GeoTrends: U.S. Tariffs and the Future of “China Plus One”
China, Tariffs
Key Takeaways:
“China Plus One” Under Pressure: U.S. tariffs targeting Indo-Pacific trading partners are raising serious questions about the long-term viability of “China Plus One” (CP1) supply chain diversification strategies – impacting the manufacturing of semiconductors, autos, consumer goods, green technology, pharmaceuticals, and other strategic goods.
Preparing For Risk: While the most salient Trump administration tariffs face legal jeopardy following last week’s ruling by the Court of International Trade (CIT), businesses should still prepare for a successful appeal – along with possible amplification of Section 232 and Section 301 tariffs unaffected by the CIT decision. Some semblance of Washington’s “reciprocal” tariffs will remain in force for the foreseeable future, negatively impacting the cost effectiveness of manufacturing in “Plus One” markets.
Critical Watchpoints: In measurable net terms, the continued cost effectiveness of CP1 manufacturing will depend on the relative outcomes of U.S. tariff negotiations with China and the United States’ other trading partners. This will directly impact the price competitiveness and operational feasibility of maintaining parallel supply chains versus operating within China itself. Additional unexpected shifts in U.S. tariff policy could quickly erode the advantages that initially made CP1 strategies attractive.
The Bottom Line: While CP1 manufacturing is unlikely to disappear as a useful hedging strategy, the approach may become more costly to maintain, especially if Washington fails to ink trade deals with non-China trade partners or opts for further tariff measures. Therefore, businesses should seek incentives in “Plus One” markets to offset potential tariff costs and consider “China for China” or “Everyone but China” strategies alongside current CP1 efforts. These complementary approaches can help companies localize risk, preserve market access, and build structural flexibility into their existing supply chains.
TAG Partner Amb. Dan Kritenbrink joined Jim Sciutto for an interview on CNN’s AC360 to discuss the global impact of ...
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