Navigating Tariff Volatility: Strategic Bets in 'China-plus-one' Manufacturing Hubs Post-US-China Truce

The 90-day U.S.-China trade truce, effective May 2025, has introduced a fragile reprieve in the world’s most consequential trade war. While tariffs on Chinese goods have been slashed from 145% to 30%, and U.S. imports face a reduction from 125% to 10%, the agreement’s temporary nature leaves manufacturing cost advantages—and global supply chains—in flux. For investors, this creates a critical window to assess which “China-plus-one” manufacturing hubs—Vietnam, Mexico, and Southeast Asia—are best positioned to solidify their roles as low-cost, tariff-advantaged alternatives.

The Truce’s Impact: A Temporary Reprieve, Not a Resolution

The tariff pause has eased immediate pressure on supply chains disrupted by earlier punitive measures. Ports like the Port of Los Angeles, which saw cargo volumes plummet to pandemic-era lows, now face a surge in freight as companies “frontload” shipments to exploit the lull. Yet residual tariffs—30% on Chinese goods and 10% on U.S. exports—remain a drag on margins. reveal this volatility, with businesses now prioritizing geographic diversification to hedge against further escalation.

The truce’s fragility is underscored by unresolved tensions: U.S. concerns over technology theft and China’s economic slowdown (e.g., deflation, unemployment) persist. For manufacturers, this means the era of “China-plus-one” is here to stay. The question is: Which hubs can leverage this moment to lock in long-term trade advantages?

Vietnam: Textiles and Electronics Lead the Way

Vietnam has emerged as the poster child of the “China-plus-one” strategy, with its textile industry poised to benefit from both the tariff pause and its membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Companies like Vinatex and Masan Group are capitalizing on Vietnam’s 0% tariffs on U.S. cotton imports and its 7% duty on apparel exports to the EU, compared to China’s 10%.

Key sectors to watch:
- Textiles: Vietnam’s labor cost advantage (20% below China’s) and proximity to Southeast Asia’s raw material hubs position it as a go-to for apparel and footwear.
- Electronics: Firms like Samsung and Foxconn have already relocated production to Vietnam, leveraging its 5G-ready infrastructure and CPTPP terms.

highlights its outperformance during trade disputes, suggesting a compelling investment case in sectors like textiles and tech manufacturing.

Mexico: The Auto Industry’s Safe Harbor

Mexico’s strategic advantage lies in its automotive sector, bolstered by the U.S.-Mexico-Canada Agreement (USMCA). The 90-day truce has reduced U.S. tariffs on Mexican auto parts from 125% to 10%, making it a critical buffer against China’s diminished cost competitiveness. Companies like Grupo Mexico and Auto parts suppliers to Tesla are scaling up production to meet U.S. demand, particularly in electric vehicle (EV) components.

Why Mexico?
- USMCA compliance: Ensures preferential access to the U.S. market, with 75% of Mexican auto exports now tariff-free.
- Geopolitical stability: Unlike China, Mexico faces fewer U.S. sanctions risks, despite ongoing border disputes.

underscores this sector’s growth trajectory, making it a must-hold for investors.

Southeast Asia: Diversification Beyond China

Southeast Asia’s manufacturing ecosystems—driven by Indonesia’s steel, Malaysia’s semiconductor hubs, and Thailand’s automotive supply chains—are increasingly attractive. The truce has allowed firms to reassess Southeast Asia’s cost structure: while labor costs are rising, they remain 30–40% below China’s, and regional trade pacts like the Regional Comprehensive Economic Partnership (RCEP) offer tariff-free access to 15 markets.

Key risks to navigate:
- Logistical bottlenecks: The truce’s freight surge has already pushed ocean freight rates up 20%, as carriers reroute ships from Europe.
- Policy uncertainty: China’s retaliatory non-tariff barriers (e.g., export curbs on critical raw materials) could disrupt Southeast Asia’s supply chains.

Caution: Avoid China-Dependent Sectors Until Structural Certainty Emerges

The truce’s temporary nature demands caution in sectors still tethered to China. Chemicals, for instance, face inventory shortages (e.g., phosphoric acid stocks at 10% capacity) due to earlier tariff-induced disruptions. Meanwhile, consumer electronics remain vulnerable to U.S. “force majeure” rulings on misclassified imports, as seen in cases like Honeywell’s tariff dispute.

Investors should prioritize sectors with self-sustaining trade advantages: Vietnam’s textiles under CPTPP, Mexico’s autos under USMCA, and Southeast Asia’s RCEP-driven industries.

Conclusion: Act Now, but Stay Vigilant

The 90-day truce offers a fleeting opportunity to position portfolios in “China-plus-one” hubs. Vietnam’s textiles, Mexico’s autos, and Southeast Asia’s diversified manufacturing are sectors where geopolitical tailwinds align with economic fundamentals.

confirms this shift. Investors should act swiftly—but remember: until the U.S.-China tariff structure is permanently resolved, geographic diversification remains the safest bet.

The window is open. Seize it.

Disclosure: This article is for informational purposes only and does not constitute investment advice.