Vietnam and China+1

How Vietnam benefited as companies moved production out of China after the 2018 US-China trade war, and concerns about Chinese goods being routed through Vietnam.

When the US-China trade war began in 2018, many firms sought factories outside China. Vietnam was a top choice.

Why Vietnam

Close to China, so suppliers could still send parts.
Low costs and skilled workers.
Trade deals and stable politics.

Growth

Vietnam’s exports to the US surged after 2018.
Firms like Apple suppliers moved some production of AirPods and other products to Vietnam.

Dependence on Chinese inputs

Much of Vietnam’s production uses Chinese components. Vietnam imports heavily from China and exports to the US.

Transhipment concerns

The US has worried that some Chinese goods are just relabelled or lightly processed in Vietnam to avoid tariffs. Rules of origin determine where a product legally comes from.

Competition with India

India also seeks China+1 investment, and Vietnam has often been faster in attracting factories.

The moved factory

A Chinese-owned electronics supplier opens a plant in northern Vietnam, importing parts from China, assembling them and exporting to the US at lower tariffs.

Thinking China+1 means cutting China out completely

Vietnam's factories often depend on Chinese inputs.

Key takeaways

Vietnam gained factories after the 2018 US-China trade war.
Proximity to China and low costs helped.
Much production uses Chinese inputs.
Transhipment concerns raise rules-of-origin issues.