Ask a founder who moved production from China to Vietnam how the switch is going, and you’ll often hear a version of the same story. The factory is in Vietnam, the label says Vietnam, but the zippers, fabric and most of the parts that actually make the product still ship in from China. They didn’t truly leave China. They added a stop, paid duties on the assembly, and called it “diversifying their supply chain.”
I’ve spent over a decade moving products out of China, and I’ve watched this happen over and over. A February 2026 study from the Information Technology and Innovation Foundation, a Washington think tank, found that even as companies move final production out of China, their supply chains stay dependent on China for the parts underneath. Electronics is the clearest case, where most of the parts inside a Vietnamese-assembled product still come from China.
Now the trade data shows just how common it has become. China’s exports to the U.S. fell 16% in the first quarter of 2026 while its exports to Southeast Asia rose 20%, according to Chinese customs figures compiled by the U.S.-China Economic and Security Review Commission. At a glance that looks like brands leaving China. Look closer and you’ll see that while less product is shipping from China to U.S. shoppers, more is shipping to factories in Vietnam, Thailand and Indonesia, which handle final assembly. But those factories are still buying their parts from China.
So the supply chain got longer and China is still central to it.
The point here is, a product can say “Made in Vietnam” and still be, very much so, made with China. For brands, that’s an expensive nuance. If a jacket sewn in Vietnam still needs Chinese zippers, fabric and lining, the brand now has to pay to hold inventory in two places instead of one: the parts sit at the factory in Vietnam, and the finished jackets sit in a warehouse in the U.S. The same money that used to fund one pile of inventory now funds two.
Now, this doesn’t mean trying to diversify was a mistake. To understand why brands try to leave China in the first place, you have to look at the pressure they’ve been under for the last decade. There was the first round of Trump-era tariffs on Chinese imports in 2018 (25% duties aimed at China’s intellectual property practices), then Covid-19 broke single-country supply chains, followed by investors treating heavy reliance on China as a business risk that could be mitigated by diversification. And for some categories, the move genuinely worked. Take wooden furniture—China supplied about 40% of U.S. wooden furniture imports before the 2018 trade war and only about 15% by 2021, while Vietnam climbed from under 1% to roughly 40%. Bulky, heavily tariffed goods like these were costly enough to justify the move and simple enough to make it stick.
But furniture is the exception. Most products aren’t simple enough to leave cleanly, so rather than replacing China, brands build a second base alongside it, a strategy called “China plus one.” It’s a sensible play, but for most products it hasn’t reduced dependence on China so much as relocated it.
The trouble is the near term, and it comes down to three things.
China was never really about cheap labor
Chinese factory wages now run about double Vietnam’s, but lower wages don’t automatically mean a cheaper finished product. The Reshoring Institute has found cases where, once you account for lower productivity and higher error rates, the Vietnamese version costs as much as China or more. Cheap labor is only cheap if the work comes out right the first time.
The ecosystem is the hardest piece to copy
China didn’t become the world’s factory because of wages. It spent 75 years building everything around the factory: component suppliers within a two-hour drive, fabric mills that turn a sample in days, mold makers who’ve already made every variation of the part you need. You can prototype in Shenzhen on Monday and have working samples by Friday. Nowhere else can do that yet.
The math is unstable right now
Tariffs hurt, but they are one line on the spreadsheet, and lately quite volatile. A rate gets announced, paused, challenged in court and revised, all within a few months. Building a multi-year sourcing plan around this year’s tariff number is its own kind of bet. Add up the full cost of getting a product to the customer, the cash tied up in inventory along the way, and the risk of marking down goods that arrive late or in the wrong mix, and a higher tariff on a fast, tight China supply chain can still beat a lower one on a slow, scattered alternative.
The gap between what brands announce and what they actually buy is the real story here. The announcements describe an exodus from China, with brands adding assembly lines across Southeast Asia. But they haven’t moved away from China’s parts, its tooling or its speed. So yes, brands are going to keep spreading out their assembly. But it hasn’t yet reached deep enough into the supply chain to change where a product truly begins. Until it does, “made somewhere else” will keep meaning “still made in China.”
