Why US factories continue to look for alternatives outside of China

When then-President Donald Trump started a trade war with China during his first term, Simon Lichtenberg decided to wait and see. He had owned factories producing leather sofas in China since the 1990s and believed the two countries would resolve the dispute.

He doesn’t think like that anymore. Lichtenberg invested around US$20 million to transfer its factory aimed at the American market to Vietnam this year. Now, not even the ceasefire Trump reached with China has changed his view that deep-seated animosity between the countries has altered the economics of his business.

Also read:

China’s scale and abundance of labor have for decades transformed it into an industrial powerhouse, firmly placed at the center of the global economy. But Trump is dismantling the system that allowed manufacturers to pursue the most efficient supply chains. At the same time, China has strived to become less dependent on the US economy.

Trump’s latest deal — which reduces some of the new tariffs imposed on China — has not reversed these trends. On the contrary, it highlighted the volatility of the relationship between the US and China.

So executives like Lichtenberg are opting to abandon China in their dealings with the United States, motivated by fear of being on the wrong side of an increasingly unpredictable bilateral relationship. What once seemed like just a backup alternative — having a factory outside of China — is now starting to look like an economic necessity.

“Nobody trusts that there is stability between China and the US,” Lichtenberg said. “It’s like they say: burned children are afraid of fire.”

He said his company, Trayton Group, which makes Danish-style modular sofas and recliners, lost millions of dollars this year because of Trump’s abrupt and steep new tariffs.

For many industries that have long outsourced production to China, bringing factories back to the United States is not viable. The costs are too high and there is a shortage of workers. Companies that have left China have already migrated to neighboring countries like Vietnam, where labor is cheap and it is easy to transport machinery and raw materials.

After meeting with Chinese leader Xi Jinping in South Korea last month, Trump agreed to halve a 20% fentanyl-related tariff and extend an existing pause on reciprocal tariffs, leaving the average tariff rate on Chinese goods at 47.6%, according to estimates.

Small companies that were unable to find factories outside of China celebrated the news. But for many others who have already started to leave the country, the truce has had little impact on their strategies and planning.

“The agreement does not change the calculation that in the long term, because of the competitive relationship between the U.S. and China, there will be much more risk for companies that manufacture and source inputs in China,” said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, Vietnam.

China is already losing the title of factory floor to the United States. Some of the world’s best-known companies — including Nike, Apple and Intel — moved quickly this year to reduce what they produce in China for the American market. The country is no longer the sneaker capital for Americans. That title now belongs to Vietnam.

The trend also appears in U.S. Census data, even for products that received tariff exemptions, such as laptops and smartphones. According to the latest figures, the United States now gets most of its smartphones and laptops from India and Vietnam.

While the business world converges on the idea that China is no longer the best option for manufacturing products sold to Americans, it is still unclear which countries will be the best alternatives.

Trump’s trade policy remains uncertain — including his reaction if the Supreme Court overturns the legal basis for many of his tariffs. For manufacturers in China planning for the future, the question remains about how Trump will define products that contain Chinese raw materials or investment.

Will products made in factories in Vietnam with strong ties to China be considered Vietnamese or Chinese?

“In Trump’s first term, he made everyone flee China, and a lot of businesses migrated to Vietnam,” said Gabriele Natale, general manager of Man Wah USA, which makes furniture for retailers like Walmart and Costco.

The company decided to move to Vietnam in 2019 and spent hundreds of millions of dollars building a 540,000-square-meter factory near Ho Chi Minh City.

“Everything we sell in North America now comes from that factory.”

“In his second term, Trump is reaching everyone and everything,” added Natale. “You can run, but you can’t hide.”

The company now has 15 production sites around the world, including in Mexico and Eastern Europe.

American retailers are increasingly demanding that their suppliers reduce exposure to China.

Fleming International, which makes candles in Vietnam, has been pressured by its largest American customers to move as much production as possible to the United States. It will soon begin producing vanilla, elderflower and pumpkin-scented candles at a new factory in Heber Springs, Arkansas — at a cost two to three times higher than in Vietnam.

“In geopolitical terms, we view this as a long-term strategy,” said Lowell Newman, senior advisor at Fleming. “We don’t expect success overnight.”

New tariffs could change the calculation again for the company, which will also open a unit in El Salvador in the coming months. Trump’s willingness to use tariffs in unpredictable ways, sometimes as punishment for perceived offenses, has made business decision-making difficult.

“Just tell us what the rates are,” Newman said. “Don’t get mad and throw the marbles away like a tantruming child.”

c.2025 The New York Times Company