost was 15% higher than in China.

Currently, the tariff rate for exporting flashlights from China to the United States is 20%, while it's 19% from Thailand, Vietnam, or Cambodia—almost the same. Besides cost pressures, the company also faces competition from other Chinese businesses selling at lower prices on e-commerce platforms like Amazon.

Last joined the company in 2023, and his experience with the COVID-19 pandemic made him inclined to diversify supply chain risks. However, he admitted, "We don't want to go back to China, but we also have to take care of this business."

He revealed that despite the higher production costs in Thailand, the company is still maintaining the operation of this supply chain. However, the company previously invested in moving some upstream production lines, such as lithium batteries and integrated circuit boards, out of China, but now it may have to move them back to China.

Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said that China's supply chain has a huge cost advantage, and if the final tariff gap with other countries is small, the previous trend of moving supply chains out of China will be reversed. "We expect some companies to return to Chinese suppliers."

Sebastien Breteau, founder of Qima, a firm specializing in supply chain auditing for businesses, further pointed out that the fuel shortages caused by the Iraq War have recently strained factories in countries like Vietnam, prompting North American companies to return to China for more procurement. He said that at the slightest sign of trouble, these companies will rush back to China.

Last week, the Trump administration invoked Section 301 of the Trade Act to impose a new round of tariffs , re-establishing the reciprocal tariffs overturned by the Supreme Court. China's tariff rate is 12.5%, similar to that of other economies.

In addition, Chinese exports face other tariffs, including those imposed during Trump's first term, and more tariffs may be imposed in the future.

Analysts expect that Washington, in order to maintain stable relations with Beijing, will likely be unwilling to push the overall tariff level on China above 20% at the end of last year, so as not to provoke retaliation from Beijing.

"If you listen carefully to China's definition of the tariff ceiling, it's quite clear that it's 20%," said Deborah Elms, director of trade policy at the Hanley Foundation.

Source: [Lianhe Zaobao] (https://www.zaobao.com/news/world/story20260801-9455527)