The tariff dispute between the U.S. and China has created uncertainties in the world of trade and commerce. Hence, US businesses are compelled to consider other alternatives that can help them continue cost-effective production. Here emerges a question- is made in China still the most favorite option for the American manufacturing industry? Is it still the low cost country sourcing quality goods?

This question rooted its origin from an event took place in July 2018 when the U.S. government announced an additional 25% tariff on the existing tariffs on the products that U.S. import from China. The value of this tariff is worth $USD 34b per year. This additional tariff has sowed the seed of an unpredictable two-year trade war between the U.S. and China- the two largest economies of the world. The tension is further heightened by the hike of recent additional tariffs up to 30%.

To negotiate a new trade deal, both countries signed “phase 1” of a crucial agreement on 15th January. This agreement aims at lowering tariffs and improve the trading relationship between the two countries. However, the current situation has raised a question on China’s viability as a one-stop destination for low-cost sourcing.

If China gets off the table, then which options are there for U.S. businesses? With the increase of the tariffs, a trend of moving the entire manufacturing set up to a foreign land has become popular. Chinese suppliers who are heavily dependent on the U.S. market have been inclined towards the trend. This way, the businesses can leverage the competitive cost advantages.

To resolve the problems caused by the increased tariffs, FTI attempted at finding other low-cost countries in Asia. It analyzed two vital impacts:

  • Short-term product replacement
  • Long-term production and Foreign Direct Investment shift.


FTI explored that Vietnam and India can be the best two alternatives of China for U.S. customers. These two nations are categorized as first-tier countries. Other nations including the Philippines, Indonesia, Bangladesh, Malaysia, and Thailand come after Indian and Vietnam. These are called second-tier countries. The third tier includes Cambodia, Myanmar, and Laos.

Which Alternative Country is the Best Option?

FTI has broken down the main product groups, which are exported from these nations to the U.S to create a heatmap. This heatmap highlights the LCCS capabilities of each alternate country by listing their beneficial product categories.

This heatmap indicates that the conventional labor-intensive industries including apparel, clothing, and footwear are greatly threatened by the hiking labor costs. But the technological barriers are few in such cases. That’s why many U.S. businesses are considering a shift from China to other alternative countries such as India, Vietnam, Indonesia, and Bangladesh.

A Final Takeaway

Though the alternative nations offer a wide array of resources and attractive trade patterns, they need to go a long way to reach the level of China. China, still, is the top low cost country sourcing goods to U.S. businesses. Therefore, both nations should focus more on negotiation than avoiding trading with each other.

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