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Supply-chain shift: friend-shoring and 'China+1'
2018–· Issue or flashpoint
Widely agreedMost analysts agree.
Companies moving production out of China, or adding sites elsewhere, to cut exposure to tariffs, sanctions and geopolitical risk.
See it on the Geopolitics map →The picture
The 'China+1' idea, keeping China but adding a factory elsewhere, spread in the 2010s; US Treasury Secretary Janet Yellen popularized 'friend-shoring' in 2022. Since the 2018 trade war Mexico overtook China as the top US trading partner (2023), Vietnam's US exports roughly tripled, and India became a major iPhone maker. Research finds much of this is rerouting: Chinese parts and firms often move along to Vietnam or Mexico. In 2025 the US added penalty tariffs on 'transshipped' goods.
Why it matters
It decides where factories, ports, warehouses and industrial parks get built, and which countries gain jobs and investment.
Think of it like
Like a tenant keeping its main lease but opening a second location across town, so no single landlord can hold it hostage.
Key facts and numbers
US Census trade data, foreign-investment figures, company announcements such as Apple's, and studies by the IMF and by economists Laura Alfaro and Davin Chor on the 'great reallocation'.
What to watch
Debated: how much is real diversification versus Chinese goods rerouted through 'connector' countries; supply chains have grown longer, not necessarily less dependent on China.
Connections (3)
▸Mexico gains from Supply-chain shift: friend-shoring and 'China+1'Widely agreed
The relationship
Next door to the US and inside USMCA's tariff-free zone, Mexico drew 'nearshoring' investment as firms hedged against China: auto parts, electronics, appliances and medical devices. In 2023 it overtook China as the top US trading partner. Chinese firms also built plants there, which Washington watches warily.
Since when and why
Northern industrial states such as Nuevo León, Coahuila and Chihuahua, and the central Bajío region, from about 2018 and especially after 2021.
How solid?
US Census trade data, Mexico's foreign-investment figures, and industrial real-estate absorption and vacancy data from brokers such as CBRE.
What to watch
Whether tariff uncertainty, the 2026 USMCA review, water and power shortages and insecurity stall the boom; how much reflects Chinese goods routed through Mexico is debated.
▸Vietnam gains from Supply-chain shift: friend-shoring and 'China+1'Widely agreed
The relationship
Vietnam is the clearest 'China+1' winner. Samsung makes about half its phones there, and Apple suppliers, Intel and chip-packaging firms moved in. Its exports to the US nearly tripled from 2018 to 2024, giving the US its third-largest goods trade deficit. That surplus drew a 20% US tariff in 2025, 40% on transshipped goods, until the 2026 IEEPA ruling.
Since when and why
Industrial zones around Hanoi, Bac Ninh, Thai Nguyen and Ho Chi Minh City; accelerated after 2018; US–Vietnam tariff framework of July 2025.
How solid?
US Census trade data, Vietnam's foreign-investment registrations, and announcements by Samsung, Apple suppliers and Intel.
What to watch
Debated: how much of Vietnam's exports are Chinese goods rerouted or lightly processed; Washington has not fully defined what counts as transshipment.
▸ASEAN (Association of Southeast Asian Nations) is a top beneficiary of Supply-chain shift: friend-shoring and 'China+1'Widely agreed
The relationship
As firms hedge against US–China tension and tariffs, Southeast Asia has drawn new factories: Vietnam for electronics, Malaysia for chip testing and packaging, Thailand for EVs and hard drives, Indonesia for battery materials. ASEAN attracts over $200 billion of foreign direct investment a year, a growing share from Chinese firms themselves.
Since when and why
Accelerated after the 2018 US–China trade war and again with 2025 US tariffs; hubs include northern Vietnam, Penang in Malaysia and Thailand's Eastern Seaboard.
How solid?
ASEAN Investment Reports and UNCTAD data, US import data showing Southeast Asia's rising share, and company relocation announcements.
What to watch
Debated: how much is genuinely new production versus Chinese goods rerouted to dodge tariffs; US tariffs on transshipped goods target the latter.