Why businesses are diversifying beyond China
The China Plus One strategy has accelerated dramatically since 2025, driven by cumulative tariffs that now push effective duty rates on many Chinese goods above 30%, ongoing geopolitical tensions between the US and China, supply chain disruptions from COVID, Red Sea crises, and trade wars that exposed concentration risk, regulatory pressures including UFLPA forced labor compliance, and increasing labor costs in China's manufacturing centers.
Rather than abandoning China entirely, the strategy involves maintaining existing Chinese supplier relationships while developing alternative manufacturing or sourcing in at least one other country.
Top alternative countries for US importers
Vietnam
Vietnam has emerged as the leading beneficiary of supply chain diversification from China. Its advantages include a young and competitive workforce, growing manufacturing infrastructure, geographic proximity to Chinese component suppliers, and relatively low tariff exposure to the US compared to China.
However, Vietnam faces capacity constraints in certain industries, less developed logistics infrastructure compared to China, and growing scrutiny over goods that are merely transshipped through Vietnam to circumvent China tariffs.
Mexico (nearshoring)
Mexico offers unique advantages for US-bound manufacturing. USMCA duty-free access eliminates most tariffs for qualifying goods. Geographic proximity means transit times of days rather than weeks. The same or similar time zones enable real-time communication. Land transportation via truck and rail provides flexible logistics options.
The automotive, aerospace, electronics, and medical device industries have been the fastest to shift production to Mexico.
India
India presents a massive market with strong capabilities in pharmaceuticals, textiles, IT services, and increasingly in electronics manufacturing. Government initiatives like Make in India are improving the business environment, though infrastructure and bureaucratic challenges remain.
Thailand and Cambodia
These Southeast Asian nations offer competitive labor costs and growing manufacturing sectors, particularly for textiles, electronics assembly, and food processing.
Logistics considerations when diversifying
Shifting production to a new country requires careful logistics planning. Port infrastructure and shipping frequency vary significantly between countries. Customs processes and documentation requirements differ. Lead times may increase during the transition period. Quality control systems need to be established. Regulatory compliance such as product certifications and testing standards must be maintained.
How to implement China Plus One
Start by identifying which product lines are most suitable for diversification based on tariff exposure, supply risk, and manufacturing complexity. Conduct supplier audits in target countries. Begin with small trial orders to validate quality and logistics before scaling. Maintain dual sourcing capability during the transition to avoid disruption.
How ASR supports supply chain diversification
We have shipping expertise across Asia, Latin America, and global markets. Whether you are establishing new supplier relationships in Vietnam, setting up nearshoring in Mexico, or exploring other markets, our freight forwarding and customs clearance teams can support the transition. Contact us at shipping@asrwe.com or call +1 786 373 3003.
