Why “China Plus One” Has Become “Anywhere but China” (Part 2)

This article is part two of a two-part series exploring how the China Plus One sourcing trend has evolved during the 2020s, and how recent geopolitical developments have turned it into a strategic imperative. Part one is available here. 

Article Highlights:

• American businesses are now paying the U.S. government a 20% duty rate on all imports coming from China.
• Given new trade realities, sourcing primarily from China no longer means simply taking on additional risk—it means assuming a punitive financial burden, one that arguably nullifies any of the advantages Chinese manufacturing has long offered. 
• U.S. businesses are working tirelessly to extricate themselves from a trade quagmire laden with tariffs, export and import restrictions, and a swelling list of sanctioned entities. 

Last week, we examined several variables that have been accelerating the China Plus One sourcing strategy in recent years. These included the fallout from the COVID-19 pandemic; the emergence of competitive alternatives in the ASEAN bloc; and a trade conflict between the U.S. and China that has now been simmering for a half-decade. This article will shift the focus to 2025, exploring how the new Trump administration has dramatically increased the pressure on businesses to diversify their supply chains and rapidly reduce dependence on China. 

Trump 2.0 and the New Supply Chain Diversification Imperative 

In the six weeks since the new U.S. administration was inaugurated, on January 20, President Trump has implemented two 10% across-the-board tariffs on Chinese goods. This means that American businesses are now paying the U.S. government a 20% duty rate on all imports coming from China. Considering the fact that China still accounts for nearly 30% of all U.S. imports, this trade barrier represents a massive financial penalty for myriad American industries. 

When taking into account the strategic volatility of President Trump—as well as his administration’s broadly protectionist stance toward trade—it’s fair to assume that the current tariff rate could increase further over the course of 2025. Given these new trade realities, sourcing primarily from China no longer means simply taking on additional risk; it means assuming a punitive financial burden, one that arguably nullifies any of the advantages Chinese manufacturing has long offered. 

When taking into account the strategic volatility of President Trump—as well as his administration’s broadly protectionist stance toward trade—it’s fair to assume that the current tariff rate could increase further over the course of 2025.

With tension and uncertainty as high as they are today, there’s never been a stronger, more urgent case for cultivating supply chains outside of China. Prior to the installment of the new U.S. administration, many firms believed that a reasonably robust China Plus One strategy was enough to give them the resilience required to navigate the heightened risk landscape associated with the “world’s factory.” But after the trade turmoil of the past two months—combined with the flurry of controls and restrictions imposed in recent years—vigilance has quickly evolved into a snowballing sense of dread. 

Companies are now starting to come to terms with the fact that China Plus One may no longer be a sufficient approach for the treacherous environment they’re now facing. Long perceived as a prudent supply chain risk management (SCRM) measure, minimizing dependence on China is now increasingly seen as a strategic imperative. Consequently, U.S. businesses are engaged in a kind of headlong scramble to flee China, working tirelessly to extricate themselves from a trade quagmire laden with tariffs, export and import restrictions, and a swelling list of sanctioned entities. 

Recent Trade Barriers Between the U.S. and China at a Glance

• Tariffs: Trump has imposed a 20% Across-the-Board Tariff on All Chinese Imports
• U.S. Sanctions: There are over 700 Chinese firms currently sanctioned by the U.S. Department of Commerce (including 100 firms added to the UFLPA Entity List over the past 13 months alone).
• Minerals Export Restrictions: China’s Ministry of Commerce has banned the export of gallium, germanium, antimony, and “superhard materials” to the U.S. 
• Retaliatory Tariffs: On March 10, China retaliated against the Trump administration’s trade restrictions by imposing tariffs on U.S. agricultural imports. These included a 15% import tax on chicken, wheat, corn, and cotton, and 10% tariffs on fruits, vegetables, dairy products, and other American goods. 

The “Anywhere But China” Strategy

The backlash against the era of globalization—and the U.S.’s resulting disproportionate reliance on Chinese manufacturing—is now in full swing. The Trump administration believes strongly in the power of protectionist policies to both extract concessions from other countries and revitalize American manufacturing. Everything President Trump and his team have done up to this point, meanwhile, suggests that they may well be willing to ride out the short-term consequences of incendiary trade wars in exchange for what they perceive to be transformative long-term benefits. For businesses who source heavily from China, this means that a reprieve may not be coming. The case for not diversifying away from Chinese supply chains is growing weaker by the day. 

Everything President Trump and his team have done up to this point, meanwhile, suggests that they may well be willing to ride out the short-term consequences of incendiary trade wars in exchange for what they perceive to be transformative long-term benefits.

How Z2Data Helps Companies Manage Their Regional Dependencies

Those U.S. and European businesses rethinking their supply chain partners in China may want to consider the advantages conferred by a supply chain risk management (SCRM) tool like Z2Data. The Z2Data platform can serve as a highly effective resource for firms that need to understand their China dependencies and map out their options for alternative parts and suppliers. 

It does this by allowing companies to:

• Track real-time updates to tariffs, sanctions, and more, as well as see how those restrictions directly affect their products
• Identify which parts in their products have a COO of China and conduct custom cross-reference searches to find alternative parts with no China COO
• Discover which Tier 1 and subtier suppliers have ties to sanctioned Chinese entities

When leveraged effectively, Z2Data’s powerful risk sensing capabilities can be a meaningful difference-maker for businesses that want to mount a decisive response to our evolving global supply chains. To learn more about the Z2Data platform and how its tools can help you understand your connections to China and opportunities for alternative sourcing, schedule a free demo with one of our product experts.