When President Donald Trump started a trade war with China during his first term, Simon Lichtenberg decided to ride it out. He owned factories making leather sofas in China since the 1990s and figured the two sides would resolve the dispute.
He doesn't think that anymore. Lichtenberg invested around $20 million to move his factory for American clients to Vietnam this year. Now, not even the ceasefire Trump has reached with China has changed his outlook that deep-seated animosity between the countries has altered the economics of his business.
China's scale and abundant labor turned it into a factory juggernaut for decades, placing it firmly at the heart of the global economy. But Trump is tearing down the system that allowed manufacturers to seek out the most efficient supply chains. At the same time, China has doubled down on making itself less reliant on the U.S. economy.
Trump's latest deal to cut some new tariffs placed on China has not reversed those trends. It has underscored the volatility of the U.S.-China relationship.
So executives like Lichtenberg are opting out of China for their U.S. business, motivated by a fear of getting caught on the wrong side of what they expect to be an even more unpredictable bilateral relationship. Where it once seemed like having a factory outside China was a fallback, it is starting to look like an economic imperative.
"Nobody trusts that there is stability between China and the U.S.," Lichtenberg said. "It's like they say: A burned child is scared of fire." He said his company, Trayton Group, which makes Danish-style modular sofas and reclining chairs, has lost millions of dollars this year because of Trump's abrupt and steep new tariffs.
For many sectors that long ago outsourced to China, moving factories back to the United States is not possible. Costs are too high, and there's a shortage of workers. Companies that quit China have already gone to neighboring countries like Vietnam, where labor is cheap and it is easy to move machinery and raw materials.
After meeting with Xi Jinping, China's top leader, in South Korea last month, Trump agreed to halve a 20% fentanyl-related tariff and extend an existing pause on reciprocal tariffs, leaving the average tariff rate on Chinese goods at 47.6%, according to one estimate. Smaller businesses that have not been able to find factories outside China have cheered the news. But for many others that have already started moving out of China, the truce has had little impact on future strategy and planning.
"The agreement doesn't change the calculus that, over the long term, because of the U.S.-China competitive relationship, it's just going to present a lot more risk for companies to be manufacturing and sourcing things in China," said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, Vietnam.
China is already losing its title as the factory floor for Americans. Some of the world's best-known companies, including Nike, Apple and Intel, have moved quickly this year to scale down what they make in China for the U.S. market. The country is no longer the sneaker capital for Americans. That designation now belongs to Vietnam.
The trend is also showing up in data from the U.S. Census Bureau, even for products that have received tariff exemptions, such as laptops and smartphones. The United States now gets most of its smartphones and laptops from India and Vietnam, according to the latest numbers.
While the business world is coalescing around the idea that China is no longer the best option for making the things sold to Americans, it's not yet clear which countries will be the best alternatives.
But Trump's trade policy remains in flux, including how he will respond if the Supreme Court nullifies the legal underpinning for many of his tariffs. For manufacturers in China sorting future plans, uncertainty hangs over how Trump will ultimately define products that contain raw materials or investment from China. Will products made in factories in Vietnam that have close ties to China be considered Vietnamese or Chinese?
"In Trump's first term, he made everybody run away from China and a lot of business shifted to Vietnam," said Gabriele Natale, the managing director of Man Wah USA, which makes furniture for retailers like Walmart and Costco. The company decided to move to Vietnam in 2019 and spent hundreds of millions of dollars building up a 5.8-million-square-foot factory near Ho Chi Minh City. Everything it sells in North America now comes from that factory.
"In his second term, Mr. Trump is hitting everything everywhere," Natale said. "You can run, but you can't hide."
His company now has 15 production facilities around the world, including in Mexico and Eastern Europe.
American retailers are increasingly demanding that their suppliers reduce exposure to China.
Fleming International, which makes candles in Vietnam, was asked by its biggest American customers to move as much production as possible to the United States. It will soon start making vanilla-, elderberry- and pumpkin-scented candles from a new factory in Heber Springs, Arkansas -- at double or triple the cost in Vietnam.
"As far as geopolitics, we feel like it's a long-term strategy," said Lowell Newman, a senior adviser for Fleming. "We're not expecting overnight success."
New tariffs could change the calculus once more for the company, which is also opening a facility in El Salvador in a few months. Trump's willingness to wield tariffs haphazardly, sometimes as punishment for perceived grievances, has made it hard to make business decisions.
"Just tell us the duties," Newman said. "Don't get mad and pick up your marbles in the fight like a child playing."
He's not alone in experiencing whiplash. Lichtenberg is still recovering from the last shock on Oct. 10, a few weeks before the latest U.S.-China trade truce.
From his home in Shanghai, Lichtenberg had just finished up a midnight call with his American clients when, checking the news before bed, he saw that Trump was ranting on social media about Xi. He turned off the lights anticipating a fresh crisis in the morning.
When he woke up, Trump had set a new tariff of 100% on China. Lichtenberg thought back to six months earlier when Trump announced a 125% rate, which the president later clarified would be even higher at 145%.
The difference was that in April, Lichtenberg had 350 containers ready to ship from China to the United States. This time, he had only several dozen.
Now, about half of his overall production comes out of his new factory in an industrial park in Ho Chi Minh City in southern Vietnam. A dozen other factories and suppliers have also moved there from China.
Back in China, a newly built factory Lichtenberg had used for his American customers on the outskirts of Shanghai sits mostly vacant. Rows of blue and yellow metal shelves are empty. A new robot that can assemble the wood frames for his couches stands still. Around 500 Chinese workers who once filled the factory lines are gone, after being laid off this year.
