Introduction

The latest US trade policies under President Donald Trump are reshaping global manufacturing strategies. With new tariffs on imports from China, Canada, and Mexico, companies that previously relied on Chinese manufacturing now face rising costs. As a result, many companies are considering shifting from China to Vietnam to maintain competitive pricing and stable supply chains.

Vietnam has been an attractive alternative for manufacturers looking to diversify their supply chains. With lower labor costs, favorable trade agreements, and a growing industrial sector, Vietnam presents a strong opportunity for businesses seeking to avoid the financial strain of US tariffs. However, as the US government continues to evaluate trade imbalances, some risks remain.

This article explores why companies may shift from China to Vietnam, how Trump’s tax laws and tariffs are accelerating this trend, and what businesses should consider before making the transition.

How Trump’s New Tax Laws and Tariffs Are Impacting Manufacturing

Higher Tariffs on Chinese Imports

Trump’s new tariffs on Chinese goods are increasing costs for businesses that depend on China’s manufacturing sector. The latest policies include:

• 10% tariffs on all Chinese imports, effective February 2025.
• Additional duties on key materials like steel, aluminum, and electronics.

These tariffs are aimed at reducing reliance on Chinese manufacturing, but they also put financial pressure on companies that rely on China for production. As a result, many are now considering Vietnam as a lower-cost alternative.

Tariffs on Canada and Mexico Adding More Pressure

In addition to tariffs on China, Trump’s administration has imposed a 25% tariff on metal imports from Canada and Mexico and a 10% tariff on energy resources from Canada. These tariffs impact manufacturers across multiple industries, including automotive, aerospace, and industrial machinery, making Vietnam an even more appealing option for businesses seeking cost-effective production.

China’s Economic Uncertainty and Manufacturing Challenges

China’s economy has been facing several challenges, including:

• A weakened property market affecting overall industrial investment.
• Increased production costs, making manufacturing less competitive.
• US trade restrictions, limiting China’s export opportunities.

With these ongoing economic struggles, companies are reassessing their reliance on China and looking for more stable manufacturing alternatives like Vietnam.

Why Companies Are Shifting from China to Vietnam

Lower Production Costs in Vietnam

Vietnam offers lower labor costs compared to China, making it a more attractive destination for manufacturers looking to cut expenses. Key cost advantages include:

• 30-40% lower labor costs than China.
• Lower operational expenses due to government incentives for foreign investment.
• Favorable tax policies under Vietnam’s free trade agreements.

Stronger Trade Agreements and Export Benefits

Vietnam’s free trade agreements with major economies, including the EU-Vietnam Free Trade Agreement (EVFTA) and ASEAN Free Trade Area (AFTA), allow businesses to export goods with reduced tariffs. This gives companies shifting from China to Vietnam a competitive advantage in global trade.

Diversification of Supply Chains

Companies that rely too heavily on China for production are at risk of supply chain disruptions due to tariffs, trade restrictions, and economic instability. Vietnam offers an opportunity to diversify sourcing and manufacturing locations, reducing dependency on a single country.

Growing Industrial Capabilities in Vietnam

Vietnam has been expanding its manufacturing infrastructure, particularly in key industries such as:

• CNC metal machining
• Electronics and semiconductor production
• Textiles and apparel manufacturing
• Automotive and aerospace components

As Vietnam continues to develop its industrial parks and export processing zones, it becomes an even more attractive location for global manufacturers.

Challenges to Consider When Moving Manufacturing to Vietnam

Potential US Trade Restrictions on Vietnam

While Vietnam is currently benefiting from companies shifting from China, the US has expressed concerns over Vietnam’s growing trade surplus. There is speculation that Vietnam could face new trade restrictions if its exports to the US continue to increase.

Infrastructure Limitations

Vietnam’s manufacturing sector is growing, but infrastructure challenges remain, including:

• Port congestion and shipping delays in high-traffic areas.
• Limited skilled labor in advanced manufacturing industries.
• Land availability constraints for new factories.

Compliance With Local Regulations

Companies moving operations to Vietnam must ensure they comply with local labor laws, tax policies, and environmental regulations. While Vietnam’s government encourages foreign investment, businesses need to navigate regulatory requirements carefully.

How Companies Can Successfully Shift from China to Vietnam

Develop a Long-Term Supply Chain Strategy

Companies should evaluate key suppliers, logistics options, and production capabilities before relocating manufacturing. Establishing backup supply chains in multiple countries can help reduce risks.

Partner With Trusted Manufacturers in Vietnam

Finding reliable CNC metal manufacturers, electronics suppliers, and industrial partners is crucial to ensuring product quality and production efficiency.

Take Advantage of Vietnam’s Trade Agreements

Businesses should leverage Vietnam’s free trade agreements to benefit from lower tariffs and improved market access in the US, EU, and ASEAN regions.

Invest in Workforce Development

Vietnam’s labor market is expanding, but companies should invest in training programs to build a skilled workforce capable of supporting advanced manufacturing and automation.

Conclusion: Will More Companies Shift from China to Vietnam?

With Trump’s new tax laws and tariffs driving up costs in China, more businesses are considering shifting manufacturing operations to Vietnam. The lower labor costs, trade advantages, and growing industrial sector make Vietnam a strong alternative. However, companies must carefully assess potential trade risks, infrastructure limitations, and compliance requirements before making the move.

Key Takeaways

• Companies shifting from China to Vietnam are responding to higher US tariffs and economic uncertainties.
• Vietnam’s lower labor costs and free trade agreements make it a competitive alternative for manufacturing.
• Diversifying supply chains with Vietnam helps reduce risks tied to US-China trade tensions.
• Businesses must evaluate logistics, workforce availability, and trade compliance before relocating operations.