China sourcing strategy and alternatives

Two facts that have to be held together

Sourcing strategy in 2026 starts from two facts that point in opposite directions. The first is that China remains by far the world's largest manufacturer. World Bank data put China's manufacturing value added (MVA, the value a country's factories add to their inputs) at US$4,822.7 billion in 2025, about 27.4% of the world total of US$17,601.1 billion. That share is the desk's calculation from the World Bank's aggregate, in current dollars, so exchange rates move it.

The second is that the United States buys far less of it directly than it did. Census data show US goods imports from China of US$505.2 billion in 2017, 21.6% of all US goods imports, and US$308.7 billion in 2025, 9.0%. For January to August 2026 the share was 7.5%. Those are nominal, not seasonally adjusted figures, and the 2026 number is a partial year.

Both facts are true at once because much of what left China's direct trade with the United States did not leave Chinese supply chains. Components, materials and tooling still flow from China to factories in Vietnam, Mexico and elsewhere. A sourcing strategy that treats "China or not China" as a single switch misreads both the trade data and the customs law that applies to them.

Why so much is still made in China

Scale is the plainest explanation. China's 2025 MVA was about nine times India's and about 38 times Vietnam's, by the desk's calculation from World Bank figures. Depth matters as much as size. The US-China Economic and Security Review Commission (USCC) found, in a November 2025 staff report, that the sectors where China met most of its Made in China 2025 targets "benefited from consistent, long-term government support, vertically integrated supply chains, and/or economies of scale." A Rhodium Group study commissioned by the US Chamber of Commerce found Chinese firms gained most where industries had "high capital intensity, a large (often state-supported) demand market," and no established global leader.

Labor is no longer the main reason. China's National Bureau of Statistics reports an average 2025 manufacturing wage of 113,594 yuan in urban non-private units, up 5.2%, and 76,055 yuan in urban private units, up 6.4%. Those figures are nominal and cover urban units only, so they are not a full labor-cost measure, but they show costs rising year after year.

Made in China 2025 itself, the State Council plan issued in May 2015 that named ten priority sectors from integrated circuits to new-energy vehicles, is assessed differently by different analysts. USCC staff conclude that China "broadly met its MIC2025 goals in only about half of its focus sectors," citing new-energy vehicles at about 91% of the domestic market in 2024 against an 80% target, and semiconductor self-sufficiency of 16.6% in 2020 against a 50% target. A South China Morning Post analysis, reported via Rhodium, counts over 86% of 260 targets met. The two counts measure different things, sectors in one case and individual targets in the other, and both are printed here for that reason.

What the trade data show, 2017 to 2026

The shift in US import sources is large and measurable. The table uses Census figures; shares are calculated against total US goods imports.

Mexico has been the largest source of US goods imports since 2023. In the first eight months of 2026, imports from Vietnam came close to those from China, though a partial, unadjusted year should not be extrapolated. Kearney's 2026 Reshoring Index adds a sector view: in 2025 direct US imports from mainland China fell by roughly US$135 billion while 13 other Asian low-cost countries and regions gained roughly US$194 billion. Kearney is a consultancy and its index is built on official data rather than being official data itself.

These national totals hide large differences by product, which is why the industry profiles on this site carry their own trade-share figures. A few categories, such as textiles, remain dominated by China; others, such as bags and luggage, have moved.

Vietnam, India and Mexico compared

Each alternative solves a different problem, and none replicates China's breadth.

• Vietnam had 2025 MVA of US$126.2 billion, about a thirty-eighth of China's. Its growth has been fastest in electronics: Kearney reports that US imports of computer and electronics products from Vietnam rose by US$40 billion, or 62%, in 2025. Vietnam also depends heavily on Chinese inputs; USITC data show China supplied almost two-thirds of Vietnam's fabric imports in 2023.
• India had 2025 MVA of US$532.9 billion. Its Production Linked Incentive (PLI) schemes cover 14 sectors. A July 2026 parliamentary reply gives the approved outlay as ₹1.91 lakh crore, with actual investment of over ₹2.40 lakh crore as of 31 March 2026; a March 2025 government release gave the outlay as ₹1.97 lakh crore. Both official figures are on record, with different dates.
• Mexico had 2025 MVA of US$366.1 billion and the advantage of USMCA access, but USMCA rules of origin are demanding: for passenger vehicles, light trucks and core parts, 75% regional value content. Kearney notes that much of Mexico's 2025 gain "is still concentrated in downstream assembly" relying on Asian components. Mexico has also raised its own tariffs: a decree published 29 December 2025 raised general duties on about 1,463 tariff lines, mostly to 25% or 35%, for countries without a trade agreement with Mexico, which includes China. The line count comes from official summaries; a rough parse of the decree text found about 1,480 codes.

