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Effects of the US-China trade war on manufacturing relocations

A few days ago, I shared an article entitled Are Manufacturers Really Leaving China? The China Perspective on Linkedin. David Collins, the author, wrote:

Right now, a full-scale exodus is more talk than anything else; it is too early to tell with any degree of certainty what exactly will happen. But, numerous companies have signalled that they are exploring the option of leaving but have not pulled up stakes yet.

This post generated a number of excellent comments, some of which I reproduced below.

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Is there a clear trend of manufacturing switching to other countries?

Dan Harris, who writes the useful, interesting, and entertaining China Law Blog, shared what he sees in his practice:

We do roughly 20 manufacturing contracts a month, with probably 15 of those for U.S. companies — the rest mostly for European, Latin American, Australian, and Canadian companies. Until the trade war, probably 85 percent of these contracts were with China. Now it is around 50 percent.

So yeah, we are seeing big changes. But, we also have many clients who insist they cannot or simply will not leave China.

It seems to be driven primarily by large-scale manufacturers, as Paul Saulo pointed out:

Sounds like the top tier manufacturers are rebalancing to various manufacturing bases to hedge risk in any one locale.

Michael Faas agrees, but also suggests this trend is not impacting every production order:

What I have been seeing from manufacturers large enough is they are beginning to say they have a line or a facility in Vietnam. Very clearly looking to get around US tariffs while everything else remains in China.

Let’s not get American-centric here and think that just because they are doing it one way, the rest of the world is following suit. The majority of Chinese exports DO NOT go to the United States.

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