When President Donald Trump launched a trade war with China during his first term, Simon Lichtenberg decided to wait for things to calm down. He, who has owned a leather sofa factory in China since the 1990s, believed the two countries would eventually resolve their dispute.
Now he doesn’t think like that anymore. This year, Lichtenberg invested approximately US$20 million to move a factory to Vietnam that serves American customers. The ceasefire that President Trump recently agreed to with Beijing did not change his view that the deep animosity between the two countries has forever changed the economic logic of business in both countries.
The size and abundance of its workforce made China an industrial giant for decades, placing it at the center of the world economy. But President Trump is dismantling the system that allowed manufacturers to build efficient supply chains. At the same time, the Chinese government is redoubling its efforts to reduce dependence on the US economy.
President Trump’s latest agreement to cut some of the new tariffs imposed on China did not reverse those trends, but only highlighted the instability in the relationship.
Given this situation, executives like Mr. Lichtenberg are abandoning China for business operations focused on the American market, driven by the fear of being caught on the wrong side of a bilateral relationship that, in their view, has become unpredictable. Having a factory outside China, which once seemed like an emergency fallback, now seems like an economic necessity.
“No one believes there is stability between China and the United States,” Lichtenberg said. “As they say, a burned child is afraid of fire.” His company lost millions of dollars this year due to sudden high tariffs imposed by President Trump.
For many sectors that have already moved production to China, moving factories back to the United States is not practical. Costs are high and labor shortages. As a result, companies leaving China have moved to neighboring countries such as Vietnam, where labor is cheaper and machinery and raw materials are easier to transport.
After meeting with Chinese President Xi Jinping in South Korea last month, President Trump agreed to cut the 20% fentanyl tariff in half, extend a moratorium on reciprocal tariffs, and maintain average tariffs on Chinese goods at 47.6%. Small and medium-sized enterprises that were unable to find factories outside China celebrated. But for many other countries that have already begun the transition, the ceasefire has had little impact on their future strategies.
“This agreement does not change the calculation that manufacturing and sourcing in China poses far greater risks for companies in the long term given the competitive relationship between the United States and China,” said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.
China is already losing the title of “factory floor” to the United States. Some of the world’s most famous brands, including Nike, Apple and Intel, have sharply cut production for the U.S. market in Chinese territory this year. This country is no longer the tennis capital for Americans. That post now belongs to Vietnam.
The move also appears in U.S. census data, which includes tariff-exempt products such as laptops and smartphones. Currently, most of these products sold in the United States come from India and Vietnam.
The industry consensus is that China is no longer the best option for producing products for the U.S. market, but it remains unclear which country will replace it.
President Trump’s trade policy remains volatile, with heightened uncertainty, including the reaction if the Supreme Court strikes down the legal basis for many of his tariffs. For Chinese manufacturers trying to define their future, the question remains how President Trump will classify products made with Chinese raw materials and investments. Are products produced in Vietnam in factories with close ties to Beijing considered Vietnamese or Chinese products?
“In his first term, he forced everyone to flee China and a lot of companies moved to Vietnam,” said Gabriele Natale, director of Man Wah USA, which makes furniture for retailers like Walmart and Costco. The company moved to Vietnam in 2019 and invested hundreds of millions of dollars in a 540,000 square meter factory. Currently, all products sold in North America are shipped from this factory.
“Trump is in his second term and he’s putting everything out there, everywhere,” Natale said. “You can run, but you can’t hide.”
The company currently has 15 production locations around the world, including Mexico and Eastern Europe.
U.S. retailers are also increasingly demanding that their suppliers reduce their contact with China. Fleming International, a Vietnamese candle manufacturer, was under pressure from its largest American customer to move as much production as possible to the United States. The company will soon start producing vanilla, elderflower and pumpkin-scented candles at a new factory in Heber Springs, Arkansas, which will cost two to three times as much as in Vietnam.
“From a geopolitical perspective, we see this as a long-term strategy,” said Lowell Newman, senior consultant at Fleming. “You can’t expect success overnight.”
The new tariffs could change the calculations again for the company, which also plans to open a location in El Salvador in the coming months. President Trump’s arbitrary approach to tariffs, sometimes as punishment for disagreements, has hampered business plans.
“We just want them to tell us what the fees are going to be,” Newman said. “There’s no point in getting angry and quitting the game like a child.”
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