Tariff gaps and the origin trap

The case for moving production rests on duty differences, and those differences are narrower and more conditional than headline rates suggest. Kearney estimated 2025 effective US tariff rates (duties collected divided by customs value) of 27% to 30% for mainland China, 10% to 13.5% for India and 12.8% to 13.8% for Mexico. Those are calendar-2025 estimates made before the Supreme Court ended the IEEPA tariffs in February 2026, so they are history, not current rates.

The 2026 forced-labor Section 301 action, in force from 24 July 2026, illustrates how quickly the gap can close. According to the USTR final notice, it imposed 12.5% on products of China and of Vietnam, and 10% on products of a group of economies that includes Bangladesh, Cambodia, India, Indonesia and Mexico. Chinese goods still carry the 2018 Section 301 list duties on top, so a gap remains, but it is not the gap of 2025.

The gap exists only if origin genuinely changes. Under US law, origin moves only when processing substantially transforms an article into a new article of commerce. Assembly that leaves Chinese parts essentially unchanged does not, and CBP pursues evasion through its EAPA (Enforce and Protect Act) process and penalties under 19 U.S.C. 1592. Enforcement data show the risk follows supply chains rather than borders: CBP's UFLPA detentions from June 2022 to August 2026 included shipments from Vietnam and Malaysia as well as China, according to a third-party compilation of CBP data the desk could not re-verify on CBP's site. USTR's 2026 Special 301 Report names Vietnam a Priority Foreign Country, its most serious category, and Vietnam was the second-largest source by quantity of goods CBP seized for IP violations in FY2025.

Reshoring: two measures that disagree

Bringing production to the United States is measured in two ways that point in different directions, and both deserve to be read. The Reshoring Initiative, an industry association, recorded about 247,000 announced reshoring and foreign-direct-investment manufacturing jobs in 2025, the fifth straight year above 240,000, and identifies China as the source of about two-thirds of reshoring cases that report an origin. Those are announced jobs drawn from press reports, not government employment counts, and the report gives two different cumulative totals since 2010.

Kearney's Reshoring Index measures imports against domestic output instead. Its 2025 reading was −86, and the US manufacturing import ratio from 14 Asian low-cost countries and regions rose to 14.15% of domestic gross output from 13.29%. On that measure, sourcing moved between Asian countries rather than home. The two findings are compatible: announcements can stay high while imports also rise.

Strategy is geography inside China as well

Diversifying within China is also a strategy. The two great manufacturing regions are defined in national plans. The 2019 Greater Bay Area plan names Shenzhen and Dongguan as the core of an electronics and information technology cluster on the Pearl River's east bank, and Foshan with Zhuhai as the lead of an advanced equipment manufacturing belt on the west bank. The Yangtze River Delta plan of the same year covers Shanghai, Jiangsu, Zhejiang and Anhui, gives Ningbo-Zhoushan port a central role and calls for accelerating the Yiwu International Trade Comprehensive Reform Pilot Zone, the basis of Yiwu's small-commodities trade.

Cluster choice affects lead time, freight routing and supplier density. None of these options, inside or outside China, is free of trade-off, and a decision to move should be tested against the specific HTS line, the origin rules and the supply chain behind the supplier, not against a national average.

Frequently asked questions

Sources

• U.S. Census Bureau — Trade in Goods with China (country page) and Trade in Goods with World (2026, HTML-official)
• World Bank — World Development Indicators: NV.IND.MANF.CD (2026, HTML-official)
• U.S.-China Economic and Security Review Commission — Made in China 2025: Evaluating China's Performance (staff research report, 14 Nov 2025) (2025, PDF)
• Kearney — 2026 Reshoring Index (sidebar: How tariffs redirected sourcing away from China), p.5 (2026, PDF)
• Reshoring Initiative — Reshoring Initiative 2025 Annual Report, Including 2026 1H Data (2026, PDF)
• Press Information Bureau, Government of India (Ministry of Commerce & Industry) — PIB release: PLI Schemes Attract Over ₹2.40 Lakh Crore Investment … (2026, HTML-official)
• Office of the U.S. Trade Representative — Notice of Actions in Section 301 Investigations of Acts, Policies, and Practices of Various Economies Rela… (2026, PDF)
• gov.cn/zhengce/2019-02/18/content_5366593.htm