"The idea was that it would be full by next year," Lichtenberg said as he walked through the dark, quiet and cavernous factory.
"It's more empty than ever."
He doesn't think that anymore. Lichtenberg invested around $20 million to move his factory for American clients to Vietnam this year. Now, not even the ceasefire Trump has reached with China has changed his outlook that deep-seated animosity between the countries has altered the economics of his business.
China's scale and abundant labor turned it into a factory juggernaut for decades, placing it firmly at the heart of the global economy. But Trump is tearing down the system that allowed manufacturers to seek out the most efficient supply chains. At the same time, China has doubled down on making itself less reliant on the U.S. economy.
Trump's latest deal to cut some new tariffs placed on China has not reversed those trends. It has underscored the volatility of the U.S.-China relationship.
So executives like Lichtenberg are opting out of China for their U.S. business, motivated by a fear of getting caught on the wrong side of what they expect to be an even more unpredictable bilateral relationship. Where it once seemed like having a factory outside China was a fallback, it is starting to look like an economic imperative.
"Nobody trusts that there is stability between China and the U.S.," Lichtenberg said. "It's like they say: A burned child is scared of fire." He said his company, Trayton Group, which makes Danish-style modular sofas and reclining chairs, has lost millions of dollars this year because of Trump's abrupt and steep new tariffs.
For many sectors that long ago outsourced to China, moving factories back to the United States is not possible. Costs are too high, and there's a shortage of workers. Companies that quit China have already gone to neighboring countries like Vietnam, where labor is cheap and it is easy to move machinery and raw materials.
After meeting with Xi Jinping, China's top leader, in South Korea last month, Trump agreed to halve a 20% fentanyl-related tariff and extend an existing pause on reciprocal tariffs, leaving the average tariff rate on Chinese goods at 47.6%, according to one estimate. Smaller businesses that have not been able to find factories outside China have cheered the news. But for many others that have already started moving out of China, the truce has had little impact on future strategy and planning.
"The agreement doesn't change the calculus that, over the long term, because of the U.S.-China competitive relationship, it's just going to present a lot more risk for companies to be manufacturing and sourcing things in China," said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, Vietnam.
China is already losing its title as the factory floor for Americans. Some of the world's best-known companies, including Nike, Apple and Intel, have moved quickly this year to scale down what they make in China for the U.S. market. The country is no longer the sneaker capital for Americans. That designation now belongs to Vietnam.
The trend is also showing up in data from the U.S. Census Bureau, even for products that have received tariff exemptions, such as laptops and smartphones. The United States now gets most of its smartphones and laptops from India and Vietnam, according to the latest numbers.
While the business world is coalescing around the idea that China is no longer the best option for making the things sold to Americans, it's not yet clear which countries will be the best alternatives.
But Trump's trade policy remains in flux, including how he will respond if the Supreme Court nullifies the legal underpinning for many of his tariffs. For manufacturers in China sorting future plans, uncertainty hangs over how Trump will ultimately define products that contain raw materials or investment from China. Will products made in factories in Vietnam that have close ties to China be considered Vietnamese or Chinese?
"In Trump's first term, he made everybody run away from China and a lot of business shifted to Vietnam," said Gabriele Natale, the managing director of Man Wah USA, which makes furniture for retailers like Walmart and Costco. The company decided to move to Vietnam in 2019 and spent hundreds of millions of dollars building up a 5.8-million-square-foot factory near Ho Chi Minh City. Everything it sells in North America now comes from that factory.
"In his second term, Mr. Trump is hitting everything everywhere," Natale said. "You can run, but you can't hide."
His company now has 15 production facilities around the world, including in Mexico and Eastern Europe.
American retailers are increasingly demanding that their suppliers reduce exposure to China.
Fleming International, which makes candles in Vietnam, was asked by its biggest American customers to move as much production as possible to the United States. It will soon start making vanilla-, elderberry- and pumpkin-scented candles from a new factory in Heber Springs, Arkansas -- at double or triple the cost in Vietnam.
"As far as geopolitics, we feel like it's a long-term strategy," said Lowell Newman, a senior adviser for Fleming. "We're not expecting overnight success."
New tariffs could change the calculus once more for the company, which is also opening a facility in El Salvador in a few months. Trump's willingness to wield tariffs haphazardly, sometimes as punishment for perceived grievances, has made it hard to make business decisions.
"Just tell us the duties," Newman said. "Don't get mad and pick up your marbles in the fight like a child playing."
He's not alone in experiencing whiplash. Lichtenberg is still recovering from the last shock on Oct. 10, a few weeks before the latest U.S.-China trade truce.
From his home in Shanghai, Lichtenberg had just finished up a midnight call with his American clients when, checking the news before bed, he saw that Trump was ranting on social media about Xi. He turned off the lights anticipating a fresh crisis in the morning.
When he woke up, Trump had set a new tariff of 100% on China. Lichtenberg thought back to six months earlier when Trump announced a 125% rate, which the president later clarified would be even higher at 145%.
The difference was that in April, Lichtenberg had 350 containers ready to ship from China to the United States. This time, he had only several dozen.
Now, about half of his overall production comes out of his new factory in an industrial park in Ho Chi Minh City in southern Vietnam. A dozen other factories and suppliers have also moved there from China.
Back in China, a newly built factory Lichtenberg had used for his American customers on the outskirts of Shanghai sits mostly vacant. Rows of blue and yellow metal shelves are empty. A new robot that can assemble the wood frames for his couches stands still. Around 500 Chinese workers who once filled the factory lines are gone, after being laid off this year.
"The idea was that it would be full by next year," Lichtenberg said as he walked through the dark, quiet and cavernous factory.
"It's more empty than ever."
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