Supply Chain Exposure to China Just Got More Serious 

For now, at least, the focus is firmly back on China. Ratcheting up tariffs on Chinese imports to the US to 145% (at time of writing) in response to China’s tit-for-tat retaliation, President Trump has taken the escalating trade war between the two superpowers into unprecedented territory.  

Despite a sharp decline in the share of US imports coming from China during the past five years, the US still bought $440 billion in Chinese goods in 2024, accounting for 13% of its total imports. (China’s imports from the US were one-third the value at $145 billion.) 

American companies whose supply chains are heavily dependent on China face huge cost increases in both finished and intermediate goods. Smartphones (9%), laptops (7%), batteries (3%), toys (2%) and telecoms equipment (2%) were the five biggest categories imported into the US from China in 2024, according to US International Trade Commission data.  

Machinery, medical instruments, pharmaceutical products, and apparel, along with raw materials and intermediate goods such as chemicals, metals, rubber, and plastics, also represent billions of dollars in annual US imports from China. 

Wait and See or Action Now? 

Trump’s sudden 90-day pause on country tariffs above the 10% universal baseline followed a previous pause on Mexican and Canadian tariffs. That, combined with uncertainty about future US trade policy and the outcome of any negotiations between Washington and Beijing, will encourage many firms to continue with a “wait-and-see” supply chain strategy. 

A snap poll by Zero100 among COOs and CSCOs last week in response to Trump’s Liberation Day announcement found that 53% planned to take action now, with the rest intending to hold off on making supply chain changes. 
 

 
Leaders of US companies with large annual shipments from China can’t afford to wait, unless they are willing to take a big margin hit and/or pass the additional costs on to customers. They need to move swiftly to lock up supply in alternative countries and from alternative suppliers. As during Covid-19, those companies that have strong relationships with their supply base will be in a better position to do this than those that take a more transactional and adversarial approach. 

Window of Opportunity 

With “China+1” locations such as Vietnam, Cambodia, Thailand, and Indonesia spared tariffs of up to 49% for the time being, companies have a short window of opportunity to switch orders from China to their own or suppliers’ factories in those or other countries.  

Apple, for example, may be able to move some production to Vietnam or India in the short term. But with around 85% of its iPhones still made in China it will be at a cost disadvantage in the US market compared with Samsung, which now makes all its smartphones in Vietnam and India.  

In the longer term, companies including Apple need a strategy for increasing their production in higher-cost manufacturing locations like the US. That won’t be an easy or fast transition, and it will require deep investments in robotics, automation, and digital skills among a local workforce. 

Over the coming weeks, our research team will be sharing key plays to plan for network moves on a mid-range time horizon. Look out for the first of those viewpoints — considerations for manufacturing in new regions — in next Tuesday's Signal.