The tariff volleys that began in 2018 and were reaffirmed in the United States Trade Representative’s statutory four-year review in 2024 jolted firms and countries into redrawing their production maps. Their first instinct has been to “reshore,” “near-shore,” or, most fashionably, “friend-shore” to rebuild factories in locations deemed politically safe and tariff-free. The logic seems obvious: if tariffs raise the cost of Chinese components, shift assembly to Vietnam, Mexico, or Poland then the problem disappears. Yet tariffs are only the visible edge of two deeper pressures: the domestic backlash of communities left behind by globalization and mounting fears that dense economic links can be turned into geopolitical weapons. Until those two roots are addressed, any new supply chain configuration is at risk of becoming the next casualty of the tariff cycle.
Thinking Hard About Why Supply Chains Are Moving Out of China
Economic dislocation is the first and still dominant reason firms are redrawing production maps. Before the tariff shock, global value chains (GVCs) followed a familiar “smile curve.” High-income economies retained design, R&D, and branding at the lucrative ends of the curve, while low-wage Asian hubs took on labor-intensive assembly. In apparel, Vietnam, Bangladesh, and Indonesia cut and stitched garments dreamed up in Oregon or Bavaria; in electronics, Guangdong turned piles of imported components into sleek phones whose profits ultimately landed in Silicon Valley. The model kept consumer prices low and innovation high, but it also parked specific skills – and thus specific jobs – in certain places, storing up political volatility in the communities that lost their factories.
Because those time bombs were never defused, tariffs, and now supplier flights from China, serve mainly as a political substitute for real adjustment. When the China import surge hit U.S. factory towns in the 1990s-2000s, many workers lacked retraining pathways; plant closures eroded tax bases and social capital, and resentment turned tariffs into a blame-shifting technology rather than an efficiency tool. The Office of the U.S. Trade Representative’s 2024 four-year review kept most Section 301 penalties in place, implying that the politics of loss, not the economics of cost, sustains them. Without credible labor-market support for misplaced workers such as skills vouchers, wage insurance, mobility grants, any new offshore platform will simply inherit China’s role as a scapegoat for “stolen” jobs.
Relocating from China therefore risks replaying the same drama on a different stage. Early evidence suggests the cycle is already repeating. Trade flows show tariff-sensitive goods simply detouring through Southeast Asia with Washington’s merchandise deficit with Vietnam, Malaysia, and Mexico is widening. The U.S. “Liberation Tariff” schedule now sweeps China-plus sites into duties that can exceed 40 percent, signaling that diversification alone will not still the politics of grievance. In short, swapping one assembly platform for another does nothing to defuse distributional anger at home. Once those countries reach scale, they too can be cast as unfair competitors. Yet, many firms view relocation as a one-and-done fix rather than a political flashpoint in waiting. A McKinsey 2024 supply-chain survey finds that only one quarter of corporate boards even discuss multi-tier exposure.
Security anxiety provides the second, equally potent, motive for decoupling. States that control critical choke points – dollar clearing, rare-earth processing, advanced-chip lithography – can “weaponize interdependence,” extracting data or denying access to coerce rivals. This way, Washington has leveraged its payments network to sanction adversaries, while Beijing has slowed customs or embargoed imports from Australia and the Philippines, and more recently, restricted rare-earth exports. Firms respond by “friend-shoring,” yet recreating the same single-hub structure in an ally merely trades one gatekeeper for another, leaving the underlying leverage intact.
Lessons for New Supply Chain Configuration
Diversifying suppliers is, therefore, necessary but not sufficient. By itself, it does not still the political anger that fuels tariffs, nor does it eliminate systemic chokepoints. Domestic adjustment must travel alongside geographic diversification: when workers see credible pathways from old jobs to new ones, they are less likely to endorse punitive trade policy. Similarly, genuine resilience requires visibility beyond first-tier suppliers and contingency planning that spans the whole network. Some consultants now recommend “local-for-local” production – duplicate plants inside every major end market so that finished goods never cross tariff walls. The idea may make sense where duties are permanent and margins are high, but for low-value staples such as apparel, it would redeploy high-skilled labor to low-wage tasks and saddle consumers with higher prices. Worse, the new jobs rarely match the skills of workers displaced by earlier offshoring, so inequality inside the home market can widen even as nominal unemployment falls. When the public runs out of foreigners to blame, frustration turns inward; at that point, the global economic network may simply route around the protectionist economy.
A more durable “insurance policy” is to cultivate “strategic irreplaceability:” embed one’s economy in tasks so specialized that partners cannot easily bypass them. Taiwan’s TSMC illustrates the logic. Its dominance in leading-edge chips means that any attempt by China or the United States to disrupt supplies would inflict prohibitive collateral damage on both sides. That asymmetry deters coercion more effectively than any formal treaty. In fact, chips and strategic electronic components were quickly exempted from the tariff list by Washington, highlighting the “irreplaceability” logic of being too important to weaponize. Building irreplaceability, however, is capital- and knowledge-intensive. It demands sustained investment in STEM education, R&D tax credits, and standards-setting diplomacy – not merely swapping one assembly site for another.
Putting the two agendas together, domestic inclusion and strategic deterrence, the essential lesson is that tariffs expose genuine weaknesses, but simply re-routing containers will not insulate supply chains from the next political or strategic shock. Friend-shoring that overlooks domestic distributional pain or leaves new chokepoints unchecked risks condemning firms to endless rounds of disruption and relocation. Durable resilience depends on tackling inequality at its root and on dispersing, rather than just relocating, critical nodes. Until those deeper issues are faced, the badge of origin on a shipping label may change, but the fault lines underneath global trade will remain exactly where they were.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the position of any institution or organization to with which the author is affiliated.
Image: President Trump announcing the reciprocal tariffs that the US will be placing on other nations of the world. Credit: Alberto Mier
Trinh Nguyen is a PhD student and Presidential Scholar in International Relations at George Mason University. Her research focuses on geoeconomics, weaponized interdependence, and network analysis, with a regional emphasis on East Asia. Her previous work has examined Vietnam – China economic interdependence, frameworks for assessing geoeconomic risk, and Chinese economic statecraft in Southeast Asia. Trinh is also a Pacific Forum Young Leader and a Hirschman Fellow at the Helsinki Geoeconomics Society.