Rules of the game are still uncertain and ... Why US-China tariff pause is bad news for these countries eyeing 'China-plus-one' strategy of American companies

The new America-China agreement to pause tariffs on each other is reportedly pressuring manufacturing hubs such as Vietnam and Mexico to make their own, better deals with the US to continue benefiting from a 'China-plus-one' strategy of American companies. According to Reuters, in the volatile trade landscape shaped by President Donald Trump 's tariff announcements, countries gauge their success by how their trade terms stack up against others. For five weeks, nations facing Trump's "reciprocal" global tariff regime, announced April 2, found relief in having lower rates than China, which faced U.S. tariffs soaring from 20% to 145% between March and May. Vietnam, for instance, had a 46% rate, Thailand 36%, and Malaysia 24%, giving them a comparative advantage.

Reuters reports that these manufacturing hubs expected multinational corporations to further shift supply chains away from China, bolstering the "China-plus-one" trend. However, a breakthrough in U.S.-China trade talks has introduced a 90-day tariff reprieve, reducing China's import tax to 30%. While still higher than the 10% rate for competing hubs during the pause, experts suggest this could slow the momentum of supply chain diversification.

Uncertainty persists
"The rules of the game are still uncertain," Diego Marroquin Bitar, a North American trade consultant, told Reuters. "I think companies are just going to delay their investments as much as they can."
Since Trump's first term, tariffs on China aimed to drive manufacturing back to the U.S., but "reshoring" largely failed. Instead, companies like Apple sought alternatives in low-cost countries like Vietnam, Thailand, and Mexico. Reuters notes that if the U.S.-China tariff pause extends, these nations risk losing their edge.

Vietnam, Thailand, and Malaysia ...
Vietnam, Thailand, and Malaysia are now negotiating their own tariff deals with the U.S., while Mexico seeks to lower duties on products like automobiles. Wu Xinbo, director of the Center for American Studies at Fudan University, told Reuters that companies may slow offshoring from China, maintaining it as their main hub while making partial arrangements elsewhere.

Sun Chenghao, a fellow at Tsinghua University, highlighted to Reuters that Trump’s unpredictable policymaking creates uncertainty, leaving companies hesitant to fully engage in China. Vietnam, which has attracted Chinese manufacturers since Trump’s first-term tariffs, faces pressure to secure better deals. Leif Schneider, head of Luther in Vietnam, told Reuters that if Vietnam negotiates a better deal than China, it could solidify its role as an alternative investment destination.

Reuters also reports that Vietnam’s foreign investment pledges fell to $2.84 billion in April, down 30% from March and 8% year-on-year. In Mexico, President Claudia Sheinbaum has emphasized its tariff-free advantage under the U.S.-Mexico-Canada trade deal, though steel, aluminum, and auto tariffs remain. Jorge Guajardo, a former Mexican ambassador to China, told Reuters that despite the U.S.-China deal, companies like Walmart and Target, rattled by recent trade tensions, will continue seeking alternative supply sources, with Mexico poised to benefit.